Yes the bottom has not arrived - sigh ...
While traveling and in Beijing, I am not totally immune to glancing at the goings on in the U.S.A. (Everyone asks where are you from? Whether you speak to them in Chinese, English or they are trying to get you to buy something!!! Laughing - after awhile, you have to ignore them. I mean after the 100th time THAT DAY, one gets less polite at times - like when they are obviously only trying to get you to buy something and grab your arm so that you do not walk away!!)
So the markets fell again today (Thursday). Safe haven securities, even far out in the future, the 10 year U.S. Treasury Note, have seen a huge influx. The interest rate dropped below 3% now - mortgage rates have dropped too, but have housing prices stopped falling? The expectations I wrote about many months ago (with a nice graph) were that many areas of the country would not see the peak of the problem until the end of the first quarter of 2009. Furthermore, the economy and financial crisis have deepened vastly since then. More layoffs are yet to occur, especially if the automakers and their parts suppliers go into bankruptcy proceedings as well.
From the New York Times today:
I do not share many of the commentators thoughts in the article. Although I agree that the market has not hit bottom, I believe the fundamentals are not yet positive enough for the markets to take heart and change direction. Deflation is not just a possibility but an expectation now. Though mostly in oil prices at the moment, the whole economy will soon face declining prices too. Maybe even wages, we shall see. The scenario is becoming more and more like the Great Depression as Congress, the President and many of "the public" seem to believe we need to let the Auto Industry suffer their bed they made.
As Greg Mankiw stated in a previous Op-Ed (source later), the repercussions to "ordinary" Americans in the 1930s were vast and deep. Will we follow such a path after bailing out Wall Street? An interesting question which WILL play out during the next short period. (I AM an Economist and we do talk like that - Short-run versus Long-run but with no defined time periods!! Grin)
So the markets fell again today (Thursday). Safe haven securities, even far out in the future, the 10 year U.S. Treasury Note, have seen a huge influx. The interest rate dropped below 3% now - mortgage rates have dropped too, but have housing prices stopped falling? The expectations I wrote about many months ago (with a nice graph) were that many areas of the country would not see the peak of the problem until the end of the first quarter of 2009. Furthermore, the economy and financial crisis have deepened vastly since then. More layoffs are yet to occur, especially if the automakers and their parts suppliers go into bankruptcy proceedings as well.
From the New York Times today:
I do not share many of the commentators thoughts in the article. Although I agree that the market has not hit bottom, I believe the fundamentals are not yet positive enough for the markets to take heart and change direction. Deflation is not just a possibility but an expectation now. Though mostly in oil prices at the moment, the whole economy will soon face declining prices too. Maybe even wages, we shall see. The scenario is becoming more and more like the Great Depression as Congress, the President and many of "the public" seem to believe we need to let the Auto Industry suffer their bed they made.
As Greg Mankiw stated in a previous Op-Ed (source later), the repercussions to "ordinary" Americans in the 1930s were vast and deep. Will we follow such a path after bailing out Wall Street? An interesting question which WILL play out during the next short period. (I AM an Economist and we do talk like that - Short-run versus Long-run but with no defined time periods!! Grin)
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