Recovery or Merely Spending Before Bankruptcy?

Whether or not you believe the economy has turned the corner might depend upon your views on how distorting the Hamp and other housing programs have been on economic behavior. The issue is discussed from both sides in this post at  The Washington Independent.

The issue is how much the non-payment of mortgages has contributed to increased consumption. As stated:

It was Paul Jackson, the founder of Housing Wire, who first put the economic pieces together and said that strategic defaulters — people walking away from their mortgages — must be the reason consumption is rising despite high unemployment and declining real wages. “[M]illions upon millions of consumers in the U.S. [are] meeting their shelter needs for free, even if only temporarily; and what’s becoming of any extra disposable income, since no rent or mortgage need be paid?” Jackson wrote. “[W]e’re seeing consumer spending head northward, and for five straight months, too…. Put simply: people are spending their mortgages.”

Whether or not our economy is being falsely buoyed by what has been termed “foreclosure queens” is a moot issue with analysts and economists lining up on both sides.

While the issue might be moot, it is not unimportant in terms of assessing whether a recovery is or is not underway. Read the article and make your own judgment.

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