Alan Greenspan has been able to keep the housing bubble expanding by maintaining interest rates at such a low level for so long largely because inflation has been in check. But due to the disruptions in oil as a result of Katrina and the ensuing hike in prices that will soon make their way into transportation costs of just about everything, as well as the billions that will soon be pouring into the economy to repair the damage, inflationary pressures are starting to mount.
Says Jerome a Paris:
Altogether, the extent of the damage is not fully known, but is likely to be major, and may appear in the most unexpected places. The economic impact of the total devastation of a whole region is unknown; the impact of higher oil and gasoline prices, and later of power prices, on US consumption will be significant and could trigger the long feared bursting of the housing bubble.Bush's economic planning is no more skilled than his disaster management planning. We could all be ankle-deep in it soon as the Fed is forced to raise interest rates to counter inflation, and the housing market (which is responsible for the creation of 43% of all new jobs since Bush took office) suddenly deflates.
Meanwhile, Preznit Never Responsible announced on GMA that "I have zero tolerance for looters." Never let it be said that he passed up an opportunity to shit on the poor, the desperate and the dying.
Look for FEMA to start passing out cake.