Interesting commentary by Gary Duncan in the London Times...for the entire essay, click here.
Conditions in the stricken US housing market worsen
"Three key factors will now be crucial in determining how bad things become in the world’s biggest economy. The multibillion-dollar question is how severe a knock consumer spending, the driving force of US growth, takes from the double whammy of the housing slump and soaring fuel bills.
The blow is certain to be hard. Just how hard, though, will partly depend on how well Americans’ usually resilient confidence holds up. Hallowe’en has passed, but the extent of fear over personal and economic fortunes will be critical. The remaining two factors will play a big role in settling that.
First, does the credit squeeze in the financial markets persist, or get worse, so that banks become much less willing to finance the borrowing that pays for Americans’ high-spending habits.
Secondly, how far and fast can the US Federal Reserve cut interest rates to shore-up confidence, incomes and spending power. A big worry is that the Fed’s scope to act will be hampered by its serious worries over the extra inflationary threat being created by the leap in oil prices, and a slumping dollar. "
The blow is certain to be hard. Just how hard, though, will partly depend on how well Americans’ usually resilient confidence holds up. Hallowe’en has passed, but the extent of fear over personal and economic fortunes will be critical. The remaining two factors will play a big role in settling that.
First, does the credit squeeze in the financial markets persist, or get worse, so that banks become much less willing to finance the borrowing that pays for Americans’ high-spending habits.
Secondly, how far and fast can the US Federal Reserve cut interest rates to shore-up confidence, incomes and spending power. A big worry is that the Fed’s scope to act will be hampered by its serious worries over the extra inflationary threat being created by the leap in oil prices, and a slumping dollar. "
"Amid all the uncertainty, what is beyond doubt is that the danger of a deep US downturn is greater now than for a long time. Americans will have much to give thanks for if they can escape that painful fate. "
No comments:
Post a Comment