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A snip from How the World Works:

Where is David Lereah? The always-look-on-the-bright-side chief economist of the National Association of Realtors got a fair amount of media play yesterday, when he used a mild monthly bump-up in existing home sales to declare that the bottom of the housing market had been reached last September. But today, with new home sales going off the cliff (in the West, new home sales in January were 50 percent lower than a year ago!), he's nowhere to be seen.

One reason is that the existing home sales data was released by Lereah's trade group, while the new home sales numbers come straight from the Commerce Department. But if I were him, I wouldn't be taking calls today, because any way you cut it, today's new home sales numbers, in conjunction with last week's housing start figures, are bad news for those looking for a rebound. If it weren't for Tuesday's stock market plunge, the 16.6 percent monthly drop in new home sales would likely be the lead economic story. Not least because the numbers add fuel to the already blazing debate about whether troubles in the subprime lending industry are going to move into broader territory.

[Some] analysts, like Bloomberg's Caroline Baum, are already suggesting that risky business is set to spread from the subprime sector (where, by definition, we expect defaults to happen) to more reputable corners of the lending industry. In her column today, Baum writes that stress is spreading from subprime loans to what are known as "Alt-A" loans -- mortgage loans made to borrowers who have good credit ratings but don't want to provide complete documentation on their income and assets.

It is worth reading all Leonard's blog reports (and links) since yesterday.

If I understood well, the sell off in Shanghai started out of concern that the Chinese government was going step up its efforts to curb speculations in the stock market, and perhaps real estate market as well.
That is what capital gain taxes, raising interests or reducing the money available for lending are for. This makes the following model sensible: all this globalization process has the core function to postpone recessions or collapses in traditional markets (especially US), by vastly expanding the pool of new market participants, and solving one bubble problems by greater bubbles elsewhere or across the world. That may continue until the globalization hits the limits of this finite world. China is a huge new space for a few more bubbles. But once Chinese government shows some intent to limit the bubles, markets get very nervous acroos the globe. No ingenuity can keep insanity forever.

by das monde on Thu Mar 1st, 2007 at 08:05:27 AM EST
That may continue until the globalization hits the limits of this finite world. China is a huge new space for a few more bubbles. But once Chinese government shows some intent to limit the bubles, markets get very nervous acroos the globe. No ingenuity can keep insanity forever.
One person's insanity is another person's consistent growth, I guess--check out this chart.  If there were stock market charts available back to 1500 they would likely have this same slope.  IMO, human ingenuity will continually improve our lot.

But as this chart shows, growth has ups and downs, as it has in the last five years.  This current down will likely be another bump in the road on another long economic boom.  Before the 2001 mini-recession we had a boom that lasted from Bush Sr, through all of Clinton, and through the second month of George Jr, 10 years in total.  I would think we're in the middle of another one--at least until 2010.  But only time will tell.

by wchurchill on Thu Mar 1st, 2007 at 07:50:20 PM EST
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