Posted on 2nd February 2012No Responses
Housing Is Not a Drag on the Recovery
The Morning Edition piece on President Obama’s new mortgage refinancing proposal implied that the housing market is a major drag on the economy. This is misleading.
The housing bubble was the motor of the economy during the last business cycle. It did this both by leading to a construction boom and by propelling consumption through the creation of $8 trillion of ephemeral equity. Now that the bubble has burst it can no longer play this role, however it is inaccurate to describe it as a drag on the economy.
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