The spiraling energy meltdown is the new housing crash, according to David Stockman, White House budget chief in the Reagan White House. Just as the 2007-09 housing plunge did not put a dime into consumers’ pockets – even though average home prices tanked by about 30 percent, from $230,000 to $165,000 – the energy crunch likewise is not going to add to consumer wallets, Stockman asserts. At the peak of the mortgage boom, he notes, the U. S. savings rate had actually vanished, falling to about 2.5 percent of personal income from pre-Greenspan rates of 10 percent to 12.5 percent.
‘Stated differently, the mortgage credit boom exploded uncontrollably in the run-up to the financial crisis because free-market pricing of debt and savings had been totally distorted and falsified by the monetary central planners at the Fed,’ Stockman writes on his Contra Corner blog.
‘Drastic mispricing of savings and mortgage debt in this instance touched off a cascade of distortions in spending and investment that did immense harm to the main street economy because they induced unsustainable economic bubbles to accompany the financial ones.’
Now Stockman predicts it will be deja vu all over again for Federal Reserve Chair Janet Yellen and her minions at the Fed.
‘Substitute the term ‘E&P [exploration and production] expense’ in the shale patch for ‘housing’ investment and employment in the sand states, and you have tomorrow’s graphs – that is, the plunging chart points which are latent even now in the crude oil price bust.
This post was published at David Stockmans Contra Corner on December 18, 2014.
Recent Comments