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If Spain’s crisis deepens Europe’s recession, it could tip the entire world economy into a stubborn slump. The ramifications would be enormous, including: reduced odds of Barack Obama’s reelection, assuming a weaker U.S. recovery; less political cohesion and more social unrest in Europe (even now, the European Union’s unemployment rate is 10.2 percent); and growing pressures in many countries for economic nationalism and protectionism.
Spain is suffering a hangover from what economist Desmond Lachman of the American Enterprise Institute calls “the mother of all housing booms.”
Just so. At the peak in 2006, “Spain started nearly 800,000 homes — more than Germany, France, Italy and the United Kingdom combined,” noted a 2009 IMF report. Construction workers represented one in eight jobs (the U.S. figure at the height of the American real estate bubble was one in 18). Even after correcting for normal inflation, Spain’s home prices more than doubled from 1995 to 2006.
Samuelsson is, as usual, wrong. Spain needs to keep interest rates low so people can occupy all those homes. If industrial work is unavailable infrastructure building is a substitute. If the big banks and the speculators get pinched it is what they deserve.
Another ticking time bomb, IMO is Australia. They too are facing a housing bubble and retraction of the Chinese economy is going to seriously harm Australian exports.
Anybody notice that housing is not a productive but a speculative investment. Housing does not make more houses at lower unit costs but does, while the bubble is growing, make a lot of speculative gains. The money invested in housing in all these places, including the US, should have gone into factories, transportation and improved energy use. Those investments would have been productive not speculative.
Samuelsson is, as usual, wrong. Spain needs to keep interest rates low so people can occupy all those homes. If industrial work is unavailable infrastructure building is a substitute. If the big banks and the speculators get pinched it is what they deserve.
There are not enough people for those homes no matter how low interests rates are besides 25% don't have jobs. Half of young people don't have jobs, you know the very people who pair up and start their own families can't afford to do it.
Maybe the world economy had better figure out a way to get jobs, or at least buying capacity, into the hands of the young people before either collapse or revolution.
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Dutch government near collapse
