Wednesday, Jan 30, 2008
Chief economist of Morgan Stanley says: Give me the money or the economy gets it
Financial Times: A better strategy to deal with mortgage fallout
"Fear of risks with UK mortgage-backed securities may to some extent be fuelled by an inappropriate extrapolation from securities backed by US subprime mortgages." (In other words, he thinks the UK isn't as bad as the USA.) ---
"If that is the case, there is a form of market failure." (He thinks the markets aren't working. I think they're behaving very rationally, all things considered!) ---
"A new government agency, not the Bank of England, could either buy or lend against the collateral of mortgage-backed securities." (Just to tide things over until the markets get back to normal, however long that might take. In the meantime can we please all carry on making shedloads of profit at the taxpayers expense?)
Posted by drewster @ 02:49 AM (360 views) Add Comment
4 Comments
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1. drewster said...
Here's another article from today's FT, not housing related but probably of interest to regular bloggers.
Financial Times: America’s middle classes are no longer coping
The fact is, middle-class families have exhausted the coping mechanisms they have used for more than three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago. Yet for years now, America’s middle class has lived beyond its pay cheque. Middle-class lifestyles have flourished even though median wages have barely budged. That is ending and Americans are beginning to feel the consequences.
The first coping mechanism was moving more women into paid work. The percentage of American working mothers with school-age children has almost doubled since 1970 – from 38 per cent to close to 70 per cent. The second coping mechanism was working harder: the typical American now works two weeks more each year than 30 years ago. They work more even than the notoriously industrious Japanese. The third coping mechanism was borrowing. Americans got 10 percent of disposable income from home equity loans. But this final coping mechanism can no longer keep us going, either. The era of easy money is over.
In short, the anxiety gripping the middle class is not simply a product of the current economic slowdown. The underlying problem began around 1970. Almost all the benefits of economic growth since then have gone to a small number of people at the very top. Any presidential candidate seeking to address the problems will have to think bigger than bailing out lenders and borrowers, or stimulating the economy with tax cuts and spending increases.
2. su said...
Drewster. Your second article reminded me of a programme I glimpsed recently talking about the rich and the increasing pressure they were under to keep up with the Joneses. The more money they earned, the higher the standard of living they were expected to keep up with e.g private schooling, multiple foreign holidays. Also our concept of what is essential and what is luxury is very different from previous generations.
I got the quote below from this web-page.
http:www.timesanddemocrat.com/articles/2008/01/29/opinion/12936206.txt
I remember my mom talking about the Great Depression, and how, since they lived on a small farm that produced nearly everything they needed, they generally only bought coffee, sugar, rice and flour. She said nothing much changed except that they sometimes went without sugar and white bread, but just ate more corn bread, and used cane syrup for sweetener. Coffee was the thing they missed most. They heated and cooked with wood, of which they had plenty, had no electric, water or telephone bills--no running water, electricity or telephone. She said that they really didn't have to do without much of anything.
3. planning4acrash said...
The US have only maintained 1970's level wages because rising oil supplies have let others rise in wealth as they keep going at the same level. What happens as oil supplies dwindle? Somebody will have to suffer here, and industrialisation of the east is an insatiable process driven by investment. Stagnation of the west is something else!
4. shipbuilder said...
Nice one, Drewster. The great lie of capitalism - I wonder if we have a similar picture over here? With Gordon's Tax-o-rama I guess it's even worse.