Global economy on the rise despite sluggish growth in the United States

Sources: London Free Press, Chicago Tribune, New York Times

Today the International Monetary Fund (IMF) reported that the global economy was on the rise in spite of slower growth posted for the world’s largest economy and importing country—the United States.

The IMF further asserted that the United States’ economic slowdown has thus far had little effect on other economies because of the fact that U.S. economic troubles have been centered on the domestic housing market crash.

The IMF also noted that as of yet there has been little spillover from the troubled housing market into other areas of the U.S. economy, but that it is foreseeable that consumer spending and investment could be adversely impacted if the residential housing market does not improve, thus potentially implicated economies in exporting countries around the globe.
In the United States, concerns are growing as market watchers begin to change their economic forecast from a “soft landing” for the troubled domestic residential housing market to a housing-led recession for the United States that will—and some assert already is—spilling into other economic sectors.

In addition to the mixed signals on Wall Street—numbers for companies like U.S. Steel indicate a healthy economy while homebuilders’ stocks paint a very different picture—is the effect on state revenues, important because these political entities are more involved in major investments for infrastructure.

Reports that the nationwide housing slump has reduced state revenues are tempered, asserting that while states have seen decreases in taxes from real estate sales and transfers, as well as decreases in the purchase of associated items. At this point, state governments assert that the problem is not serious as the rest of the economy is fairly strong. That could change if there is spillover from housing to other market sectors.

FOR DISCUSSION:

1. Is or was the housing crash avoidable?

2. Do large economies like the United States have a responsibility to the global economy?

3. How are other major economies (e.g., China, a growing economic power on the global scene that is facing a housing bubble akin to that experienced by the U.S.) dealing with burgeoning domestic economic issues that could spillover into the global economy?