Blooming Housing Crisis

All the powers that be in economic circles keep saying that the housing crisis hasn't spilled over yet into the rest of the economy. But this is sounding like so much whistling in the dark - or, perhaps, trying to keep those ever irrational markets from wigging out - and it's not clear that they can keep it up with a straight face. First, the Wall Street Journal Online reports:

In a model of central-banker understatement, Mr. Bernanke noted to the Economic Club of New York that "the past several months have been an eventful period for the U.S. economy." And he recounted the mortgage meltdown, market panic and increase in Fed anxiety about the economy that prompted a reversal of the Fed's risk balance toward growth worries and the resulting half-percentage-point reduction in the cost of borrowed money last month. While members of the Federal Open Market Committee agreed Sept. 18 that "significant spillovers [from housing-market trouble] to household and business spending were not yet evident," the downside risks to both had clearly increased, exacerbated by "somewhat downbeat consumer sentiment, and slower growth in private-sector employment."

The WSJO continues, calling feedback that the Fed is getting from local bankers and executives "a darker description" than that collected and published before the Fed came out with its Beige Book report, a collection of "anecdotal information on current economic conditions" each branch of the Fed gathers from "key business contacts, economists, market experts, and other sources." The Treasury department is trying to build a coalition that will help stabilize the mortgage markets, August housing starts in Japan were down 43 percent from the same period in 2006, and, according to NPR, the US foreclosure rate is the highest it's been since the Great Depression. At this rate, how can conditions not spill into the rest of the economy. It sounds as thought it already has, only no one has wanted to be the first to say it.