The last log on the fire

Posted on January 23rd, 2008 in Culture,Economy by Robert Miller

The Feds have managed to stave off a free-fall in the American stock market, with less success in manipulating foreign markets. But their dramatic lowering of the interest rate and the promise of further reductions to follow, will do little to re-activate the housing market if the lending institutions do not follow suit and loosen their now very tight lending practices. Borrowing maybe cheap, but can you get a loan? I assume the institutions will follow and attempt to re-ignite the housing market, but we will not see a return to the crazy days of sub-priming a loan to anyone with a normal body temperature. By lowering interest rates in such dramatic fashion, in the face of inflationary pressure from huge oil costs and the sub-prime fiasco, we are admitting to ourselves, even if the political/economic pundits are unwilling to tell the public, that the housing market is really the last log we have to put on the fire to keep the economy warm; re-igniting even a reduced housing market frenzy is about all we have left.

We have such overwhelming personal debt, with a negative savings rate and an economy that depends on consumption, that there is no place else to go except through putting hot air into another housing bubble. We have exported several million jobs under the current administration and, using a straight line projection, our balance of payments will equal our GDP sometime in the next decade or so. What does it mean to you if our GDP is equal to our negative balance of payments? Does it mean at last, we are all working for China? Is that what the Cold War meant? We defeated the Soviets and their brutal system of suppression only to go to work for the Chinese? Maybe we should all begin to learn a foreign language.

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