Housing Will Lead Us Out

Housing recovery is highlighted as the driver of recovery in

this article by James Cramer:

…If all that seems depressing, take heart. The same sector that got us into this mess—housing—will lead us out of it. The federal government, sub rosa, has determined that we will have a European-style financial system, consisting mainly of the four megabanks I mentioned—Citigroup, JPMorgan, Bank of America, and Wells Fargo. These are the institutions that will be deemed too big to fail and will be protected no matter what. In return for the creation of the jolly oligopoly, these four banks will have to make mortgage money available to all at a reasonable price, something that will help real estate bottom and begin heading upward before this time next year. Of course, it helps that Fannie Mae and Freddie Mac are nationalized and can absorb hundreds of billions in losses to make it so. It will also help that I expect short-term interest rates to decline to 1 percent as the Federal Reserve wakes up to the notion that the battle was, is, and will be deflation, not inflation, so rates have to be as low as possible to stir economic activity and drive unemployment down. Once that happens, and housing rebounds, the rest of the economy will follow.

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2 Responses to Housing Will Lead Us Out

  1. Cindy says:

    I remember a builders association being quoted in the news a few years ago saying housing was “saving the economy” post-9-11. Was the artificial run up in prices, and loose lending, “saving the economy?” Or perhaps when toxic loans were resold as “investments,” was that saving the economy? I wondered back then, will they also take the blame, when this house of cards comes down…of course they didn’t and it was a rhetorical question. But now it’s already predicting that when/if we come out of this, housing again will grab the credit. IMO some of the people in these industries that got us into this mess should be prosecuted criminally, not allowed to benefit from a bailout. Same goes for some of the govt officials who helped them take out the economy.

  2. frothingdeveloper says:

    That’s an excellent point. Many people are unaware that the Housing Industry is responsible for the elimination of childhood polio and for the Emancipation Proclamation. It’s also poorly understood that the Housing Industry was in the first wave that hit Omaha Beach on D-Day.

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