Uh oh: the housing bubble and consumer spending

Yesterday's Goldman-Sachs financial markets note contained some astounding numbers about the extent of borrowing against home equity in the US. In 2004 Americans drew down their home equity to the tune of more than half a trillion dollars for the second straight year: $528 billion in '03, $640 billion in '04, or 7.4 percent of the country's personal disposable income. It's dramatic evidence of just how far the house-price inflation and low interest rates of recent years have gone toward financing consumer spending and the American standard of living. It's also evidence of the potentially dire ripple effect the whole economy will feel when rising interest rates and a deflating bubble take re-fi madness off the table.

Read excerpts of the GS note on the housing bubble. 

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