Debt Issues Top Economists’ Fears

I’m not sure if this is for or against the credit crunch story, but it now tops a poll of economists’ fears about the economy:

The combined risk of mortgage defaults and heavy debt loads has overtaken terrorism as the biggest short-term threat to the U.S. economy, according to a survey of economists being released today.
The National Association for Business Economics says almost a third of its survey respondents listed debt-related problems as their top worry: About 18% cited the effects of subprime-loan defaults and 14% listed excessive household or corporate debt.
About 20% of the 258 members responding put defense concerns and the possible economic disruption of a terror attack at the top of their list, down from 35% in the group’s March survey. Energy prices were the top-cited risk among 13% of the group, which largely includes economists working at U.S. corporations or with think tanks and universities.
The poll results, collected from July 24 to Aug. 14, reflect early worries about the turmoil spreading through equity and debt markets in recent weeks. Defaults tied to riskier home loans soared this year, devaluing mortgage-backed securities and spurring a pullback from many lenders. The ensuing crisis has spurred worries of cutbacks in business and consumer spending.

The second-quarter GDP report will be revised later this week. It will be interesting to see how well the economy did. The initial report said the economy grew by 3.4%. I wouldn’t be surprised to see that number adjusted higher.

Posted by on August 27th, 2007 at 11:02 am


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