Thursday, June 21, 2007

Rrecession?

Bloomberg reports that the housing market is tanking due to high interest rates. The housing market has been the major engine of post 9/11 recovery.  The rise in home prices and home building has been the only bright spot in a weak economy.  Thanks to ARMS (adjustable rate mortgages) people have been able to use their houses as ATMs.  By taking out second and third mortgages many people have been able to purchase cars, TVs, Stereo sets, refrigerators and other goods.  

But now the chickens are coming to roost.  Those low-low ARMs are now on a rocket powered trip to the stratosphere. Foreclosures are up. Again it is those re-adjusting ARMs that are causing the pain. It is a double whammy, interest rates are up and the value of housing is down.  Getting squeezed is all those marginal homeowners.

So what happens if the country does slip into recession?  One thing for sure, the sitting president will get the blame. George W Bush might just become the first resident of the white house to reach single-digit popularity.  The only thing propping up his poor numbers has been the economy.  With the economy possibly going south, Bush will be in a very bad place.  A bad economy will be the straw that breaks the camels back.

Bush has been very good for the Wall Street types, the dividend and bond babies of the upper crust.  But if the Stock Market tanks because W failed to control the wild speculation in housing, well, all bets are off.  W might just get impeached after all.  Remember it was the combination of a disastrous war and bad economy that did in Richard Nixon.
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