That's good to know, some folks might have thought the loss of $5 trillion in housing wealth, more than $60,000 per homeowner, was a big deal. Standard models indicate that this will lead to a large falloff in consumption spending (@$200 billion to $300 billion in annual spending). This falloff coupled with continued weakness in the housing market, declining non-residential construction, weak investment, and cutbacks in the state and local spending, might be expected to lead to a serious downturn. Of course record loan write-offs might also be expected to weaken the economy. But the Post told readers that "the economy is in only a modest downturn, with economic growth still slightly positive and fewer jobs being shed than in recent recessions." So, why worry?
--Dean Baker
