U.S. at risk of recession from housing

[UpInArms]

Source: Reuters

ACKSON HOLE, Wyoming (Reuters) - The weak housing market could topple the country into a full-blown recession and the Federal Reserve should slash interest rates aggressively, one of the country's most prominent economists warned on Saturday.

"Lower interest rates now would help," Martin Feldstein, president of the influential National Bureau of Economic Research, told an annual retreat of central bankers and academics, including a number of senior Fed policy-makers.

Feldstein, who warned of a "multiplier effect" from declining home prices and lower consumer spending, said a cut of as much as 100 basis points might be warranted.

<snip>

Feldstein said he understood there was a moral hazard issue if the central bank was seen to be bailing out reckless speculators, whose rash bets got the country into the problems it now faces.

Read more: http://www.reuters.com/article/businessNews/idUSN0130560120070901?feedType=RSS&feedName=businessNews&sp=true

[sam sarrha]

1. bu$h program to help crisis wont help people who couldn't afford to pay the loan payments

the people were duped into contracts, application info was changed by the mortgage people like the guy working for walmart who they added a 0 to his income and qualified.. that F'n psychopath in the white house will never help the poor.. just the mortgage companies

[Gregorian]

2. I don't get it. Lower rates?

They're already low. And even if they lowered them, lenders aren't going to lend to those who need it the most.

I don't get it. But then I'm very slow. So it may just be me.

[Doctor_J]

10. It might get some of homes that have been on the market for years

to move. I think that's the idea.

[NC_Nurse]

3. Ackson Hole, where's that?

Maybe it's where the acksholes meet...

[MissB]

4. It is right next to Jackson.

Ackson just couldn't afford the "J".

[lapfog_1]

5. If we lower interest rates then the countries that own

10s of billions (or is it 100s of billions or trillions now?) would have no incentive to buy more T-bills. That's what we are using right now to pay for our federal deficits. Worse, as foreign held T-bills mature, they might decide to dump the asset and buy something else (no more rollovers). And that might worse than a recession. Think foreign dictated restructuring of US debt, possible runaway inflation and currency devaluation... or at the very least, a prolonged recession (like what happened to Japan for most of the nineties).

Any way you slice it, I don't think there is a "soft landing" from the housing bubble. Hope I'm wrong.

[onewholaughsatfools]

6. seems to me, someone is asking

the investors, the house flippers, the banks to give me some protection, or should i be blunt and say bail me out cooperations ... this does not help the people who have to pay this mortgage and can not do it.....AMERICAN PEOPLE ARE BEGGING FOR HELP and the investor will be the one who gets the help.......bankrupsy is up 97%...

[Kittycat]

7. Seriously? 97% - do you have a source to site?

Not that I don't believe you, I just want to read more about it, and also over what time frame that number has risen. That's just an insane number.

[David__77]

8. It won't make much difference.

This credit bubble is much too large for such an action to do much. It will only smooth out some of the effects, but in no way diminish them over the longer term. It could be argued that a shorter, deeper correction would be better from the longer-term strategic perspective.

[kineneb]

9. the worst is still ahead of us

see chart of ARM resets:

http://patrick.net/housing/contrib/arm_resets.html

...manure, meet ventilator...

recession? thought we were already there...price of one dozen jumbo eggs jumped from $2.79 to $3.09 in one week...

[Quantess]

11. Ah, yes. Remember when Iraq was "at risk" for civil war?

:eyes: