Getting Graphic is a semi-sort-of-irregular collection of our favorite BIG real estate-related chart(s). This week we have a two for one…
In this post from last summer The US Trade Deficit is Unsustainable [Axis of Logic] Bud Conrad shows how dependent the US housing market and US government deficit spending is on re-investment by foreigners. This is consistent with the negative savings rate. Americans are spending more than they make but this activity is expected to reverse as the housing market eases as consumers reign in spending and begin saving.
The following charts show the role of housing in the economic cycle.
A basic view of the economy as show by Axis of Logic: _Households earn the wages they spend on the goods and services from businesses._
The next chart adds that _consumers spend a portion purchasing foreign goods. The foreigners then recycle the dollars they collect from this trade into the US government debt by buying Treasuries and into Agency debt of Government Sponsored Enterprises like Fannie Mae, which then provide money for housing._
Albeit simplified, these charts help demonstrate that:
Foreigners have funded our housing boom and provided enough credit that the growing federal deficits have not driven interest rates up.
Tags: Getting Graphic