Quick summary of a nice piece in today's WSJ:The severity of this economic downturn is rooted in the household leverage crisis, which in turn is closely related to the housing market. If the housing market continues to deteriorate, then further de-leveraging of the household sector will likely keep a lid on any rebound in consumption. In other words, the future of consumptionand house prices are closely linked.
--"Housing Bubble Fueled Consumer Spending"; The Wall Street Journal (6/25/09)
--If you borrow a lot against an asset that then falls in value . . . you're in trouble.
--If lots of people do that . . . the economy's in trouble.
Read the piece, though; the authors’ methodology is quite clever (and their logic is compelling).
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