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Politics : Politics for Pros- moderated
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To: Constant Reader who wrote (132675)8/15/2005 2:18:32 PM
From: carranza2  Read Replies (2) of 793883
 
Thanks, CR, much appreciated.

The blogger said this:

Now here’s the thing. Is there a housing bubble in parts of the US? Yes, obviously. Is the deflation of that going to cause problems. Yes, obviously. But to the extent that Krugman is puffing it? Absurd.

I agree with 99% of the sentiment, except that we don't know the speed at which the RE bubble will burst. Will it bust or rust?

It seems as a matter of intuition--and we know how far that will get you when considering macroeconomic issues, vbg--that the more inflated the bubble, the harder the fall. I would agree with Greenspan that in that sense the local nature of the bubbling is very important. Thus, I suspect that the West Coast and other highly frothelized areas will get hit very hard, very quickly. The only question is the extent to which such a quick and hard hit will affect areas not undergoing extensive bubblization and what it means from a national perspective.
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