Sheila Bair’s take on the housing recovery:
Despite a recent upturn in sales and prices, “the housing market is still very weak,” said Sheila Bair, who headed the Federal Deposit Insurance Corp. from 2006 to 2011. Bair, speaking at a Washington “economic summit” organized by The Atlantic magazine, warned homeowners that “we need more experience and data to know if it’s really turned around.”
Well, we’re in a recovery. The question isn’t whether or not but could anything happen to turn it around. The answer to that appears to be yes.
Without hearing Sheila Bair’s entire message on the subject, we might rightly speculate that perhaps she means that the recovery may be so artificially supported that it is simply unsustainable. Can the Fed wind down? Will the Fed wind down? It has said that it is considering not selling off the bonds it’s holding but letting them mature. Could the US economy wait things out while housing values creep up enough without other factors unsettling the whole plan? How inextricably connected and dependent is the US economy to the rest of the world? Will a crash of China’s real-estate market send shock waves around the world and cause major damage to the US or simply reestablish the US at least somewhat as the safe haven and allow US manufacturers to surge?
Perhaps the Chinese would have to greatly lower their expectations to once again compete against the lowest-paid nations in the world. How much chaos would China have to go through before they’d settle down to a more realistic growth pattern, one that wouldn’t destroy the environment, one that would allow the Chinese people to freely interact with the other citizens of the world?