General Economic News Oct. 25-29

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News
FRIDAY
Shattered Dreams: Homeowner Protection
So with eighty thousands homes in foreclosure in New York state alone, Judge Lippman developed a new procedure requiring attorneys to sign a form confirming that they have personally reviewed the paperwork, including a loan file where a client, the lender, is claiming a homeowner is behind on their payments and in default.
(Tea) Partying for Halloween?
This Halloween, sales are up across the board but sales of Colonial costumes are beating the spread.
Australians swoop in on U.S. foreclosures
The Australians are riding a commodity-driven export boom. China, workshop to the world, is gobbling up ever more metal and fossil fuel, much of which comes from Australia. Among Australia's top commodity exports are coal, iron ore and gold.
Bringing NAFTA back home
Despite Chinese competition, Mexico’s exports are growing. But the country is still not taking full advantage of its trade agreement with the United States.
The indispensable economy?
China may not matter quite as much as you think.
U.S. Michigan Consumer Sentiment Index Decreased in October
Confidence among U.S. consumers fell in October to the lowest level in almost a year, which may temper the biggest part of the economy.
Mortgage Rate Edges Up Again, to 4.23%
Mortgage rates were mixed the latest week, with long-term fixed-rate loans edging higher for the second consecutive period after a streak of record lows, according to Freddie Mac's weekly survey of mortgage rates.

THURSDAY
Administration to get freer with trade
U.S. Trade Representative Ron Kirk has been a genial caretaker for an Obama administration trade agenda mostly aimed at placating labor unions and their Democratic allies by erecting barriers to imports. With the public more opposed to free trade than ever, and Democrats running hard against it this fall the White House has shown no interest in the issue.
Foreclosure Crisis Worsens in Most U.S. Metros
The foreclosure crisis intensified across a majority of large U.S. metropolitan areas this summer, with Chicago and Seattle -- cities outside of the states that have shouldered the worst of the housing downturn -- seeing a sharp increase in foreclosure warnings.
Corporate profits' big climb
Does President Obama deserve credit for the fact that corporate profits have risen faster under him than during any other 18-month period since the 1920's?
Will Germany now take centre stage?
Its economy is booming, but its strength poses new questions
Europe Economic Confidence Improves More Than Forecast
European confidence in the economic outlook improved more than economists forecast to the highest in almost three years in October, led by manufacturing sentiment.
Settlement Reached In Muni-Bond Probe
The Securities and Exchange Commission says the civil settlement is the first time it has secured financial penalties against city officials in a muni-bond fraud case. It comes as the regulator is stepping up scrutiny of the estimated $2.8 trillion muni-market.

WEDNESDAY
Harvest time: The migrant economy
Global weather disruptions have boosted food prices this fall, but one thing that hasn't changed is the annual migration of workers to farms. Secretary of Agriculture Tom Vilsack says that between 50% and 60% of the food Americans eat has been handled by immigrants (legal or not). Here are some key facts about the migrant economy.
New rule: No more up-front fees for debt fixers
Companies that claim to settle your debts for less than you owe can no longer charge up-front fees for their services. Instead, they have to wait to collect from consumers until they actually deliver on the promise.
Cash-Balance Pensions Stand to Gain Favor
Cash-balance pension plans, where employees stand to get a lump-sum payment at retirement based on a system of "credits," are poised to gain traction in the coming year.
Consumer Confidence Still Weak
Americans' confidence in the economy rose only slightly in October from September, according to a monthly survey, as they continue to grapple with job worries.

TUESDAY
Gas prices rise, breaking pre-election pattern
Gasoline prices haven't gotten much attention amid all the other bad economic news for Democrats heading into a final week of campaigning, but the price per gallon has climbed nearly 15 cents since Labor Day - a surprising jump, given that prices usually plummet before an election.
Global food crisis forecast as prices reach record highs
Cost of meat, sugar, rice, wheat and maize soars as World Bank predicts five years of price volatility.
Consumer Confidence Rises to 50.2
U.S. consumer confidence rose slightly in October but remained near historically low levels as concerns about the labor market persisted, according to a private sector report released on Tuesday.
Ford Earns $1.7 Billion in Q3, Pays Down Debt
Ford Motor Co.'s third-quarter net income rose 68 percent as it grabbed a bigger share of the U.S. auto market and buyers paid more for its highly-rated cars and trucks.
Inspector General: Obama Mortgage Relief Program Failed
The Obama administration's foreclosure-prevention effort has been ineffective in tackling the foreclosure crisis, the watchdog for the federal bank bailouts said Monday.
Want to get away with murder? Become a bank.
The biggest danger to the U.S. capitalist system doesn't come from communists or community activists or left-wing academics. It comes from some of the nation's biggest financial institutions. These companies, which helped create the financial meltdown that touched off the Great Recession, have now found yet another way to undermine the public's faith in capitalism and markets: the foreclosure fiasco.
Business Inventory Gains Continue to Slow
Manufacturers Enjoyed Strong Boost From Restocking, but More Cautious Mood Among Customers, Retailers Prevails
Housing data flip-flop: Don't bank on a recovery yet
Great news on home sales was followed up by dismal data on home prices. The lesson? Don't look to the monthly figures for signs a recovery is near.
UK growth doubles forecast
Britain's economy grew twice as fast as expected in the third quarter of this year, easing fears the recovery is faltering and dimming the chance of more quantitative easing from the Bank of England.

MONDAY
Existing-home sales jump 10 percent
September surge the biggest monthly gain in 28 years.
Poll: Independets Siding with GOP
On the economy: 66% of Independents say the recovery legislation is not working (compared to 57% overall.) The percentage who said the stimulus is not working spiked 12% since Labor Day.
Looking Ahead: Economic Reports This Week
View the economt report schedule.
Bernanke: We take foreclosure problems seriously
Federal Reserve Chairman Ben Bernanke said Monday that a federal agency review of foreclosure procedures at the nation's largest mortgage servicers should be completed next month.
Coping with poor, confused consumers
The growing number of Americans living below the poverty line is troubling on many levels, and it's a problem that consumer companies can no longer ignore.
U.S. newspaper circulation dips further
Average daily circulation fell 5 percent in the April-September period.
Economists more cautious on U.S. growth
Despite a number of positive signs, experts believe rate of economic growth will slow.

Economist Comments
FRIDAY
Tea Party Is Best Way to Get Economy Back on Track
To gain support of the Tea Party, candidates will need to focus on spending cuts, lowering taxes, and private-sector job creation.
How the Great Depression and the Great Recession Are Similar
I've been critical of those who compare the Great Recession to the the Great Depression. Still, one area where today's economy is similar to the Great Depression is the lack of private-sector job creation.
Stimulus worked, but not as well as hoped
The U.S. economy is much stronger than it would have been without it, and millions more Americans have jobs because of it. That’s hard to dispute. However, the fiscal stimulus passed by the Democrats in early 2009 probably didn’t deliver as many jobs per dollar spent as hoped by its planners.

THURSDAY
ROSE: Crowding freedom out of the market
Big government kills consumer choice, then forces compliance.
Not the Time to Hamper Entrepreneurs
Private equity, a sector which has demonstrated its ability to take moribund businesses and improve their performance, is about to have its room to maneuver significantly curtailed. The European Parliament and Council have this week reached agreement on the Alternative Investment Fund Managers (AIFM) Directive, guaranteeing that next month it will be passed by the European Parliament.
China has every right to cheat, but shouldn’t
China, we are told, is cheating. It is cheating by making it harder for western companies to invest there and for stealing their technology when they do. It is cheating by directing cheap credit to favoured industries. It is cheating by allowing companies that operate in China to pay their workers less and pollute more. Above all, it is cheating by manipulating its currency, suppressing the value of the renminbi to make its exports super-competitive.
A Stark Choice between European Model or the American Way
The question is whether to begin the daunting task of turning the United States back toward its founding principles, or whether to descend further into the status of European social democracies like France and Greece.

WEDNESDAY
Private Social Security Accounts: Still a Good Ide
As Democrats and Republicans jockey to set Congress's agenda for after the midterm elections, President Obama has already dismissed one reform that would improve Americans' financial standing: allowing workers to save and invest some of their Social Security taxes in personal accounts.
Three reasons why energy M&A is surging
Deal activity in the U.S. oil and gas sector is going gangbusters. Here's why.
House Afire
The elusive search for villains in the foreclosure crisis.
The Nobel Case for Immigration
Only 1 in 20 people on earth live in America. But Americans won 4 of 11 Nobel prizes this year. Last year, it was 8 of 9. Many of those American laureates are immigrants. Today, about 1 in 8 Americans are foreign-born, but 1 in 4 American Nobel laureates since 1901 are foreign-born. Immigrants, it seems, are chronic overachievers. America would benefit by letting more in.
The Unseen Carbon Agenda
Anyone who cares about the U.S. economy is breathing easier now that cap and tax appears to be on the political garbage barge, but don't be so sure. The White House is still pursuing its carbon agenda through regulation, albeit with almost no public attention, and a new study shows the damage that is already being done.
Was TARP Really That Effective?
Think the Troubled Asset Relief Program has performed poorly? So does a government auditor. He says it has lacked transparency, been mismanaged and failed some of its core objectives.

TUESDAY
Small businesses losing out to red tape
In an economic climate with few jobs and cutbacks on basic city services such as police protection and firefighting, you would think cities and states would be overjoyed when someone was willing to open up a new business, bringing with him jobs, economic vitality and tax revenues. You might think that, but you'd be wrong.
Our Next Stop: Greece -- or Rome
If there's one theme dominating our midterm elections this year, it's outrage over runaway government — government running our lives, and trampling morality in the process.
Green lipstick on the stimulus pig
Recovery won't come from more government spending.
The Free Checking Restoration Act
Middle-class consumers are paying the price for the Dodd-Frank financial reform. The next Congress can undo the damage.
D.C. entrepreneurs wrapped in red tape
Bureaucracy blocks attempts to start new businesses in the District.
China cranks up the innovation machine
The Chinese, indeed, respect America's long record of innovation. No Chinese leader today is ever going to say, "We have no use for your country's manufactures." But there should be no doubt that China will go to extraordinary measures to build its own industrial and technological base. The question is how global corporations -- and their governments -- respond.

MONDAY
Ask Labor Whether Foreign Money Is Pouring In
Foreign money may be having a profound influence on the U.S. elections, more so than many people are aware.
Has the Earth Run Out of Any Natural Resources?
China has cut exports of rare-earth metals to Japan, Europe, and the United States, undermining high-tech manufacturers that rely on the minerals for wind turbines and missile-guidance systems. The People's Republic controls more than 90 percent of rare-earth production and now claims that their reserves may be exhausted in the next 20 years. Extinct plant and animal species notwithstanding, has the Earth ever run out of a natural resource?
To fix the economy, let bad banks die
Bad banks, and their bad business model of willful incompetence, are still alive, and dragging down the recovery.
Economy to grow at slower pace
The U.S. economy should continue to grow this year, though forecasters have lowered their expectations about the pace of recovery, according to a new survey.
Government Employees: Still Overpaid
Several studies from left-leaning research groups claim that state and local government employees are underpaid. All of the studies are seriously flawed.
How to Privatize the Mortgage Market
Europeans manage just fine without Fannie and Freddie-type agencies.
Macroeconomics: Three Years Aboard the Failboat
After years of the same failed policies, we're finally ready to set sail.

Blogs
FRIDAY
The long road back
Through the first five quarters of recovery after the 1982 recession, real GDP grew by 7.8%. The total expansion this time has been just 3.5%. Little wonder that employment has risen so slowly.
House Prices have corrected to what year?
Detroit is back to 1995 prices, and some cities like Dallas, Portland and Seattle are only back to 2005 or 2006 prices.
Barack Delano Obama
Reason TV’s Ted Balaker produced and narrated this truly excellent six-minute-long video on regime uncertainty and the parallels between FDR and Barack Obama.
Here’s Why the UN Is Broken
The 43 lowest-paying UN member governments, each assessed 0.001 percent for the regular budget in 2007, together pay a whopping 0.043 percent of the total UN regular budget. The 128 lowest-paying governments pay a combined 1.064 percent of the budget. By contrast, the 16 countries that each pay annual, regular budget assessments of more than 1 percent contributed, in the aggregate, 85.4 percent of the UN’s budget in 2007.
Economists React: Growth Remains ‘Too Weak’
Economists and others weigh in on the increase in third-quarter gross domestic product.
Understanding Regime Uncertainty
Unleashing this destructive uncertainty requires more than simply changing in major ways government’s role in the economy. Instead, regime uncertainty is increased by changes that portend into the indefinite future a greater degree of arbitrary government economic intervention.
A Regulatory Shock from the FCC
The Federal Communications Commission (FCC) has set its regulatory sights on wireless telephone providers for instigating a supposed epidemic of “bill shock” across the land.
Government Dependence Is Back With A Vengeance
Rasmussen Reports released poll results yesterday showing that 23% of Americans say they receive some form of cash benefits from the government. This is remarkably close to the truth. As The Heritage Foundation’s 2010 Index of Dependence on Government documents, 21% of the total U.S. population (64.3 million people) receive some level of assistance from dependence-creating federal programs.
Robust Economy Needs Affordable Energy
The notion that restricting access to affordable energy will make us world leaders in the production of alternative technology doesn’t jibe with past experience. We are world leaders in the consumption of televisions, cell phones, and virtually all other consumer electronics, yet we import the overwhelming majority of these goods. Mandating consumption is different from stimulating domestic production.

THURSDAY
Tea Partiers: America’s Oldest (and Newest) Free Traders
Some in the media have reported that today’s Tea Party members are simply paranoid populists who oppose free trade. This condescending stereotype is false.
One Reason the Economy Sucks in Graphs
In normal times banks were holding under a trillion in reserve. Now banks are holding onto their money. Banks are holding on to their cash for a number of reasons: uncertainty about taxes and regulation, an aversion to risk, and an increase in consumer savings.
Did "Most" Economists Support the Stimulus?
"Most" is a tricky word, but the idea was to convey the idea that a near consensus or general agreement that federal intervention, specifically spending, was necessary. It helps that professional surveys of economists are rarely conducted on timely policy issues, but new evidence suggests that general agreement simply did not exist at the time.
Are Banks Lending Again?
Based on the data I am seeing, it appears that banks, especially the regional and local banks, are starting to solve their nonperforming loan problems. This is very relevant to the credit crunch we are having. There are two aspects to it. First is that banks have tightened credit because they are unsure of the future with a ton of problem commercial and residential real estate on their books. They would rather hold on to their capital until they see a recovery in the economy. Second is that businesses aren’t borrowing, at least not as much as they would if we were in a recovery.
Home Builders Slash 2010 Construction Forecast
The National Association of Home Builders Wednesday slashed its 2010 forecast for single-family home construction, but said activity will accelerate the following two years as the economy improves. Single-family housing starts are set to grow 8.4% this year to 479,000 before construction hits 655,000 new houses in 2011 and 970,000 in 2012.
Home Sales: Distressing Gap Sept 2010
Initially the gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn't compete with the low prices of all the foreclosed properties.
Freddie Mac: 90+ Day Delinquency Rate Declines Slightly in September
Freddie Mac reports that the serious delinquency rate declined to 3.80% in September, from 3.83% in August.
Primer on Austrian Economics
A society does not choose; a collective has no life or mind of its own. That, according to Butler, is an Austrian methodological principle.

WEDNESDAY
What Gets You Most Upset about the TARP Bailout, the Lying, the Corruption, or the Economic Damage?
As an economist, I should probably be most agitated about the economic consequences of TARP, such as moral hazard and capital malinvestment. But when I read stories about how political insiders (both in government and on Wall Street) manipulate the system for personal advantage, I get even more upset.
Are Seniors Being Cheated? No
So the short story is a) rising spending by seniors doesn’t necessarily mean rising costs for seniors; b) inflation has fallen in recent years but seniors haven’t received negative COLAs, temporarily increasing the purchasing power of their benefits; and c) even if a CPI designed for retirees were used, no COLA would be paid next year.
Trade Deficit = Capital Inflow = BOP = 0
We hear a lot about the U.S. "trade deficit" or the "current account deficit," but we don't hear as much about the offsetting "capital account surplus" or "capital inflow" that has to exist when there's a trade deficit. For example, a Google search reveals three times more results for "current account deficit" (775,000) than for "capital account surplus" (224,000).
Returning the People’s House to the People
We have to pass the bill so that you can find out what is in it,” House Speaker Nancy Pelosi said in March. No single statement better epitomizes everything that is wrong with how Congress works. While Speaker Pelosi was referring to Obamacare at the time, she could have been referring to any of the thousand-plus page bills Congress passed this year. This was not how the Framers intended Congress to be run.
Real House Prices, Price-to-Rent Ratio
Yesterday CoreLogic reported that house prices declined 1.2% in August, and this morning S&P Case-Shiller reported widespread price declines in August.
The Truth Behind Superman
The documentary film Waiting for Superman follows five children and their families as they struggle to find educational opportunities. Fed up with the ineffective public schools in their communities, but unable to freely transfer their tax dollars to a school of their choice, the families enter lotteries for the few available slots in private and charter schools. As an unapologetic denunciation of the American educational system, the film features families openly weeping at the prospect of losing the lottery and returning to the public schools.
Philly Fed September State Coincident Indexes
A number of states are showing declining activity - and this "recovery" looks very similar to the sluggish recovery following the 2001 recession. No wonder consumer confidence remains very low.
The Evidence Is In: Head Start Still Doesn’t Work
We are sure that Orzag and President Obama have nothing but the very best of intentions when they promote Head Start expansion. And we are sure they believe that the very best social science evidence should show that Head Start works. But it doesn’t. As President Ronald Reagan once said: “The trouble with our liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.”
Economics' limits
Talking about the economy as if it involves the interplay chiefly of large aggregates such as "consumption" and "investment" blinds Keynesian economists to the real action that takes place at a much more detailed level. It's a very unscientific approach.

TUESDAY
The Colbert Effect
Watch the video!
A Look at Case-Shiller, by Metro Area
The October Update
Unsubsidized Ford Profitable for Six Straight Quarters
Ford Motor Company has recorded its sixth straight quarter of profits and expects to have its net debt down to zero by the end of 2011. Ford was the only domestic auto manufacturer to avoid bankruptcy or take a bailout from the federal government.
Economists React: ‘Major Upside Surprise’ in U.K.
The U.K. economy grew strongly in the third quarter, the Office for National Statistics reported Tuesday, defying expectations of a sharp slowdown in the country’s economic recovery. In its preliminary estimate, which is frequently revised at a later date, the ONS said the economy grew 0.8% between July and September after an unusually strong 1.2% quarterly expansion between April and June.
Down again
Almost immediately after the expiration of the government's tax credit for homebuyers, it became clear that American housing market stability had been remarkably dependent on the generous subsidy. Data released this morning indicated that declines accelerated in August.
Immediate Changes to Reform How Congress Works
Changing the membership of the Congress does not fix its out-of-touch culture.

MONDAY
Chicago Fed: Economic activity slowed further in September
Led by declines in production-related indicators, the Chicago Fed National Activity Index decreased to –0.58 in September from –0.49 in August.
Which economic ideas are hard to popularize?
It is hard to popularize "maybe" claims, agnoticism, uncertainties, confidence intervals, and contingencies. The marketing process encourages excess certainty.
Schedule for Week of Oct 24th
The key economic report for the coming week is the Q3 advance GDP report to be released on Friday. There are also three important housing reports to be released early in the week: Existing home sales on Monday, Case-Shiller house prices on Tuesday, and New Home sales on Wednesday.
Why Say's Law Does Not Preclude Gluts and Shortages
Like so many other important insights in economics, the organizing principle that is Say's Law provides us a framework for understanding how different scenarios will play out depending on the institutional arrangement that frames human action.
Unofficial Problem Bank List at 871 Institutions
Here is the unofficial problem bank list for Oct 22, 2010.
Why Germany is different
One question rich world countries, including Germany, should be asking themselves is how Germany managed to set itself up as among the chief suppliers of capital goods (and some other products, like cars) to emerging markets. Germany has been advantaged relative to Japan thanks in part to currency movements. But other economies should perhaps think about the implications of this particular pattern of trade for long-term economic growth: their own, and Germany's.
Defending the Constitution Against Radical Federal Government Power
Speaking at The Heritage Foundation Thursday, Cucinelli urged the public interest lawyers in attendance to do all that they can to educate the public about how the federal government’s ever expanding power is antithetical to our nation’s First Principles.
Goolsbee Refudiated
It doesn’t matter who asks the question (CNN, Gallup, Pew, Fox, ABC, or CBS) the answer is always the same: the American people believe President Barack Obama’s $814 billion economic stimulus failed. The White House believes that this is a failure of communications not a failure of policy.
Foreclosure Crisis: Home Equity Loan Time Bomb
The biggest cost ahead for large mortgage servicers may not be "robosigning" settlements or buying back bad debt -- it's the follow-on mortgage products like home-equity loans that take longer to go sour.

Reports
FRIDAY
Did France Cause the Great Depression?
The gold standard was a key factor behind the Great Depression, but why did it produce such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This “gold hoarding” created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33.

THURSDAY
Durable Goods Orders Weak Outside of Aircraft
Durable goods orders for September came in stronger than expected, but the headline number was boosted by a jump in aircraft orders. Ex-aircraft, orders fell 0.6 percent signaling a slower pace of business spending.
The Case for Raising Social Security's Early Retirement Age
Estimated effects of increasing the Social Security Earliest Eligibility Age (EEA) from sixty-two to sixty-five on Social Security's finances, retirement income, and the economy. Increasing the EEA would extend the solvency of the Social Security trust fund by about five years, increase total annual retirement income as of age seventy for affected individuals by around 16 percent, and increase gross domestic product (GDP) by around 5 percent.
The Economic Outlook and Options for Fiscal Policy
There are monetary and fiscal policy options that, if applied at a sufficient scale, would increase output and employment during the next few years. Such options would have costs as well. Expansionary fiscal policy would increase federal debt, which is currently larger relative to the size of the economy than it has been in more than 50 years—and is headed higher.

WEDNESDAY
How the “Scientific Consensus” on Global Warming Affects American Business—and Consumers
The only consensus over the threat of climate change that seems to exist these days is that there is no consensus. The 2007 United Nations report on greenhouse gas emissions has served as a catalyst for lawmakers to burden traditional energy sources with regulations in favor of so-called clean energy. Recent revelations of erroneous and misleading data in the report have led many to question the wisdom of government-mandated emissions caps and costly energy-efficiency regulations. Congress should eliminate subsidies and reduce regulatory red tape—and let all energy technologies succeed or fail on their own merits. Artificially propping up a select few distorts the market and hurts American businesses—which means that the final bearers of the costs are, as usual, the taxpayers.

TUESDAY
Existing Home Sales Up More Than Expected in September
Sales of existing homes rose 10 percent in September, which was much stronger than expected. Single family and condos increased for the second consecutive month, we do not foresee a genuine recovery yet.
Rethinking Homeownership: A Framework for 21st Century Housing Reform
The government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac were significant contributors to the build-up of the housing bubble. Yet, virtually no substantive action has been taken to reform them. This delay, continuing a model that has been proven to be both bad business and problematic for the broader housing sector, is distorting the market and preventing a real recovery in housing.

MONDAY
Weekly Economic & Financial Commentary
U.S. and Global Weekly Economic Review.
Four Immediate Reforms to Change the Culture of Congress
Making Congress more responsive to the American people requires something more than just changing the players. Congress must first agree to change its internal rules of organization.