Calculated Risk notes that Mortgage Equity Withdrawal (MEW), was $171 Billion in
Q3 2005, out of total household mortgage
increases of $289.5 Billion dollars.
Goldman Sach’s estimates ~2/3 of MEW is flowing through
to personal consumption. Using their numbers, we can estimate the impact of
Mortgage Equity Withdrawal on GDP:
Source: Calculated Risk
Its readily apparent from the graph how crucial MEW has been
to GDP spending. If MEW falls significantly, it will be a major drag on GDP:
Expect personal consumption to slow, impacting retail. The Real Estate Complex
will also see job creation fade.
See also Northern Trust’s Paul L. Kasriel Households – Another Quarter Older And Deeper In Debt.
Quote of the Day:
The Stock market is that creation of Man which humbles him the most