A bit late today, got a bit caught up in dissertation and work matters and finally. With a solution of OTC medicines to finally tamp down my allergy-induced sinus headaches, I think might be a bit more productive all around for the rest of the month. This week's post will be short and sweet because it is all kinda grim at the moment.
The retail sector is taking a nosedive.
The shitty mess in the credit market will further fuck NYC and NY as the losses pile the amount of corporate taxes goes down...to just about nothing. How we all feeling about deregulation? Heck of a job Bushie.
In more housing news: Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth. Gulp.
In still more housing news: Wave two of defaults might be in the offing. I don't think we have reached the bottom. Greenspan disagrees with me, though I won't trust him until he takes some (or any) responsibility for this mess.
Banks are tightening credit, so it is even harder for otherwise low-risk borrowers to get loans, such as mortgages.
In no shit news: Sec. Henry "Strong Dollar" Paulson* says he won't stay at the Treasury past January. What happens on January 20th again? It really makes my head hurt.
However, the dollar did improve against the Euro this week. Not sure what that means in the grand scheme of things. The rise might be temporary anyway.
I'll leave Zimbabwe alone this week. We can all buy a house for $1 (yes, one dollar) in Detroit.
_John
*As my friend has taught me, we are actually carrying out a weak dollar policy (or are we floating it? Is there a difference?) for some very good reasons. Paulson, however, kept repeating like an idiot parrot that we were carrying out a strong dollar policy. He fit in so nicely with the reality based Bush administration.
image: "paper_house_2" from flickr sachiebade
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Housing thought: A colleague of mine details the crisis in this way: if we measure this length of the crisis by "What inning are we in?", it's fair to say we're in the 8th inning. Problem is, we're playing a double-header. We're in the 8th inning of the "writedown" game, but we haven't really begun in the economic credit losses game. Who will win, er..., survive that one? Housing experts say that we're about halfway or a little over halfway through the price decline. So, by next summer, you should see a trough in prices.
Dollar thoughts: floating currencies (i.e. those that aren't tied to another currency wherein the "fixing" country's government intervenes in the market to keep it fixed) are valued based on expectations of a) the differential in interest rates between the countries and b) the differential in inflation. It's not a precise calculation, but basically, recent strengthening the dollar came from the ECB's statement that they won't be raising rates again anytime soon, which suggest FX traders believe that US rates will rise and the differential will narrow. Inflation? Who knows what they're thinking.
A weak dollar policy means that the government intervene in the markets to prop up or strengthen a currency. A floating currency is just one that trades without intervention - or in reality, minimal intervention. Most large countries float their currencies; China, Singapore, among others fix theirs to the dollar or euro or pound sterling. What they say and what they do... different things? You betcha.
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