This article isn’t long on details. Treasury feels “enhanced regulatory powers” would be a “better tool than interest rates” to “contain asset price bubbles.”
The bad news on housing keeps coming:
WASHINGTON — U.S. new-home sales slid further in March to their lowest level since 1991 while the supply of homes for sale soared to nearly a three-decade high, suggesting little prospect of any near-term turnaround.
The Sunday Times Magazine will be publishing a fascinating article regarding the credit rating agencies and the role they have played in the housing bubble. (The introductory paragraphs of the article are below; the full article is available at the link above.)
Using a phrase like “too expensive” would seem to be subjective. But compare median house prices with median income (via Patrick). If people’s incomes aren’t climbing, how can they afford so much more house? (Click on the image to see a larger version of the chart….and the back button to return to the post)
The Fed’s aggressive interest rate policy is fanning inflation fears, causing some intrepid observers to argue for a return to the gold standard. I thought it very interesting last February when the WSJ published an op-ed by Judy Shelton that concluded as follows:
A few interesting items to pass along today.
The first is an interesting interview with an anonymous hedge fund manager (via JL). It’s a longish interview, but a good insider’s view on everything from the credit crunch to the downfall of Bear Stearns to the hedge fund business itself. A highlight:
Didn’t think I’d see an op-ed like this in the Journal. The editors themselves hate Fed easing, and for good reason. Inflation hurts everyone in the economy except for those in debt; those who, financially-speaking, have behaved most irresponsibly. But this opinion piece says the Fed shouldn’t feel ashamed about printing money in order to get us through the housing crisis.
Arthur Kimball-Stanley published a fascinating op-ed on Credit Default Swaps in the Providence Journal on Monday. I spoke with the author and he gave me permission to republish his piece in its entirety. A 30-page version of this argument was accepted for publication in a law journal to be published this fall. The author gave me a recent draft, though the article below offers the essential elements of the argument. Hopefully it gets traction……
In the latest CFA Institute Conference Proceedings, Paul McCulley’s article (“The Liquidity Conundrum”) has a superlatively readable discussion of economist Hyman Minsky’s work on financial instability. Minsky’s theory goes a long way toward explaining the housing bubble, in particular the creative mortgage products that blew it up.