Start Bailing

THE BE YOUR OWN ECONOMIST ® BLOG We’ve had a lot of rain, and many boats have filled with water. Too bad the powers-that-be stand ready to help bail out the biggest boats only. The small-boat owners, especially those that have taken on the most water, must fend for themselves. Some will continue to float, but many will sink. Since the big-boat owners had the means to most accurately forecast the weather and make provision for the approaching storm, why offer them the largest share of assistance? Perhaps many small-boat owners were foolish, in the wisdom of hindsight, not to Continue reading

Up 500

THE BE YOUR OWN ECONOMIST ® BLOG No sooner did the Dow slip below 11,000 on Tuesday, it rebounded almost 500 points in the last couple of days. Is the slump over? Probably not. The stock market jumped because oil slipped and some financial firms did well in the second quarter. That raised hopes that inflation might subside and the financial sector rebound, and that both developments pointed the way to recovery. But those hopes may be premature. The downturn is no longer encapsulated in housing. Autos and business capital expenditures have begun to weaken or show signs of weakness. Continue reading

Below 11

THE BE YOUR OWN ECONOMIST ® BLOG Today the Dow closed below 11,000, falling to 10,962.54. Just a little more than half-a-year ago, in November 2007, it was over 14,000. The S&P, which exceeded 1550 in November, fell to 1214.91. Fannie Mae and Freddie Mac, of course, are on everyone’s mind – as is the stability of the entire banking system. While a general banking collapse is not likely, it is true that the mortgage crisis infected many banks’ balance sheets. It will take a while for the system to work its way out of this predicament. Of greater concern Continue reading

We Avoided Moral Hazard, And Now Rome Burns

THE BE YOUR OWN ECONOMIST ® BLOG Today’s near-collapse of Fannie Mae and Freddie Mac, and the accompanying erosion of stock-market values, can not be blamed on the managements of those firms. To a large extent they, and the markets generally, have suffered because of our commitment to avoiding moral hazard. We want home buyers and lenders to suffer the consequences of their actions. No bailouts!!! They borrowed (or loaned) too much and paid (or loaned) too much. It’s their problem. If millions of homes consequently go into foreclosure and drag down everyone else’s property values, so be it. Market Continue reading

Moralizing at Treasury

THE BE YOUR OWN ECONOMIST ® BLOG On July 8 Treasury Secretary Henry M. Paulson addressed the Federal Deposit Insurance Corporation’s Forum on Mortgage Lending to Low and Moderate Income Households. Excerpts from, and comments about, his remarks follow (http://www.ustreas.gov/press/releases/hp1070.htm): “Many of today’s unusually high number of foreclosures are not preventable. Due to the lax credit and underwriting standards of the past years, some people took out mortgages they can’t possibly afford and they will lose their homes. There is little public policymakers can, or should, do to compensate for untenable financial decisions. And in the midst of rapid price Continue reading

The Other Shoe Drops

THE BE YOUR OWN ECONOMIST ® BLOG The residential-real-estate collapse remained a stand-alone problem for so long that some hoped that it would not infect the overall economy. But the Commerce Department reported 13.6 million new-vehicle sales for June at a seasonally-adjusted annual rate. Here are the figures for the past year. June……………………2007………………15.6July……………………2007……………….15.2August…………………2007……………….16.2September……………2007……………….16.2October……………….2007………….……16.0November…………….2007……………….16.1December……………2007………………..16.2 January………………2008………………..15.3February……………..2008………………..15.3March…………………2008………………..15.0April…………………..2008…………………14.4May………………..…2008………………….14.3June………………….2008…………………13.6 While auto sales have not collapsed, you can detect a south-bound trend. Update the following chart with the latest data, and the direction is clear. (Click on chart to enlarge) Recessions shaded Few charts, however, are as dramatic as the next one. The Commerce Department reported Continue reading

July Publication Schedule & Web Sources

THE BE YOUR OWN ECONOMIST ® BLOG Here’s July’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 July 2008 Source (* below)…………Series Description…………Day & Continue reading