Wednesday, August 22, 2012

Today's links

1--Corporations hoard record cash (From the archive), Bloomberg video

2--Still Getting the Housing Bubble Wrong, CEPR

...Bubble-inflated house prices created close to $8 trillion dollars of housing equity. The housing wealth effect implies that people would spend between 5 to 7 cents on the dollar of this additional wealth, creating between $400 billion and $560 billion in additional annual consumption. The property taxes on inflated house prices also helped support perhaps $80 billion or so in state and local government spending. For good measure there was a bubble in non-residential real estate that followed in the wake of the housing bubble, which created a boom in this sector as well.


When the bubble burst, there was nothing to replace the lost demand. Residential construction fell by more than 4 percentage points of GDP ($600 billion annually in today's economy). It fell below normal levels because the boom of the bubble years had led to record vacancy rates. Consumption plunged because the housing bubble equity disappeared. When the wealth was gone, the consumption that it generated also vanished. And, we saw cutbacks in government spending at the state and local level in response to the lost tax revenue.

All of this seems clear and simple. We lost $1.2 trillion to $1.4 trillion in annual private sector demand. Some of this has been replaced by the federal government's budget deficits, but not enough to fill the gap. So what would have various plans to rescue housing done?

3--China bubble in 'danger zone' warns Bank of Japan, Telegraph

4--"Many members” believe more QE may be needed, Bloomberg

5--Zombie China, macrobusiness

6--Wages and compensation stagnating, state of working america (chart)

7--CBO: Prepare for recession, pragmatic capitalism

8--CBO: Even if Fiscal Cliff Avoided Unemployment to Remain High, WSJ

9--The US debacle in Afghanistan, WSWS

10--Existing Home Sales: Inventory and NSA Sales Graph, calculated risk




1 comment:

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