Links, July 21

The Second-Half Slowdown Begins. Jan Hatzius, Goldman Sachs, via Paul Kedrosky.

Paul Krugman quotes Goldman Sachs in his post Why I worry.

By our estimates, (federal) fiscal policy has contributed +2½ percentage points (annualized) to real GDP growth from early 2009 to mid-2010. From mid-2010 to mid-2011, we estimate an impact of about -¼ percentage point—i.e. 2¾ percentage points less than before—even under our baseline assumptions of extended unemployment benefits, more aid to state governments, and at least a temporary extension of the bulk of the 2001-2003 tax cuts. We need a lot of improvement in private sector activity to offset this swing, and at the moment it unfortunately doesn’t look like we’re getting it.

Existing Homes: Months of Supply and House Prices. Calculated Risk.
(conservatively) projects months of supply to rise from 8.3 in May to 10.4 in July

Meanwhile, in the Chinese property market. Joseph Cotterill, FT Alphaville.
refers to an NBER working paper, which includes this doozy:

Much of the increase in prices is occurring in land values. Using data from the local land auction market in Beijing, we are able to produce a constant quality land price index for that city. Real, constant quality land values have increased by nearly 800% since the first quarter of 2003, with half that rise occurring over the past two years.

discussed further at Econbrowser.

Also by Mish in Ponzi "shark loans" fuel China's housing bubble; home sales plunge 44% in Xiamen; bubble busts in Tianjin.

China's property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out....

A typical Beijing flat costs about 22 times average incomes in the city, state media said Monday, highlighting the challenge China faces providing affordable housing amid a property boom.A 90-square-metre (968-square-foot) apartment in Beijing cost 1.6 million yuan (236,000 dollars) last year, the China Daily said, citing an independent report.That compared to an average household disposable income of around 71,000 yuan in 2009, according to city figures.

The expected inflation curve. David Beckworth.
shows inflation expectations continuing downward path

Paralyzed by debt. Roger Lowenstein. NYT.

Which raises the issue: how much of that debt will have to be repaid before people return to their customary, and stimulative, profligacy? ... To return to the status quo of before the housing boom — say, back to debt to income ratios prevailing in 2000 — it would take five more years of deleveraging at the current rate.

other fare:
Ego: Illusionist, Trader's Nemesis. Kent Thune, via The Big Picture.