Posted on 11/18/2007 7:21:16 AM PST by Huck8119
IN 1929, days after the stockmarket crash, the Harvard Economic Society reassured its subscribers: “A severe depression is outside the range of probability”. In a survey in March 2001, 95% of American economists said there would not be a recession, even though one had already started. Today, most economists do not forecast a recession in America, but the profession's pitiful forecasting record offers little comfort. Our latest assessment (see article) suggests that the United States may well be heading for recession
(Excerpt) Read more at economist.com ...
Exports soared at an annual rate of 16% in the third quarter. Thanks partly to strong export growth, revised GDP figures due on November 29th are likely to show that America's output grew at an annual rate of around 5% between July and September.
I fail to see a recession around the corner. A slowdown is likely (unless exports continue to boom at will) but there is no evidence of a recession on the near horizon.
“but the profession’s pitiful forecasting record”
let’s check on this author’s record in two quarters.
Exports and foreign investment due to the weak dollar will be a surprise IMO. No recession around the corner, despite what the Hillary machine is trying to make the public believe.
That "70%" number is one of those phony statistics that's cited so often that it becomes "truth". About 1/2 of that consumer spending is business-to-business spending.
And the economy isn't driven by spending anyway. It's driven by production. If people are all working (producing), they'll have money to spend . . . even if the values of their houses have dropped.
I have a bit of a contrarian view on consumer spending. I think falling housing prices mean that more people will have money to spend instead of sending it to the mortgage company. Also, all of those ‘record foreclosure’ people aren’t sending money to the bank and are probably spending it (knowing those types of people). The retail company I work for still has comp sales up around 6% year over year, which has been consistent pretty much all year. Last year it was higher but we haven’t seen any slowdown in the 4th Quarter.
The odds of a recession have risen but it may not yet materialize. We’ll just have to see. I think the analysis here is good. However, while the minimize the ability of the export sector to generate growth (it’s 14% of the economy), they maximize the ability of the housing sector to weaken the economy (it’s 7% of the economy.) Business spending is still expanding and it remains to be seen just how much consumers will pull back. The number of households that are facing foreclosures or whatever is still a very small part of the population. I expect people to save more, which is a good thing.
Figures were rather good during the first Bush,but the average American just knew 1929 could happen any second then...
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I’ll wait for Treasury Secretary Paulson to tell us that The Economy Is Still Strong, etc. He did so well assuring us that the subprime mortgage thing was well contained that any official statement from him will be a perfect negative confirmation.
The mortgages are already committed.
You are trying to split an unsplitable hair. Production and consumption are intimately related and you cannot have one without the other except for what accumulates in or draws down from warehouses.
Furthermore there is the little lesson that Milton Friedman taught us about money being the lubricant that keeps the whole business going, and a lot of money just got taken out of circulation.
Current mortgages are of course—I’m talking about upcoming buyers or those that move. Mortgage rates have also dropped in recent months.
Space aliens could show up waving wads of cash to buy residential real estate at any price.
We knew our mortgage payment would rise as the interest rates climbed, and we realized we were getting into an ARM at bottom of the rates, but additional increases, like homeowner’s insurance that has risen 300% in two years, mean we really have to keep track of the pennies.
Where do you live that Homeowner’s insurance has risen 300% in 2 years? It hasn’t gone up at all for me in NC. Also, I’d suggest refinancing to a fixed rate if you have an ARM now. You can get well under 6% fixed with 1 or 2 points down and just barely over 6% with no points and little or no closing cost.
One, those that move, are in much worse than neutral position because of the every considerable transaction costs.
It is only new purchasers who will be better off, but for every purchaser there is a seller who in some sense is worse off.
“....but despite what the government says about inflation we are paying more for virtually everything we buy...”
“From October 2006 to October 2007, finished goods
prices advanced 6.1 percent. Over the same period, the index for finished energy goods climbed
16.6 percent, prices for finished consumer foods rose 7.1 percent, and the index for finished
goods other than foods and energy increased 2.5 percent.”
They know...
#1 is their mortgage payment cheaper? What's their monthly/annual/5 year savings?
#2 How much cheaper can they get a place now?
#3 How long have they owned the place? If it's more than 3 years they probably still have decent equity in most places
#4 What is the exact cost to move? You can get no cost mortgages now.
#5 What is their old interest rate? If it's greater than 6 % fixed, it'll be cheaper now
Dozens of other factors
It's not really as simple as you make it out to be. People tend to pay the mortgage and other expenses, save a bit, and then spend the rest. If the move means their mortgage costs are now cheaper and all other expenses (food, gas, savings, etc) are still the same, odds are they will spend more.
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