Subprime mortgage defaults, debts are the biggest threat to the US economy

March 03 2008 CNBC.com National Association for Business Economists members are increasingly concerned over the short-term risks associated with subprime mortgages and other forms of indebtedness, while inflation is a distant third risk. The combined punch of subprime mortgage defaults and heavy debt remains the biggest risk to the health of the U.S. economy, the panel said on Monday. The conclusion was based on a survey of 259 members conducted between Feb. 1-15 and updates a poll conducted in August. Fewer respondents support monetary and fiscal policies being implemented to address the credit situation, with more than one-third saying current monetary policy is too stimulative. The most frequently cited concerns about lower interest rates, which followed the Federal Reserve’s aggressive cut of the benchmark federal funds interest rate, are the threat of inflation and the sense that lower rates might bail out investors who should have known better.

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