Peter Blane


Bubbles

It seems, recently, the headlines have had 2 different themes about CPI and the housing industry.  1) That CPI is down, people are saving money, and cutting back, and 2) that home construction and building permits are “up”.

Look at consumer credit.  The federal reserve’s statistical release (August 7th 2009) for June reported “Revolving credit decreased at an annual rate of  8-1/4 percent, and nonrevolving credit decreased at an annual rate of 3-1/2 percent.”  (revolving credit would be like credit cards, nonrevolving credit would be like a mortgage).

So, you have people, on average, NOT taking on new debt,  BUT we have increased construction.   Let’s look at unemployment.  The Bureau of Labor Statistics, on August 7th 2009, released the unemployment rate of 9.4% – noting little change for the past couple months.

We have a pretty historically low CPI, a historically high unemployment rate, shrinking personal debt, and a historically high savings rate.  It doesn’t sound like people are ready to start buying homes again.  Yet, construction is increasing?  Something isn’t adding up.  Unless this is a result of the Emergency Economic Stabilization Act of 2008 (TARP).  If these numbers are a result of TARP funds being pumped into “the system”, perhaps this will result in an attempt to “re-inflate the bubble”.  So, you could say I fall in the “double dip recession” group.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: