I believe that the Chinese (and others) have an interest lending us money so we can buy their stuff. America is still the engine of world economic growth. If the American consumers stop spending then China wouldn’t need to make all the consumers products to sell to us. China has an overcapacity as it is. If the US economy goes into recession, commodity prices will drop.
Bush should fire Condi Rice and give Henry Kissenger the job. He’ll make a pragmatic (rather than ideological) deal with Iran thus solving the Middle East problems in one swoop. That’ll bring stability back to oil prices. I was listening to Dr. Kissinger on Charlie Rose and it seems to me that if we could make a deal with Iran, we’d neutralize Hezbolah, Syria and the Shiites in Iraq all at once. If your can’t fight your ennemy, make him your friend.
So, if things work out, with low priced consumer goods and lower oil prices, we would withstand a recession quite well.
I still however think that we’ll have a housing crash regardless of the overall economy. As was mentioned before, assets prices have nothing to do with economic growth.
