by This is a very short note, prompted by the increasing fears of the default and its consequences, which I think it's greatly exaggerated, and the relatively optimistic views about the effects of monetary tightening. Sure enough, as I noted recently, an adjustment, and lower spending, associated either with an agreement with Congress Republicans (very unlikely) or as contingency plans (14th Amendment of other solutions) are implemented, could certainly through the economy into a recession. But I'm somewhat skeptical about that scenario.On the other hand, I'm less sanguine than Krugman on the possibility of a soft landing. Note that I don't think our situation is as good as the unemployment numbers show, and that the recovery, while fast, brought is back to a position with underutilized
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Matias Vernengo considers the following as important: Housing crisis, Krugman, recession, Soft-landing
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This is a very short note, prompted by the increasing fears of the default and its consequences, which I think it's greatly exaggerated, and the relatively optimistic views about the effects of monetary tightening. Sure enough, as I noted recently, an adjustment, and lower spending, associated either with an agreement with Congress Republicans (very unlikely) or as contingency plans (14th Amendment of other solutions) are implemented, could certainly through the economy into a recession. But I'm somewhat skeptical about that scenario.
On the other hand, I'm less sanguine than Krugman on the possibility of a soft landing. Note that I don't think our situation is as good as the unemployment numbers show, and that the recovery, while fast, brought is back to a position with underutilized capacity, and more slack in the labor market than what the official numbers suggest. But that's another story (discussed before several times). At any rate, the number I would look is the one below: New Privately-Owned Housing Units Started. Basically, construction.
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However, the current and fast increase in interest rates by the Fed, with direct impact on mortgage rates, not only affects the construction of houses (less people willing to buy, less construction), but also affects the patterns of consumption of a large share of the population. And construction is already declining. Sure enough the Fed might stop the interest rate increases, and Biden might continue spending, even expanding his social agenda (that's were this gets iffy), and this might look like 1966. But I wouldn't expect a lot from fiscal policy at this point, and the Fed is not helping. My two cents.