It's remarkable how widely the bag holders of the US RE bubble are distributed around the world. The real victims are not the homeowners who have no stakes in "their" houses, but the European banks, the Norwegian townships, the Australian pension funds, as well as the US banks that financed those houses.
One can even argue that because an estimated half, if not more, of the losses from this debacle are non-US, while the housing will remain in and benefit the US, this may turn out to be an advantage for the US long term. Just like when the Japanese bought all that overpriced US real estate some twenty years ago, and then turned around and sold it to the locals at huge losses a few years later.
The conventional wisdom is that the coming collapse in the US consumption binge will hurt greatly the US. My view is that the world is in for a surprise. Much of this US consumption is imported goods. Their collapse will help the US balance of payment (and GDP). At the same time, agricultural goods prices are soaring, further boosting the US balance of payments. A collapse in the price of oil, if we get a world wide recession, will be icing on the cake. When this cycle is complete, I will not be surprised to see the US balance of payment deficit reduced greatly, if not eliminated. |
