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Cracks in the Foundations of Growth: What Will the Housing Debacle Mean for the U.S. Economy?

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  • Dimitri B. Papadimitriou
  • Greg Hannsgen
  • Gennaro Zezza

Abstract

With economic growth having cooled to 0.7 percent in the first quarter of 2007, the economy can ill afford a slump in consumption by the American household. But it now appears that the household sector could finally give in to the pressures of rising gasoline prices, a weakening home market, and a large debt burden. The signals are still mixed; for example, while April’s retail sales numbers caused concern, May’s were much improved, and so was the ISM manufacturing index for June. Consumption growth indicates a slowdown. This Public Policy Brief examines the American household and its economic fortunes, concentrating on how falling home prices might hamper economic growth, generate social dislocations, and possibly lead to a full-blown financial crisis.

Suggested Citation

  • Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2007. "Cracks in the Foundations of Growth: What Will the Housing Debacle Mean for the U.S. Economy?," Economics Public Policy Brief Archive ppb_90, Levy Economics Institute.
    • Handle: RePEc:lev:levppb:ppb_90
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    References listed on IDEAS

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    Cited by:

    1. Charles J. Whalen, 2007. "The U.S. Credit Crunch of 2007: A Minsky Moment," Economics Public Policy Brief Archive ppb_92, Levy Economics Institute.
    2. Charles Whalen, 2008. "Understanding the Credit Crunch as a Minsky Moment," Challenge, Taylor & Francis Journals, vol. 51(1), pages 91-109.

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