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Morici predicts manufacturing and house price slumps
Howard Richman, 4/25/2013

University of Maryland economist Peter Morici predicts a deceptively strong GDP report for the first quarter (Deceptively strong US GDP report expected). On the near horizon he sees slowdowns coming in U.S. manufacturing and house prices.

As far as U.S. manufacturing is concerned, he sees layoffs on the horizon due to President Obama's decisions to tolerate Asian mercantilism:

The continuing surge of Chinese exports onto American store shelves, and weakening demand for U.S. products in recession torn Europe are dampening demand for U.S. manufactures. Japan's weak yen policy is imposing tougher competition on U.S. automakers and other manufacturers of technology-intensive products. Already, the Commerce department reported durable goods orders fell 5.7% in March, indicating much slower sales going forward.

He argues that rising house and agricultural land prices are due to a speculative boom, that will eventually bust. Morici writes:

Aided by the Federal Reserve's easy money policies and a surge of wealthy buyers from Europe's troubled economies, speculative investors have been scarfing up properties in choice markets in Florida, New York City and elsewhere with cash offers that frequently squeeze out ordinary homebuyers seeking a permanent primary residence.

In several markets, prices have zoomed past what these ordinary buyer's incomes will support; hence, speculators bets require that somehow after-tax household incomes will somehow surge permitting them to unload at a profit. That is a dubious assumption, and the speculative surge cannot end well -- housing price increases will slow, plateau or could crash all together. The housing market bump to household wealth that supported consumer spending in recent months will relent.

When will it become clear to Washington's policy makers that balancing trade, not producing asset-price bubbles, is the solution to America's economic problems?

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  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

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  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

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