The Glass-Steagall Act and Shadow Banking

THE BE YOUR OWN ECONOMIST ® BLOG Recently the Federal Reserve announced that it would provide assistance to investment banks, such as Merrill Lynch, Goldman Sachs and Lehman Brothers, as well as commercial banks such as Citibank, Bank of America and Wells Fargo, by exchanging U.S. Treasury securities in the Fed’s portfolio for less-secure securities, including mortgage-backed, in the investment banks’ and commercial banks’ portfolios. Both investment banks and commercial banks benefit if they can swap lower-value securities for higher-value securities. The investment banks (called shadow banks by those who accuse them of reckless borrowing and lending) now have a Continue reading

Glimmer of Hope?

THE BE YOUR OWN ECONOMIST ® BLOG Yesterday the National Association of Realtors reported (http://www.realtor.org/press_room/news_releases/2008/existing_home_sales_rise_in_february.html) February existing-home sales were 2.9% higher than January’s, although 23.8% below a year ago. Prices were 8.9% lower than last year. Some analysts were encouraged by these data and expressed the view that falling prices may, at last, have attracted buyers into the market. Perhaps the long slump may be coming to an end. According to Lawrence Yun, the Realtor’s chief economist: “We’re not expecting a notable gain in existing-home sales until the second half of this year, but the improvement is another sign that Continue reading

Sound of the Next Bubble Bursting?

THE BE YOUR OWN ECONOMIST ® BLOG Friday’s New York Times and Wall Street Journal carried stories of last week’s commodity-price retreat. The Times article (http://www.nytimes.com/2008/03/21/business/21commodity.html?_r=1&oref=slogin), “Oil and Gold Prices Continue to Slide,” began with the paragraph: “Oil, gold and other major commodities fell sharply on Thursday, capping their steepest weekly drop in a half-century, as investors fled what many had believed to be the last safe haven in turbulent markets.” The story also said: “Seeking to make sense of the sharp declines, some analysts on Thursday saw a bubble bursting….In their view, investors are growing increasingly worried that a Continue reading

The Veil of Money

THE BE YOUR OWN ECONOMIST ® BLOG Eighty years ago neoclassical economists concerned themselves with the “veil of money.” They wished to part the financial curtain that obscured the real economy. We continue to adjust for inflation when observing GDP, so that price changes do not distort our picture of real-output changes. Neoclassical economists knew that financial turmoil affected output, but they relegated that knowledge to the study of business cycles. In the long run, the money supply could rise or fall and inflation would surge or ebb accordingly. Real-output growth, however, depended upon the availability of the factors of Continue reading

The Flu and the Fed(s)

THE BE YOUR OWN ECONOMIST ® BLOG There’s been so much bad news lately, how does one adequately describe the situation? It feels like the economy has caught a bad case of the flu. The nose isn’t running like an open spigot (yet), but there’s a sniffle and feeling of chill and some aches and pains. You know that tomorrow will be horrible and there’s nothing you can do to prevent that turn of events. You’re about to spend a few days in bed. The Fed(s), i.e. the federal government and the Federal Reserve have done what they believe to Continue reading

If It Wasn’t For Bad News, There Wouldn’t Be Any News At All

THE BE YOUR OWN ECONOMIST ® BLOG Today’s Wall Street Journal headline (http://online.wsj.com/article/SB120489597965119543.html?mod=todays_us_page_one) said it all: “Jobs Data Suggest U.S. Is in Recession.” There it was: the R-word. Big and bold, splashed across the front page. The article informed us the economy lost 63,000 jobs last month. The chart reveals job growth has been shrinking for some time. Now we know we’re in negative territory and the number of jobs is falling. Only the quickest are getting seats. Job Growth (Click on chart to enlarge)Recessions shaded On Monday the Institute for Supply Management reported its February Purchasing Managers’ Index (manufacturing Continue reading

Smoking In Bed and Fiddling While Rome Burns

THE BE YOUR OWN ECONOMIST ® BLOG Suppose somebody sets his or her home on fire while smoking in bed. Should the fire department turn around and say, “Sorry, we’re not rescuing anyone dumb as you. Smoke in bed…….pay the price. We’re heading back to the station house. Deal with it on your own.” No doubt some of us would feel that way. Besides, what better way to teach a lesson to all the other morons out there. If they see the first bozo’s house go up in flames, that may teach them a lesson about (not) smoking in bed. Continue reading

March Publication Schedule & Web Sources

THE BE YOUR OWN ECONOMIST ® BLOG Here’s March’s tentative economic-indicator publication schedule, followed by a list of web sources. Future postings will discuss these indicators. You can use the WEB SOURCES listing (below) to find the data on your own and read the accompanying press release. The addresses take you to the source’s home page and the steps tell you how to navigate the site. That way (rather than provide a direct link to the data) you can become familiar with these sites and find additional information on your own. PUBLICATION SCHEDULE March 2008 Source (* below)…………Series Description…………Day & Continue reading