September 10, 2011
The Post is world-renowned for having relied on David Lereah, the chief economist at the National Association of Realtors and the author of Why the Housing Boom Will Not Bust and How You Can Profit from It as its main expert on the housing market during the build-up of the housing bubble. Remarkably, it still seems to rely exclusively on economists who do not understand the housing market as sources on economic issues.
It headlined an article on President Obama’s stimulus package:
“economists give good reviews but say more needed on mortgage debt.”
The article included comments from Mark Zandi and the chairman of Macroeconomic Advisers. Both Zandi and Macroeconomic Advisers were dismissive of the idea that the housing bubble posed any serious threat to the economy.
In fact, it is easy to show that mortgage debt is not the major problem facing the economy, even though the housing crash has placed many homeowners in a precarious situation. Even after the crash, consumption continues to be a far larger share of GDP than its average over the post-World War II period and the saving rate – which is hovering near 5 percent – continues to be well below its 8 percent average.
Source: Bureau of Economic Analysis.
It is easy to show that the main factors keeping demand depressed are the sharp falloff in construction due to the overbuilding from the bubbles in residential and non-residential construction and the large trade deficit. The trade deficit was offset in the bubble years by bubble-driven consumption and construction, but it is ridiculous to envision the U.S. economy returning to this growth path.
The Post should try to find some economists with a better understanding of the economy as sources for its news articles.
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