A sideways look at economics

Housing markets are prone to bubbles, when prices soar relative to incomes and then collapse all at once. And housing bubbles, because they tend to be associated with excess bank credit, can be very damaging for the whole economy when they burst. It tends to mean a banking crisis too.

There is a bubble inflating in the European housing market: can you see it?

Yes, that’s right! It’s in Germany. Incredibly, that is the emerging concern among German policymakers and central bankers.

Perhaps they are right to be concerned. But then UK policymakers should be in a state of panic.