In the once widely-disdained credit cycle proposed by Hyman P. Minsky, we are currently in the panic stage of the housing/mortgage market, and interestingly, John Cassidy of The New Yorker does not blame Bush, but Fed Chief Greenspan for his decisions back in 2003 (and since then).
But as I don’t know much about economics, I’d like to just highlight a couple quotes of interest (The New Yorker; Feb 4, 2008) that raised my eyebrows over my egg burrito this morning:
“According to Dean Baker, the co-director of the Center for Economic and Policy Research, average house prices are falling nationwide at an annual rate of more than ten per cent, something not seen since before the Second World War. This means that American households are getting poorer at a rate of more than two trillion dollars a year.”
“It’s hard to say exactly how falling house prices will affect the economy, but recent computer simulations carried out by Frederic Mishkin, a governor at the Fed, suggest that, for every dollar the typical American family’s housing wealth drops in a year, that family may cut its spending by up to seven cents. Nationwide, that adds up to roughly a hundred and fifty-five billion dollars…”
Makes you kinda want to stay home and not spend, doesn’t it?