Economics and similar, for the sleep-deprived
A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?
Update: seemingly not
Update: Oh yeah!
Wednesday, April 07, 2010
You can't have a housing crisis without a crisis in housing
Paul Krugman is telling it like it is on his specialised subject of exchange rates and trade. My main topics of conversation these days are babies and house prices, however, so I think I can help him out on this one:
There have been many stories about the decline of the birth rate in 2008, with almost all attributing it to the recession. But James Trussell raises an interesting point: doesn’t it take nine months from conception to birth? Abortion aside, to reduce births in the first three quarters of 2008 in response to a recession that started in Dec. 2007 would have taken pretty impressive rational expectations.
What are we missing?
Basically, two things, both related to the difference between the overall cycle of output and the situation of the average American consumer.
1. You don't in general start a family unless you are securely established in a house which will be suitable to put the family in. As house prices rose, fewer people were in this situation. As foreclosures rose, even fewer people were in this situation.
2. And foreclosures were a leading indicator of the crisis and recession: as The Australian correctly notes, those of us for whom the share price of HSBC was a big deal were aware that something was going very wrong in California in late 2006/early 2007.
In any case, it's not exactly unknown that consumer confidence is a leading indicator; that's why it's so assiduously surveyed. The same lack of confidence that had people postponing family events in Q1 07 was part of the causal process that put the economy into recession in Q1 08.
this item posted by the management 4/07/2010 01:56:00 PM