Wednesday, June 29, 2005

Look On the Bright Side

This article makes the argument that if the Fed is going to keep printing money, than that excess liquidity is better spent on housing here, then on some television factory in China. The point is an interesting one; however, I think Roach would argue that the final result will likely be more pain than was originally intended and therefore the rampant creation of more money was/is irresponsible.

Snip...

“The apparent reliance on housing to spur job growth could mean we're cruising for a fall if the red-hot sector shows signs of cooling. But it's also possible that housing was the bridge that helped us get over the post-bust job chasm. Between June 2004, when the Federal Reserve began raising rates, and April 2005, Bangalore notes, "housing and related industries have accounted for 13.0% of private sector payrolls." In other words, as talk of a housing bubble increased, other nonhousing-related sectors were retaking the lead in job creation. To paraphrase Thomas Jefferson, it could be that a little bubble now and then may be exactly what this economy needed.”

Rest of article...

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