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Blowing Credit Nose, US Kleenex Box Is Empty

In the grand scale of things, I never viewed the US as creating the global housing boom. Now that the “contagion” is now crossing the border of the US into other countries via the credit crunch so it’s starting to look like we caused the global downturn. This Monday’s page 1 NYT story: Housing Woes in U.S. Spread Around Globe [1] was about the spread of credit problems across the planet (when towns in Norway are going bankrupt [2] because the AAA mortgage-back securities were full of subprime mortgages, it’s global)

The collapse of the housing bubble in the United States is mutating into a global phenomenon, with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports and even parts of northern India. This synchronized global slowdown, which has become increasingly stark in recent months, is hobbling economic growth worldwide, affecting not just homes but jobs as well.

During the housing boom of 2003-2006, housing markets were booming from Europe to Australia to India. In fact, many of these markets saw booms before we did. As much as I feel Greenspan contributed to the development of the US credit bubble conditions that we are in now, I don’t think he brought down the planet financial system.

To some extent, the world’s problems are a result of American contagion. As home financing and credit tightens in response to the crisis that began in the subprime mortgage market, analysts worry that other countries could suffer the mortgage defaults and foreclosures that have afflicted California, Florida and other states.

Citing the reverberations of the American housing bust and credit squeeze [3], the International Monetary Fund last Wednesday cut its forecast for global economic growth this year and warned that the malaise could extend into 2009.

Can someone tell me what effective changes have occurred to rekindle the credit market? I see it’s repair as the key to enabling a housing market bottom.