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Good article in the NYtimes by Stephen S. Roach. It’s basic idea is that the US is in danger of a deflationary period, espiecially if the housing or consumer spending bubble breaks. It dosn’t come right out and say so but it seems to imply that this is inevitable. My thinking comes particularly from this qoute
“As their property values rise, hard-pressed consumers have been quick to extract purchasing power from their homes, taking advantage of low interest rates to refinance their property and use the savings to buy cars, furniture, appliances and other luxury goods. Thus the ever-expanding property bubble has become central to the culture of excess that is now driving the United States economy.”
If housing bubble debt is driving the consumer bubble that means the whole thing is a ponzi scheme that will come crashing down very hard when the Housing bubble (inevitably) pops. Plus with the war on Iraq taking out 1-2% of the GDP, we are really going to pay for our imperialistic dreams…
Need to study up on my economics.