Archive for September, 2008
« Previous EntriesCrisis Commentary: Second Installment
Submitted by unsettling economics
I just posted the second installment on my crisis commentary. Again, I would appreciate any comments, since it still needs more work.
Thanks.
crisis-2
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Detroit gets in on the action
Submitted by Econbrowser
With all the excitement in financial markets, I almost missed this story on the bailout for automakers.
Breitbart reports:
The US Senate Saturday approved 25 billion dollars in loan guarantees for the financially strapped US auto industry, intended to spark a wave of automotive innovation. The loan guarantees were included in a continuing resolution that [...]
Gas Prices: $3 Per Gallon in MO and OK, $8 in GA
Submitted by CARPE DIEM
Gas prices are approaching $3 per gallon in Missouri and Oklahoma.
Meanwhile, in Georgia, “The state has received 1,300 complaints of gas gouging and has subpoenaed sales records from 130 gas stations to determine if they illegally jacked up prices in the wake of Hurricane Ike. There was one report that a [...]
Real Estate Roller Coaster
Submitted by CARPE DIEM
The Housing Bubble in 4 Easy Steps, from the Mises Institute:
1. Cut Fed Funds rate from 6.5% in 2000 to 1% by 2003.
2. 30-year mortgage rates fall to all-time low by June 2003.
3. Because of low interest rates, mortgage loans double between 2001 and 2006.
4. All these low-interest loans had to be [...]
When Government’s In Charge, Expect Shortages
Submitted by CARPE DIEM
WASHINGTON (AP) — The U.S. Mint is temporarily halting sales of its popular American Buffalo 24-karat gold coins because it can’t keep up with soaring demand as investors seek the safety of gold amid economic turbulence. Mint spokesman Michael White said Friday that the sales were being suspended because demand for the [...]
Thomas Sowell On The Current Financial Crisis
Submitted by CARPE DIEM
As always, economist Thomas Sowell puts the current situation into perspective - here are some key points from his most recent column “Bailout Politics“:
1. Nothing could more painfully demonstrate what is wrong with Congress than the current financial crisis. Among the Congressional “leaders” invited to the White House to devise a [...]
Homeowners, Lenders Last Line of Defense: Denial
Submitted by CARPE DIEM
1. Looking backward, home buyers paid too much, and lenders wrote contracts that exposed them to the homeowners’ losses. With home values declining by something like $2 trillion, we are in a mad scramble to divide the loss between homeowners, lenders and taxpayers. In the meantime, homeowners and lenders are exercising their [...]
New Banking Data: Where’s The Credit Crisis? Total Bank Loans and Leases Exceed $7T For First Time
Submitted by CARPE DIEM
New banking data were released today from the Federal Reserve on bank loan volume through September 17 (for weekly data and August for monthly data), showing that “Total Loans and Leases at All Commercial Banks” reached an all-time high of $7.026 trillion (reported weekly) in mid-September, going over $7 trillion for the [...]
American Manufacturing Workers Are World-Class
Submitted by CARPE DIEM
To balance all of the bad news about the U.S. economy, here’s some good news today from the BLS: Not only are American manufacturing workers probably the most productive in the world, they keep gaining on workers in other countries.
The top chart above lists the productivity gains for manufacturing workers from [...]
U.S. Consumers Are Being Taken to the Cleaners
Submitted by CARPE DIEM
In May, I posted about tariffs on hangers from China, enacted to protect the only remaining domestic supply of hangers, M&B Hangers in Leeds, Alabama, and to “punish” Chinese manufacturers for “dumping.”
Economist Frank Stephenson now reports in The Freeman that hanger tariffs are responsible for doubling the price of hangers [...]
Frank’s Fingerprints Are All Over Financial Fiasco
Submitted by CARPE DIEM
Barney Frank: “The private sector got us into this mess. The government has to get us out of it.”
Jeff Jacoby in yesterday’s Boston Globe:
While the mortgage crisis convulsing Wall Street has its share of private-sector culprits, they weren’t the ones who “got us into this mess.” Barney Frank’s talking points notwithstanding, [...]
Avoiding a Recession Without the Bailout Bill
Submitted by Businomics Blog
The critical issue is whether main street businesses that rely on credit to fund their operations will be cut off, suddenly, from credit. A sudden cut-off of credit to otherwise healthy companies would trigger a severe recession, but I think we have the tools in place now to prevent that.
Bank credit depends [...]
I DON’T LIKE MONDAYS
Submitted by The Capital Spectator
There’s never a good time to release bad news about consumer spending and income, but it’s even worse on the day that’s likely to witness Congress vote in favor of the $700 billion bailout for the U.S. financial system.
Spending that mountain of cash to salve so much self-inflicted pain will inspire [...]
IT TAKES TWO TO TANGO…
Submitted by The Capital Spectator
As we prepare to enact the mother of all bailout packages, there are lots of questions about how it all happened. As The Big Picture’s ever-perspicacious Barry Ritholtz reminds in Barron’s, even Wall Street needed some help in blowing itself up. Alas, it’s too late for salvation in 2008, but Ritholtz’s [...]
Understanding the TED spread
Submitted by Econbrowser
One measure that is being used to summarize the strain in financial markets is the TED spread. This is calculated as the gap between 3-month LIBOR (an average of interest rates offered in the London interbank market for 3-month dollar-denominated loans) and the 3-month Treasury bill rate. The size of this gap presumably [...]
Gross domestic income and recessions
Submitted by Econbrowser
The “final” values for 2008:Q2 GDP released by the Bureau of Economic Analysis on Friday were more disappointing than the earlier estimates. Still, the 2.8% annual growth rate for real GDP that we’re now told characterized the second quarter doesn’t sound like a recession. Or does it?
As we teach in any introductory macroeconomics [...]
The High Cost of Living vs. The Cost of Living High
Submitted by CARPE DIEM
Based on a suggestion yesterday from a student in my MBA class (MGT 551 Business Economics), the graph above shows the declining share of disposable personal income (data) spent on food (data), clothing (data), and shelter (housing and household operation) since 1929. From a high of almost 59% in 1933, the percent [...]
The High Cost of Living vs. The Cost of Living High
Submitted by CARPE DIEM
Based on a suggestion yesterday from a student in my MBA class (MGT 551 Business Economics), the graph above shows the declining share of disposable personal income (data) spent on food (data), clothing (data), and shelter (housing and household operation) since 1929. From a high of almost 59% in 1933, the percent [...]
Sub-prime Mortgage Crisis: Caused by Lack of Regulations?
Submitted by Businomics Blog
Did lack of regulation create the subprime mortgage crisis? I’m asked this all the time. The short answer: Of course not. Nowhere close. Not a chance. Here’s the long answer.
What regulations have we had? The mortgage originator—your local bank or mortgage broker—was under regulations not to discriminate and to inform you of [...]
Last Quarter’s Fundamentals…
Submitted by Econbrowser
Weren’t as strong as some of us thought.
I was surprised; so were market observers. From Bloomberg:
U.S. Economic Growth Slower Than Initially Estimated (Update2)
By Timothy R. Homan
Sept. 26 (Bloomberg) — The U.S. economy expanded more slowly than previously estimated in the second quarter, showing consumer spending was weakening before the credit crisis intensified.
The annual [...]
Peterson Institute for International Economics Joins the Blogosphere
Submitted by Econbrowser
From the Peterson Institute comes the “Real Time Economics Watch”. The latest posts are on how each crisis is different and yet the same [0], by Ted Truman, and the US/Japan parallels (or lack thereof) [1], authored by Adam Posen.
(The Peterson Institute doesn’t call it a weblog, but it seems like one…)
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Hey, What About Wikipedia?
Submitted by CARPE DIEM
50 of the Most Dependable Web Resources for University Students, (minus one).
HT: Craig Newmark
If I had to guess whether Wikipedia or the median refereed journal article on economics was more likely to be true, after a not so long think I would opt for Wikipedia.
~Tyler Cowen
Visit 1800blogger to see all [...]
A Bad Bank Rescue
Submitted by CARPE DIEM
In the 1980s, the government did not need a strategy to decide which bad loans to take over; it dealt with anything that fell into its lap as a result of a thrift bankruptcy. But under the current proposal, the government would go out and shop for bad loans. These come in [...]
Tragedy of the Commons and Economies of “Scales”
Submitted by CARPE DIEM
THE ECONOMIST – Like most other fisheries in the world, Alaska’s halibut fishery was overexploited—despite efforts of managers. Across the oceans, fishermen are caught up in a “race to fish” their quotas, a race that has had tragic, and environmentally disastrous, consequences over many decades. But in 1995 Alaska’s halibut fishermen decided [...]
Does House Republican Resistance Make Sense for Their Constituency?
Submitted by Econbrowser
From the Justin Fox, regarding House Republicans’ plan:
…that of the House Republican Study Committee, seems to be a joke. It calls for a two-year suspension of the capital gains tax to “encourag[e] corporations to sell unwanted assets.” But the toxic mortgage securities clogging up bank balance sheets are worth less now than when [...]
