Remember way back last summer when Fed Chairman Ben Bernanke and other prominent economists assured us that the problems in the subprime mortgage market could not possibly lead us into a recession because the market was too small to have that much impact? They were right. The subprime market, by itself, is too small to lead the U.S. economy into a recession. On the other hand, the collapse of the $20 trillion U.S. housing market is plenty large enough to lead the U.S. economy into a recession. It is the latter that is the source of the economy's current problem, not the subprime sideshow. NPR apparently still has not gotten word of this fact. This morning it did a piece where it referred to the subprime crisis as the cause of U.S. economic problems. Hopefully, its reporters will soon catch on to the nature of the problems in the U.S. economy or at least find some economists who can explain the situation to their listeners.
--Dean Baker