Krugman has an interesting chart, showing US exports rising
even as residential investment has been falling. Indeed, he writes,
“thanks to the weak dollar, they’ve risen almost enough to
offset the housing plunge”.
Now this is one of those charts where it’s well worth paying
attention to the axes. Since the second quarter of 2006, by
his chart, exports have risen from
0.11% of GDP to just over 0.12% of
GDP. At the same time, residential investment has fallen from
0.04.5% of GDP.
So yes, the fall in residential investment has been slightly
bigger than the rise in exports. But here’s the thing: at this point, a
37.5% increase in exports as a share of GDP – which is hardly
unthinkable, given the weakness in the dollar and the low level from
which we’re starting – would be enough to counteract
residential investment falling all the way to zero.
I think that there is a
policy moral here. Most of the macroeconomic disaster scenarios I have
been painting over the past five years had domestic construction
spending falling before exports began rising rapidly. We do seem to
have dodged that bullet completely.
God does indeed look after
fools, children, and the United States of America.
Of course, a fall in residential investment has knock-on
effects – but then again, so does a rise in exports, and I
doubt that anyone would care to hazard a guess as to which one’s
multiplier might be greater.
In the 1990s, we had a tech-stock bubble, the worst
aftereffects from which were mitigated by the housing bubble. Could it
be that after a decade of asset-price bubbles the US has finally found
itself making money by actually making things that people
want to buy? I’m not convinced, but it does seem to be the
most likely soft-landing scenario.