The debate over the direction of the economy and Federal Reserve policy in the coming year boils down to one basic question: Will the housing slump drag down consumer spending and the economy? As you ponder your position on that Issue, keep in mind that throughout this nearly five-year expansion, one bet has been consistently bad: the one against American consumers. For their part, a few big-time bond market folks think a housing-led decline will reduce the economic growth rate to a paltry 1 percent-2 percent range in the second half and the Fed soon will cut interest rates. Energized recently by some weak economic reports on housing and the industrial sector, several key players have been buying bonds like mad, pushing yields down to six-month lows.
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