Sunday, July 31, 2005


60 % of U.S. in a housing bubble

Bloomberg News is reporting some troubling predictions by Wall Street economists:
Federal Reserve Chairman Alan Greenspan isn't worried about the hot U.S. housing market so he isn't cooling it off by raising interest rates faster.

Worry, say Wall Street economists including David Rosenberg of Merrill Lynch & Co. and Stephen Roach of Morgan Stanley.

The economists say the Fed must act, for a simple reason: The U.S. has become so dependent on real estate and construction to fuel growth and jobs that an eventual, wrenching correction has the potential to sink the entire economy.

"Act now and cut off the pinky, or wait till later and risk slicing off the entire hand," Rosenberg said in an interview last week. "Either way it hurts, but you can still type with nine fingers."

The story goes on to say that Rosenberg estimates that 60% of the country is in the midst of a housing-price bubble.