Not like they don't have their own bubble to deal with, but it is interesting to see how over-our-heads they think we are (and I agree).
The American housing boom is now the mother of all bubbles - in sheer volume, if not in degrees of speculative madness.
The Fed itself has warned that millions of punters are "in over their heads" with 100pc mortgages and zero up-front interest costs. The personal savings rate has turned negative for the first time since the early 1930s.
As fitting testimony to the bubble, estate agents, surveyors, and the army of workers linked to property made up 55pc of the 2m jobs created by the US economy from 2000 to 2005, according to Moody's.
The rolls of the National Association of Realtors have grown from 767,000 to 1.2m in five years.
The Americans are now drawing down 6pc of GDP from the equity in their houses each year, much of it to pay bills or splash out on a spanking new V-6 Chevrolet Equinox.
Goldman Sachs estimates that 68pc of this home equity withdrawal is spent outright on consumption. It warned that the drag on growth could reach 1.5pc of GDP by next year if property stalls.
It is portrait of a nation that is living further beyond its means than any advanced society has ever dared before
6 comments:
It is portrait of a nation that is living further beyond its means than any advanced society has ever dared before.
Kudos to the Brits for giving it to us straight. When our bubble pops, it's not going to be gentle like it was in the UK. We're looking at a major economic crisis that will probably (incidentally) take the European economy down as well.
"zerosum said...
When our bubble pops, it's not going to be gentle like it was in the UK."
How can it be gentle??? I believe I read that Christmas sales were down 27%. Thats gotta hurt the rank and file wage earner,
you know,store closings and layoffs, and all that stuff that goes south with an economy.
Did Keith ever mention whether Brits use exotic lending: neg arm, I/O do docs, etc.,like here in the states, or do they just pay a lot of monthly money right from the git-go for a 600 sq ft., million pound flat and forget about eating,drinking,clothing,and living in general.
How about it Keith? You are where the UK action is. Its easy for the English to slam us, we slam us all the time.
Is their soft landing really soft, or just a stall on the way down?
Inquiring minds want to know???
Considering European tax rates, I don't see how anyone could buy anything except for the top 5%.
the bubble will pop here too - hard, reallllly hard
The former British & French Empires has experienced what we are about to experience. Their experience is still fresh in their minds and the moment is known to historians as "The Suez Canal" crisis.
Egypt nationalizes the Suez Canal in 54, which is ownned by an Anglo-Frecnh Corp. England, France & Israel invade Egypt in an attempt to take back control. In the middle of the invasion they had to stop and go back home because THEY RAN OUT OF MONEY.
Mentally, they still though of themselves as an empire, but financially they were bankrupt. It affected there economies for decades, and within 10 years they had freed their colonies.
What is in store for us is likely on the same line. Economic drought at home, currency devaluation, and closing a lot of military bases because lack of $$.
"What is in store for us is likely on the same line. Economic drought at home, currency devaluation, and closing a lot of military bases because lack of $$.
"
No way! The world will continue to take our dollars, or else!
(See Iraq for details)
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