You were expecting something better under this administration than yesterday’s bad news of a record drop in home sales?
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Going forward, the efforts of households in many countries to reduce their elevated debt loads via increased saving could result in sluggish recoveries of consumer spending. Higher saving rates and correspondingly lower rates of domestic consumption growth would mean that a larger share of GDP growth would need to come from business investment, net exports, or government spending. Debt reduction might also be accomplished via various forms of default, such as real estate short sales, foreclosures, and bankruptcies. But such deleveraging involves significant costs for consumers, including tax liabilities on forgiven debt, legal fees, and lower credit scores.
It’s not a pretty picture and it explains a lot about why 10-year Treasury Note yields this week hit an all time low of 2.5%, predicting an extended period of economic malaise. Like Jimmy Carter, our current president is presiding over a crisis of confidence, and as during the Carter presidency much of that crisis is due to a steadily declining confidence in the president himself.
The bursting of an asset bubble, especially one that so many people are involved with not just economically but also emotionally, is a painful but necessary experience. It’s worse than the hangover after a party because if you find a cure for a hangover, the cure probably doesn’t have too many bad side effects. Unfortunately, the government’s efforts to minimize the pain of the bubble bursting — because it fears the political fallout — are, and only can be, the economic equivalent of the hair of the dog, namely trying to throw some duct tape on the bubble and pumping it back up again, if not to its full countrywide (and Countrywide) scale then at least to something that causes housing prices to stay steady when they would, in an unmanipulated and un-bailed-out market, be falling.
As little fun as it is, there should be a hushed but real enthusiasm for ending of decades of government pushing home ownership as a way to endear voters to the political party that best sells itself as the one making sure you own something you can’t really afford. It’s no more rational to say that everyone should own a home than that everyone should own a yacht or a Tibetan Mastiff (one of which sold last year for much more than the price of the average home in America). Remember, when a politician wants you to own a house, he does so because he thinks it’s good for him.
In the long run, the only way for housing, like any other market, to return to health, is for the bubble to be allowed to collapse, to allow market forces to do what they do whether it feels good or not on a given day. Housing, like the rest of the economy, faces an additional unnecessary headwind in our current Administration whose disdain for and lack of understanding of the economic freedom — including freedom to fail — necessary for economic growth and prosperity simply add to potential homebuyers’ hesitancy and confusion.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?
H/T to National Review Online