House price increases are slowing down in Britain. In June in London
prices actually fell. This is the beginning of the end of the house
price bubble and it will be very painful for many families who have
borrowed on the basis of the increased equity in their property. It
will have a knock-on effect on the whole economy as spending is already
slowing.
Over the past couple of years the U.S. economy has gained some momentum
and avoided slipping back into recession, but this was based on the
increased squeezing of the U.S. and world working class, not job growth
or significant investment in productive capacity. Even if the U.S.
economy miraculously takes off in the second half of 2005, the damage
has already been done for millions of working Americans.
The world economy is being sustained by US consumer spending and
Chinese manufacturing. US consumer spending is based on the illusion of
growing property values, but these cannot keep going up forever. The
property bubble in the US will burst and when it does it will have
devastating effects on the whole of the world economy.