Potential for Crisis Remains
This (Fed) tightening cycle may have already ended without a crisis. Nonetheless, the potential for a crisis remains (housing and autos are two candidates). We'll be watching to see if weakness in those areas impacts other areas (e.g. banks or spreads). By definition, a problem becomes a crisis when it starts to impact other areas (i.e. contagion).
Following is a list of the 9 Fed tightening cycles of the last 35 years, and the associated financial crisis.
1970 Penn Central Railroad bankruptcy
1974 Franklin National bankruptcy
1980 First Penn / Latin American loans
1984 Oil Patch / Continental Illinois bankruptcy
1987 Black Monday stock market - 1 day 22% decline
1990 S&L crisis / Bank of New England (Federal Bailout)
1994 Mexican Loan defaults (Federal Loan guarantees)
1997 Pacific Rim / Russia defaults -> Long Term Capital
2000 Stock Market bubble collapse
2006 ?
Guess I better start training the dog to haul the teepee across the Great Plains. We won't have wheels when this new great depression hits, right?
Housing has accounted, directly and indirectly, for about 30% of employment growth during this expansion, including employment in retail and in manufacturing producing consumer goods, he said.
And
another 25%(?) of "employment" growth has been from expansion of FEDERAL "jobs"
Nouriel Roubini is former member of Clinton's Council of Economic Advisors.
I rest my case.
Housing slump? Maybe he is right, but someone needs to tell all the people who are still building those huge mansions just as quick they can tear down the little old cottages.
When I drive around Houston I feel like I am in a different city every month or so. The old landmarks are gone and something new is going up.
As the old saying goes, economists have predicted 21 of the last 2 recessions.
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“You know it’s said that an economist is the only professional who sees something working in practice and then seriously wonders if it works in theory.” —Ronald Reagan