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Blast from the Past (by Russell
Roberts)<http://www.cafehaye
Posted: 06 Mar 2009 10:42 AM PST
Some excerpts from a Bloomberg news
story<http://www.bloomber
June of 2003:
Fannie Mae Chief Executive Franklin Raines, who runs the biggest mortgage
portfolio in the world, said the continuing rise in housing prices won't end
in a bust like the stock market of three years ago.
``We do not see any sign of housing price decline nationwide, let alone the
bursting of a bubble,'' Raines said in an interview with Bloomberg News in
New York.
And:
Housing has been one of the few bright spots in the U.S. economy as
unemployment rose to the highest level in almost nine years and the country
struggled to recover from recession. The lowest interest rates in more than
four decades boosted home sales and mortgage-loan refinancing to record
levels, putting cash in consumers' pockets. Fannie Mae benefited as debt
backed by home loans surged and home prices rose.
And:
There hasn't been a nationwide decline in home prices since the Great
Depression, though there are signs that job losses and slow economic growth
are taking a toll, Raines said. Prices are falling in ``a lot of the old
Internet cities'' such as San Jose, California, and Seattle, he said.
Dean Baker and the Economist look a little smarter:
Mortgage rates at their lowest levels since the Kennedy administration have
exacerbated the ``fat'' in housing, Baker said. An increase in the cost of
30-year fixed rate mortgages to near 7 percent from 5.26 percent today would
burst bubbles where they exist, he said.
``Housing has helped sustain the economy so far as we've had growth, and
when it does burst that could have a big effect'' on prospects for growth in
future quarters, he said.
A study by The Economist predicted a ``property price bubble'' in the U.S.
and the U.K. would burst in the next few years, leading to consequences
``far nastier'' than seen from the plummeting stock market of 2000 and 2001.
``Some people say, well, they had a housing bubble in Ireland, why can't we
have one in the United States?,'' Raines said. ``That's like saying we had a
housing bubble in Massachusetts. You can, but you can't work up one in the
whole United States just like you probably can't in the whole of Europe.''
Here are Greenspan and Shiller:
Fed Chairman Alan Greenspan in February called a nationwide housing bubble
``quite unlikely,'' in part because there isn't a national housing market.
Comparisons to the stock market aren't justified since most people must live
in their homes and house transaction costs inhibit speculation, he said.
Robert Shiller, who predicted the 2000 stock market bubble with his book
``Irrational Exuberance,'
if a worldwide economic slump ``kills'' consumer confidence. Only some
``high-flying'
price depreciations, and the chances of declines in those regions are less
than a third, he said from his office at Yale University in New Haven,
Connecticut.
``In the last bubble in 1990 the declines were preceded by a slowdown and
accelerated by a slowing economy, and the slowdown might be a harbinger of a
drop in some places,'' Shiller said. ``Even so we predict increases
everywhere. It would be quite daring to predict'' a nationwide housing
bubble, he said.
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LET THEM FAIL (by Russell
Roberts)<http://www.cafehaye
Posted: 06 Mar 2009 09:50 AM PST
We're going to run out of money.
We can't keep GM and AIG and Fannie and Freddie and every insolvent bank and
every mortgage afloat. It can't be done. It's not a strategy. It's just
desperation to avoid pain.
We're going to have to start letting them fail.
Sooner is better than later. Otherwise, we continue to throw good money
after bad.
Let them fail.
When you're in a hole, the first lesson is to stop digging. Let's start by
putting down the shovel and admitting we are heading in the wrong direction.
Let's taste some bankruptcy. Let's let some resources and capital get out of
the hands of the people who are misusing it and into the hands of people who
can use it more productively, wisely, and prudently.
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The same old mistakes (by Russell
Roberts)<http://www.cafehaye
Posted: 06 Mar 2009 09:44 AM PST
One of the depressing parts of the New Deal was its willingness to help big
labor and big business, a classic case of the seen and the unseen. You see
the wages and profits go up for some. It's harder to see the losses paid by
consumers and non-union workers.
Labor unions today are getting more power. Part of it is the dominance of
the Democrats. Part of it is a misunderstanding that labor and unions are
not the same thing.
We have some economists, world-class economists, arguing for making it
easier<http://blog.
workers to unionize by banning the secret ballot.
We have the House passing a
bill<http://www.commerci
will make it easier to unionize Fedex.
And we have the Teamsters keeping out Mexican
trucks<http://www.washingt
.
All of these things lower the productivity of our economy and make a small
group rich at the expense of others. They make the labor market less
dynamic. You don't want to do that in the middle of a recession. But we
appear to be intent on doing it anyway.
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Saturday, 7 March 2009
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