Re: PK on GDP surge - what could a socialist say ?

["Devine, James" <jdevine@xxxxxxx>]

something like that. If the housing prices fall a lot, some homeowners will be stuck with negative equity (debts exceeding house value) and will be driven into bankruptcy. This would put big pressure on the banks, while spending falls will encourage the second dip of the Dubya recession, which would put even more pressure on the banks. Pressure on the banks will discourage loans, while falling net worth by consumers will discourage the demand for loans. 

I can't quantify this. Dean Baker's done so, I believe. 

------------------------
Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine




> -----Original Message-----
> From: joanna bujes [mailto:jbujes@xxxxxxxxx]
> Sent: Friday, October 31, 2003 12:52 PM
> To: PEN-L@xxxxxxxxxxxxxxxx
> Subject: Re: [PEN-L] PK on GDP surge - what could a socialist say ?
> 
> 
> That's what I suspected...but, just to make sure, doesn't 
> this mean that
> folks are borrowing against "inflated" values? Now I totally 
> understand
> that it's only "inflated" if the bubble bursts; but, let's suppose,
> housing prices drop 20%? And there are additional job losses...say in
> hi-tech...and people can't pay the mortgage...
> 
> Who gets left holding the bag? Will it be like the S & L 
> crisis all over
> again?
> 
> Joanna
> 
> Devine, James wrote:
> 
> >it's based on the expected future market value of the
> >house, which is mostly based on its current market value.
> >
> >------------------------
> >Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine
> >
> >
> >
> >
> >
> >
> >>-----Original Message-----
> >>From: joanna bujes [mailto:jbujes@xxxxxxxxx]
> >>Sent: Friday, October 31, 2003 12:42 PM
> >>To: PEN-L@xxxxxxxxxxxxxxxx
> >>Subject: Re: [PEN-L] PK on GDP surge - what could a socialist say ?
> >>
> >>
> >> Here's what I'm curious about: I buy a house for 300,000. 
> Within five
> >>years, the house is valued at 500,000 (not unusual in the Bay
> >>area); now
> >>I re-finance. Is my "collateral" based on the portion of 
> the 300,000 I
> >>have paid off? Or is it based on the revised market value of
> >>the house?
> >>
> >>Joanna
> >>
> >>
> >
> >
> >
> >
> >
>