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Indians Trapped by Debt as Easy Money Dries Up
Rama Lakshmi, Washington Post
In the past two months, Ravinder Raina tossed and turned on many sleepless nights trying to re-do the math of his family's monthly expenses.

Rising mortgage payments, soaring inflation and fuel prices were beginning to put the squeeze on the spending spree he'd taken for granted for the past four years.

... The past four years have brought India economic growth of seemingly unstoppable momentum, often 9 percent a year, helped along by big inflows of foreign investment. Rising incomes and low interest rates enabled many middle-class Indians to realize the dream of owning a home, even while still in their 30s.
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But economists warned that the economy was overheating, producing inflation and speculative bubbles in real estate and the stock market. So government policymakers moved to cool things down by raising interest rates and tightening the rules for home loans. Taken along with the general global slowdown and spiraling fuel costs, the measures have had the intended effect.
(16 August 2008)

Dr. Doom: Nouriel Roubini predicting crisis in the US economy
Stephen Mihm, New York Times
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.
(15 August 2008)

Bracing for Inflation
John K. Castle, Business Week
Despite the recent softening of oil prices, the U.S. could be looking at double-digit inflation as early as 2009
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Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009.

The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July. By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007's 2.85%.

... The skyrocketing price of oil is obviously a central element in the accelerating price spiral. But a sea change in China's role is beginning to have a huge impact as well.
(16 August 2008)