The Fed’s critics have complained very loudly since Ben Bernanke began lowering interest rates last Fall. They argue that low interest rates encourage more borrowing and consequently more spending. And that low interest rates depress the the foreign exchange value of the dollar. They say all of the above are driving inflation higher and point to exploding food and oil prices worldwide as evidence.
“Rise in Renters Erasing Gains in Ownership,” New York Times, June 21st 2008
The story above is based on home-ownership data released by the Census Bureau back in April. The article bemoans the fall in the home-ownership rate from 69.1% in the first quarter of 2005 to 67.8% as of the first quarter this year. Yet I wonder: did the home-ownership rate ever really reach 69.1%?
After an analyst downgrade sent their stock diving 30% to $2.35 today, BankUnited Financial of Florida tonight issued a press release announcing a secondary stock offering. The bank is looking to raise $400 million of capital, which at the current stock price would translate into an additional 170m shares.
The New York Times editorial board devotes today’s top editorial to criticizing the Bush administration, and John McCain, for doing “so little” in response to “the foreclosure crisis.” [Not the first time they've called for a bailout.] Doing “nothing” to prevent foreclosures will have an unacceptably large negative impact on the broader economy, they argue.
OptionARMageddon is all about raising awareness of our debt-fueled lives and economy. Debt is a dangerous crutch to lean on. It’s a drug, really, offering users the temporary and totally artificial high of having more stuff: the bigger house, the faster car, the size D breasts.
There’s been much chatter recently from bloggers covering China’s economy. It seems China is raking in foreign reserves at an astonishing rate so far this year. Perhaps as much as $365 billion through April. Drilling down into the sources of that cash suggests the emergence of a new and very sizable “carry trade,” in which investors sell a currency with a relatively low interest rate and buy a different currency yielding a higher interest rate.
[One of O.A.'s goals is to help readers with the vocabulary of investing and economics. This is the first in a regular series of posts I'll call "tutorials." We'll collect these and post them under a tab at the top of the page....With that, I present Part 1 of our first tutorial]