I agree with stan. Export-driven sectors of the economy (and there are some left) are doing well and should continue to do well. China and Japan and Korea and Germany and other exporters are still buying US securities. And if they stop, their exports will too, so they have a lot of incentive to continue.
On the margins, these foreign countries are tilting slightly away from the USD, and within the US they are tilting from safer bonds to riskier equity-type investments. But they have to keep buying lots of US securities if they want us to keep buying their goods, and they do still very much want that.
Between these foreigners anxious to keep exporting to us, and Congress and every pol and agency in DC and every state wanting the party to continue as long as possible, it’s unlikely to suddenly stop in 2008. There will be local catastrophes, just as homebuilders and sub-prime MBS were in 2007, but even a few of those alone don’t guarantee a depression.
Oh, and I still expect a 20% decrease in home prices here in OC in 2008.
