In the grand scale of things, I never viewed the US as creating the global housing boom. Now that the “contagion” is now crossing the border of the US into other countries via the credit crunch so it’s starting to look like we caused the global downturn. This Monday’s page 1 NYT story: Housing Woes in U.S. Spread Around Globe was about the spread of credit problems across the planet (when towns in Norway are going bankrupt because the AAA mortgage-back securities were full of subprime mortgages, it’s global)

The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India. This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well.

During the housing boom of 2003-2006, housing markets were booming from Europe to Australia to India. In fact, many of these markets saw booms before we did. As much as I feel Greenspan contributed to the development of the US credit bubble conditions that we are in now, I don’t think he brought down the planet financial system.

To some extent, the world’s problems are a result of American contagion. As home financing and credit tightens in response to the crisis that began in the subprime mortgage market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other states.

Citing the reverberations of the American housing bust and credit squeeze, the International Monetary Fund last Wednesday cut its forecast for global economic growth this year and warned that the malaise could extend into 2009.

Can someone tell me what effective changes have occurred to rekindle the credit market? I see it’s repair as the key to enabling a housing market bottom.

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4 Responses to “Blowing Credit Nose, US Kleenex Box Is Empty”

  1. The last guy with cash but no house says:

    It is worth pointing out that the nearly bankrupt towns in Norway contributed to the housing boom in the US by buying these securities. I bet they didn’t even think about the quality of the appraisals.

    Since they helped fools bid up the price of housing by providing financing, I am not sure their bankruptcy is undeserved.

  2. While I agree they wouldn’t think about the appraisal nor should they. The regulatory oversight was limited and the mistake they made was having blind faith. Many got burned and now few investors have faith in the regulatory structure.

  3. JB in NYC says:

    My PE group’s vulture fund just scooped up an indigenous tribe’s Amazon jungle village when their treasury’s AAA rated investment in a Bear Stearns issued CMO collapsed.

    The chief had the witch doctor sacrificed after admitting he didn’t really understand the magic behind derivatives and risk allocation. Now he wants to know who should be hunted down in the U.S. and shot with poison tipped blow darts. I told them it was all the appraisers’ fault.

  4. Appraisers are used to being blamed. In fact, it’s part of our license requirements. Refer to section 14a, part 301 paragraph d4 of the licensing requirements in USPAP, under the section “Blame and other sources of being victimized.” Ignore the comments in italics, otherwise or it is very hard to follow.