"Many analysts had hoped that the tax cuts, combined with the boost from high defense spending, would help jump start the economy. "
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This is the sort of thing that puzzles me. How could anyone believe that a one time infusion of a needed but still modest amount of cash (relative to people's debts, etc) and increased spending on items like cruise missiles would "...jump start" the economy? Will 1 million people be employed building F-22 raptors? Are these "analysts" really so lacking in common sense?
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(article quote):
"While there should be healthy growth from these factors over the next few months, the collapse of the mortgage refinancing boom will be a strong counteracting force in the near future. The first impact will be the collapse of an industry employing more than 350,000 people, but the longer term impact on consumption will prove far more important. If mortgage rates stay at current levels, the prospects for the economy beyond the second half of the year are bleak."
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The housing market bubble (is there agreement now that this is a bubble?) is truly frightening to me.
Around the corner from where I live, a house went on sale a year ago for something like 1.2 million dollars. It's a lovely and spacious house and I can understand both the seller and the Real Estate agent asking a hefty price for it. Still, a figure north of one million (or even approaching one million) reflects something besides the actual value of the house: it shows an overheated and irrational market.
Now since most Americans derive a good portion of their capital worth from home ownership (or, at least having equity in homes they're still paying down) it can only mean unpleasantness on a grand scale should the market value of these homes drop seriously and rapidly.
DRM
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