WC Whiner

Housing Sector Recession Will Last a While, Won't Cause Full Blown Recession

Say mortgage equity withdrawal ceases. The former was providing ~$1 trillion a year, of which between half (Greenspan's guess) and two-thirds (Goldman Sachs) went to consumption. Then to keep production growing you would need to replace a half trillion US$ in consumption. Energy expenditures went from ~7% to ~9% of GDP from 2001 to 2006. If that reverses, at $13 trillion GDP the energy dividend replaces perhaps half the lost consumption. Even in a $13 trillion economy, you'll notice.

I agree with your moderate stance; just as adding mortgage equity withdrawals didn't overheat the economy the last few years, ceasing them need not overcool it. However, it seems likely that it will act as a drag on production for a while.