An economy on life support
Commentary: No time for 'tap dancing' around banking problems
By Lou Barnes, Friday, April 24, 2009.
Flickr photo by brykmantra.Another week of odd calm ... at its heart a void of information from government. The economy is on life support, but the intentions of the physicians are unclear.
In the data details, nothing new. Mortgage rates still rattle in a very narrow, high-four range, held so low only by the Fed's massive buying. The stock market has shown some buoyancy, holding its ranges: Dow 8,000 and S&P 850.
That optimistic trading is based on hopes that the economy will follow prior cycles: New weekly claims for unemployment insurance may have hit cycle-top at 665,000 in early April, and history says recessions end two months after that top.
Historically, we're overdue for an inventory pop -- new orders to replenish excessively depleted pipelines. Historically, we should soon begin to feel the stimulus spending.
Stocks reacted well to news of a slight decline in March sales of new and existing homes, and apparent drops in unsold inventories. However, there is still no increase in applications for purchase mortgages.
Inventories are down because of foreclosure moratoria, and many millions of owners who think it unwise to try to sell. This is best evidenced by a sharp drop in the number of Americans moving from one home to another -- today about one-third below the numbers in the '80s and '90s.
The void: Treasury Secretary Geithner this week testified to Congress and delivered three speeches, all posted at http://www.ustreas.gov. He was commendably combative before Congress, but neither there nor in 25 pages of text did he describe the administration's plans.
He has always acknowledged urgency, the continuing dysfunction in credit markets, but dissembles about results, metrics to measure results and intentions. The Term Asset-Backed Securities Loan Facility (TALF) program, central to renewing credit, fell dead flat at rollout. Yet Geithner claimed its pathetic $1.4 billion opening was "relatively good for an early program."
President Obama last week, at Georgetown University, offered a definitive economic speech in the style of a Franklin D. Roosevelt fireside chat. His intentions are good, but as a policy document, or rhetoric to reassure the nation ... an awful, 10-page fireside filibuster. ...CONTINUED
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Submitted by Jon Astaris on April 24, 2009 - 2:45pm.
The nation is scared, fully aware of deep trouble...the Feds are scared of telling us what we already know...
The consequence of inadequate credit is living within our means. THAT is the one thing we cannot do any more. The Fed is right to be scared of us. The spiffy toys we've been playing with is about to be yanked from us, and we're sure to throw one awful temper tantrum right in the middle of the World Shopping Mall on the day after Thanksgiving.
Submitted by Duncan Logan on April 24, 2009 - 3:03pm.
The Fed buying US treasuries is like a snake eating its own tail for food. As for the stress tests, my money is on all the banks passing the tests they set themselves to take.
Another great article Lou. Thank you.
Duncan Logan
Submitted by chis eliopoulos on April 24, 2009 - 3:04pm.
The nation is scared, fully aware of deep trouble, and it is far past time for the authorities to speak plainly: what we're trying, how and when we'll know if it's working, and our contingencies.
That's the problem.
The nation is terrified that has to pay for all these bailouts.
The wall street and the banks pocketed the money and the people are holding the bag.
Who cares what the stock market is doing?Any one with a gram of brain will stay far from it until there is some serious regulations in place.People are talking about recession and its reasons and ignore the fact that come down to be the result of illegal and irresponsible activities.Same and worse with the banks.I cannot believe that the feds are bailing them out and then they let them sit on all this inventory.CRIMINALS
Submitted by Robert A. Hulme on April 24, 2009 - 5:25pm.
We are just in a calm before the storm, a good storm, I can't wait to see the tremendous recovery we are about to experience. My glass is half full and will continue to be half full until we don't have a glass at all.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Mortgage Xpress
www.www.cachevalleyrealestate.us
www.stgeorgerealestate.us
Submitted by Debora Auble on April 24, 2009 - 6:37pm.
The glass is neither half empty or half full. Such thoughts mean that the glass is 2 x what should be. Reality is what it is. The market it what it is. The glass is full. Good or bad. Until we stop thinking in these parables, we won't be able to accomplish what we can. It is what it is. The true skilled are able to be successful in any market conditions - history has shown that. There have always been upsides and downsides to the real estate market. And in the downsides, those who know you have to tell the market what they need to know, not what just what they want to hear, will succeed. And the order takers will not. The tougher the market is, the more they need the true professionals. It will be a long time, if ever again, the scratch and win lotto card realtors will survive. It's always been 90% hard work, professionalism and always will be. We will succeed in any market. Have and always will.
Submitted by Susan Carter on April 27, 2009 - 4:40pm.
June 2010? Right on. Glad to see someone acknowledging that the length of past recessions isn't a reliable guide to future results now. What about the bubble in financial stocks, too. Looks like a lot of wishful thinking. See Japan's reluctance to come clean on their banks in the 90s and their ongoing woes.