Housing, oil and the dollar
Three insightful articles on the state of the U.S. economy have recently appeared. The first is from the The Economist and
regards the U.S. housing market:
Even the Fed’s most hawkish governors are now hinting at more cuts in interest rates. The weak dollar and strength in emerging economies will indeed boost exports…. Even so, powerful signals point to a long period of sub-par growth. The huge backlog of unsold homes suggests house prices have further to fall—by around 20% going by housing futures. Lower house prices will force Americans to spend less and save more—a process that has hardly started.
A week later, The Economist elaborates the housing theme:
For three decades baby-boomers have helped push prices up: they settled down, then bought bigger houses and second homes. But as the first of them celebrate their 65th birthdays in 2011, this may change. The old sell more homes than they buy, according to data covering 1995-2000 (see chart). The ratio of old to working-age people is expected to grow by 67% over the next two decades. Will the younger generation be able to buy all the homes on the market?
Both articles are written for sober but nontechnical audiences. Both are filled with pertinent insights. To read both in full is recommended to you.
Maybe even more interesting than the national housing market is the intersection of the international oil market and U.S. monetary policy. The American Conservative brings a lengthy article on oil and the dollar, also worth reading in full:
There aren’t many historical examples of advanced, industrialized nations relying on a combustible mix of debt and fiat money to the extent the U.S. does. Argentina is one, as well as Germany during the early 1920s…. The relationship between oil and the dollar is paramount, for oil is our Achilles heel.
The three articles together, which are less dismal than the brief quotes above suggest but are nonetheless as serious in intent as they are in tone, prime the reader to begin to understand what is really going on in the U.S. economy today and to appreciate how greatly and fundamentally the approaching economic troubles differ from anything any of us remembers. Read and learn. The articles are enlightening.
HJH
[The Economic Nationalist pretends to remain on hiatus.]