Thursday, March 7, 2013
Households and Borrowing
In this article, Harm Bandholz, chief U.S. economist at UniCredit, believes that this is the year deleveraging of households ends. Do you agree/believe him? Is there a reason to be optimistic about the housing market? And does the net worth of U.S. households has rising 29% since 2009 impress you? The article also touches on the subject of borrowing, and how American consumers are starting to borrow more and deleverage less. Is this a good thing for our economy coming out of a recession? Will interest rates be able to stay low to keep encouraging people to borrow?
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In my opinion, it is clear that the economy is recovering from the recession; however, this will be gradually. The following link (http://blogs.wsj.com/economics/2013/03/07/u-s-deleveraging-not-so-fast/) reports the status on deleveraging in the U.S. economy. There one can see that the financial sector and the private sector is decreasing while the government is relatively increasing. According to the data showed by the FED, the United States are gaining momentum, despite ongoing budget fights, and hoping American exports would increase the demand in Europe, Asia, and Latin America. Nonetheless, one should keep in mind that the United will face the competition of the new emerging markets.
ReplyDeleteEspecially in a bubbled-market, it seems many Americans assume that houses and can be looked at as an investment where there is money to be made. Generally, houses should be seen as a highly durable good that loses value with its use. This being said, I'm pessimistic when it comes to the housing market--I feel as though too many people have too recently felt the negatives of the last burst-bubble; thus, many are--and rightfully so--wary of borrowing exorbitant amounts for a house.
ReplyDeleteAmerican consumers willingness to borrow more and de leverage less is the sign that consumer confidence is growing. Consumer confidence is necessary if the country wants to come out of recession. However, consumers should be careful regarding borrowing and be careful about prospective bubbles because at this moment it would be very hard for America to deal with another recession.
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