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The Forum > Article Comments > Tenuous US recovery doesn’t mean ‘double-dip’ recession is inevitable > Comments

Tenuous US recovery doesn’t mean ‘double-dip’ recession is inevitable : Comments

By Saul Eslake, published 29/9/2010

Australia depends far less on the US than it used to, which is just as well.

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Saul,
I would be interested in your comments on the value of housing - which seems to be being kept at artificially high level. Some commentators believe that house prices need to halve to bring them back a level where they become affordable for young couples. 40 years ago a couple could buy and pay off a house on a single wage. Where have we gone wrong? Is it just that couples are simply “house racing” each other or are we now seeing the logical conclusion of unrestrained capitalism and the manipulation of the market by forces of greed?

Are house prices in the US being propped up to an unsustainable level by extraordinarily low interest rates? What would happen to housing prices in the US if interest rates get back to a level that encouraged saving? Surely America's false recovery will dive into recession (or worse) if property values fell to where they should be.

Steven
Posted by Steven F, Wednesday, 29 September 2010 11:55:04 AM
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The US Federal Reserve is about to create in their computers another $ trillion for stimulus.So the Govt will issue more worthless bonds for the Fed to gererate phoney money depreciating people's purchasing power.

Some of this money will come here looking for better returns thus we pay via higher interest rates through no fault of our own.We should tax this phoney foreign money to keep interest rates low here.
Posted by Arjay, Wednesday, 29 September 2010 10:04:12 PM
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Steven F asked this question;
40 years ago a couple could buy and pay off a house on a single wage. Where have we gone wrong?

Simple, the government at the time, on the urging of the sisterhood
forced the lending organisations to lend on both incomes.

What happens when you dump twice as much money into any market ?
So the women now are forced to continue working and they lost the
option of being a at home mum.
The result, they are having their babies when much older and so have
a greater percentage of babies with defects of one sort or another.
The burden this places on families is just not worth it.
Posted by Bazz, Tuesday, 5 October 2010 9:24:14 AM
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The US will not recover as its economy is limited by the cost of energy.
At the present level of the cost of energy will set the level of the economy.
If the cost of energy to the US exceeds 4% of GDP then the
economy will revert to the crash level of 2008.
That level seems to be close to $90 to $100 range of oil price.
It really does seem to be as simple as that.
Posted by Bazz, Tuesday, 5 October 2010 9:32:26 AM
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