Death Star Economics



The housing market doesn’t care about the fiscal cliff

The pendulum of market-moving news has swung back to the US fiscal cliff. Not much has happened there since Greece was re-rescued, but somehow fear got the world in its grips. And what triggered the panic? Harry Reid, Senate Majority Leader, saying that there was little progress. Hang on, wasn’t there just as little progress last week? It’s like the news are recycling themselves. Either way, the wave of fear of the US falling into recession come 2013 depressed stocks all around the world.

If you want to believe the Wall Street Journal, however, the US economy should refocus on the housing market, which is blossoming in the background:

[…] an improving housing market is buoying consumers’ spirits and giving the economy its biggest lift since the real-estate boom. Macroeconomic Advisers projects the economy will grow at a 1.4% annual rate in the fourth quarter with housing contributing 0.4 percentage point. IHS Global Insight is projecting a 1% growth rate, with housing contributing 0.53 of a percentage point – the largest contribution since 2005.

And the best thing about it: so far the housing market doesn’t care about the fiscal cliff. Not like it won’t if America goes back into recession, but at this point things are still looking up. read article

The counter example are companies paying dividends, which are freaking out about the worst case scenario. Since October, US firms have paid out the largest amount of special dividends since 2010, to avoid the possibility of paying higher taxes come January. The current tax rate sits at 15% but could increase to 40% upon the expiration of Bush era tax cuts and – again – if no deal is struck on the whole fiscal cliff. read article

In European news, the EU approved the restructuring of four Spanish banks, Bankia, NCG Banco, Catalunya Banc and Banco di Valencia, the latter of which will be sold to CaixaBank. The remaining three will shrink their balance sheets by 60% until 2017. Upon the restructuring next month, the Spanish rescue fund FROB is eligible to receive another €100bnread article

The EU is also making it easier to sue rating agencies of sovereign debt for gross negligence in Europe in an attempt to manage the catastrophe that is the eurozone crisis. read article

So long.


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One Response

  1. princess1960 says:

    hello ..thank you for information ALL fiscal cliff ”, EU ZONE ” house market”” wall street ” …will find some solution ..because we make(people) ..a true some time i read and i say to my self (they can not leave with out problems) SO live tham in problems ….
    short or long are there i am here
    ps.. 2013-14 will be the peak for the crisis (remember this) ah .you know i forget
    i like your analysis
    have a nice day

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