I’m still waiting for Dean Baker’s
blog entry on why the risk of a credit crunch means that we should start importing
more white collar professionals now. But in the mean time, enjoy this, from
York Times leader column:
More than 20 percent of global private debt securities is now tied to housing
in the United States. That works out to $7.5 trillion — far larger than
the market for United States Treasuries. So if America’s mortgage market
heads south, the losses could be widespread.
The odds of a global financial crisis are still low, according to Mr. Zandi
and Mr. Licari, but they are rising. There is not a lot now that can be done
about the risks in the mortgage market. But the growing possibility
of hard times ahead is another argument for rolling back many of the recent
excessive tax cuts, so the government will have more resources available
to respond if a crisis comes.
Of course, the Times doesn’t mention that an enormous chunk of that $7.5 trillion
is made up of agency bonds from Fannie & Freddie, which are simply not at
risk. Why be honest when you’re taking a running jump at an anti-Bush punchline?
Bush has not been a great president, but I don’t think you can blame lax lending
standards in the subprime mortgage market on him. Hell, thanks to his fiscal
policy, interest rates are probably higher than they would otherwise