When you look at the boom in the housing market, don't forget that what you're seeing is the second leg of financial deregulation. That's comforting, in a way, because it says what's happening with household debt and house prices is part of a once-only adjustment in response to a change in the economy's structure. But it's also discomforting because, if you remember, the first leg of financial deregulation in the 1980s ended up with wildly …
showed first 75 words of 1093 total

showed last 75 words of 1093 total
…belts, increase their rate of saving and cut their consumption. Consumer spending has grown very strongly for a long time, bolstered by a "wealth effect" from the rapidly rising value of people's homes. When the housing boom turns to bust, consumer spending could weaken significantly. And if, at that time, the economy happened to be weak for other reasons - such as the continuing weakness of the world economy - the blow could be severe.