As you know, in mid-January I had said I expected a recession in Q2 as a result of austerity and a government shutdown in the US. Recently, however, I have moved away from that position as a baseline, largely because of the rebound in housing and the potential to avoid a shutdown. Housing impacts the economy by adding to GDP in all the housing-related sectors. But, more importantly, the floor on house prices moves people into positive equity, fuelling mortgage refinancing and adding to disposable income. This is the credit accelerator at work. And while we can question its sustainability in the absence of true income growth, it does have powerful cyclical effects. We should just eke through then.
So, I don't think we get to recession yet. The real question on recession is whether the Pr...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.