The residential real estate sector is in shambles and, some economists say, will not recover until the end of 2010, at the earliest. Now it looks like commercial real estate may be the next block to fall in our "Jenga economy."
What is causing the mass U.S. layoffs, decreased demand or more expensive financing? This article presents new research showing that two-thirds of the variation in employment across companies is due to their varying dependence on credit. In short, cheap capital is important for employment.
A GM bailout would delay restructuring and ultimately destroy jobs. Restructuring under Chapter 11 is the best solution, but credit market conditions require the U.S. government to provide transitional, "Debtor in Possession" financing. To avoid political interference, the actual lending decisions should be made by a commercial bank with a stake in the outcome.
Why are investors rushing to purchase U.S. government securities when the U.S. is the epicentre of the financial crisis? This article attributes the paradox to key emerging market economies' exchange practices, which require reserves most often invested in U.S. government securities. America's exorbitant privilege comes with a cost and a responsibility that U.S. policy makers should bear in mind as they handle the crisis.
I was going to call this article either "The economic life of squirrels and the European Union Commission on Enterprise and Industry," or "Why is the European Union's Commissioner for Enterprise and Industry so much smarter than his non-existent counterpart in Washington?" My quandary was due to the fact that while the American establishment sleeps and dreams of globalism, not globalization,, the fledging European Union has made a very good step forward towards assuming one of the most important functions of a truly federal government; it has made the economic security of all of the European nations a first priority. It has just now officially recognized and moved to craft a solution to a problem of long term economic security for itself in a way that should bring shame to the hereditary and growingly nepotistic U.S. Congress, which clearly operates with only one long term security goal in mind: re-election in perpetuity for its members-without regard to the wants, the needs, or the opinions of the American people as a whole.
The October rout of the stock market and the bailout plan reminded me of a line in the movie "Armageddon." In the movie, Earth was being threatened by a killer meteor, and NASA was trying to determine how to destroy the rock before it hit. One U.S. military general suggested shooting up a bunch of nuclear weapons to destroy the meteor. But a (of course, brilliant) physicist responded, and I paraphrase: "You could shoot up as many weapons as you wanted but they would just bounce off and the meteor would keep on smiling."
Under Bernanke's direction, the Federal Reserve has completely rewritten its mission. Many articles in the International Speculator and The Casey Report have reported the strange growth in the loans they have made and explained that Bernanke has, for a long time, espoused unconventional actions to avert deflation and to expand the economy. So the charts below tell that story, and it is truly amazing.
It's Monday Sept. 22. The week before, Lehman Brothers shocked the financial world by declaring bankruptcy and sent the markets into an epileptic siezure. But, for me and the hedge fund I work for, things couldn't be better.