More news of a slowing economy
Friday pushed money away from stocks and toward Treasury bonds, but in the
routine since January, not to mortgages. The lowest-fee 30-year deals are
still stuck just under 6.00%.
Friday's surprise, a big earnings miss and write-down at General Electric,
is disturbing because it indicates the slowdown spreading beyond finance
and housing (although GE is an immense financial enterprise). The same
contagion showed in the newest small-business index (the National
Federation of Independent Business), down in March to the lowest reading
since the 2nd quarter 1980. In the 28-year interval, unlike measures of
consumer confidence, the NFIB has never recorded a false negative: every
index downturn has coincided with recession.
Yet, the crucial indicator for the economy -- jobs -- has yet to break
hard. The spike in new claims for unemployment insurance two weeks ago
completely reversed last week.
The race is still on: will we get an effective public-policy response to
the Crunch before the economy fails, or after? Incredibly, now eight
months into this, we are still very much alive. Rattled, angry with one
another, but alive. There is still time.
However, public-policy
formation this week moved in reverse.
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Alan Greenspan, 82,
Republican, was once regarded as the finest central banker of all time.
Last year. Since his retirement he has frequently offered economic and
market commentary, unlike any predecessor -- not particularly harmful, but
not enlightening, either, and undercutting the authority of his successor.
Since the onset of the Crunch, Mr. Greenspan has been consumed by an
effort to defend his record, insisting that markets should be allowed to
work unhindered, and regulators should not intercede in excess. Last week
he said that he did "not regret a single decision" as Chairman.
Although most of the criticism hurled at Mr. Greenspan is either mistaken
or debatable (especially that he kept the Fed's cost of money too low for
too long, '02-'04), his term marked the most colossal regulatory failure
in American history, the failure to intercept the credit bubble.
Paul Volcker, 80, Democrat,
Fed Chairman '79-'87, six feet six inches tall, chewing a stogie always,
brutal inflation-fighter, personal creator of the worst recession since
the Depression (11% unemployment, 22% prime), no published memoir, no
lucrative speaking tour, rose this week to criticize Perfesser Bernanke.
He finds the Bear Stearns intervention a bad precedent, and same for
emergency financing of Wall Street dealers. Once revered for his courage,
he revealed his inner one-track: punishment is good.
© 2008 - Economic Notes is published weekly by the Economics Department of
Universal Lending Corporation. |
Great work, guys.
Dubya returned from Europe to focus on Iraq.
Congress is hard at work to keep people in houses that they cannot afford.
Mr. Bernanke has dark circles under his eyes, and seems to have lost
weight.
Treasury Secretary Paulson found the notes he misplaced last month. Too
bad. "Those institutions that need capital should raise it." One did: WaMu
found some old Texas S&L sharpies who dumped $7 billion into the wreck,
structured a deal that pretended not to control the institution, doubled
the shares of stock outstanding (stockholders who had already lost 75% of
value were "diluted" into loss of half of the remainder), and shut down
all of WaMu's mortgage offices and wholesale lending, firing 3,000 very
able mortgage personnel in favor of yappers at a "call center."
WaMu is in mothballs, embalmed until the sharpies find the moment to sell
the branches and their deposits. "Capital raising" in the marketplace has
permanently extinguished yet another source of credit.
In this leadership vacuum, the American people are confused, worried, and
pissed, which is the soul of good sense. Except in one respect: the
economy is still alive! If we're a little lucky, the people will tire of
blame and pretend solutions, and begin to send out the word: "Would you
guys get together and fix this, please?"
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