Economics Update

Yawn, another day, another all time low for the Dollar vs. the Euro, breaking the $1.53:€1.00 barrier.

The expectation of a major fall in the dollar is one of the major causes of oil prices rising again today, though the fact that OPEC his telegraphing that there will be no production increase, contributes to this.

The job market is looking increasingly grim, with
nonfarm employment declining by 23,000, and, in a good indication of an incoming recession, productivity growth is declining.

We do have some good news, the appraisal standards for Fannie Mae and Freddie Mac are not officially implemented.

It would have been better news a year, or 5 years, ago.

I have this rule of thumb when looking at the economy, which is when something happens in high finance that is truly bizarre, start by assuming that it is bad news.

That's the case with yields falling below 0% on Treasury Inflation-Protected Securities (TIPS).

TIPS are government bonds in which the principal appreciates along with the consumer price index. They are sort of inflation proofed as a result.

They are less riskier, because if inflation shoots up, you will get that back in the end, so the interest rate, which are set by auction, is lower.

Only for the past three days, the interest rate has been bid to less than zero, meaning that the bidders expect significant increases in inflation.

Paulson Sees New Capital Markets Proposals in 'Weeks'

Bush's Treasury Secretary is, after months of prodding by Democrats, coming up with a plan to close the barn door after the cow is gone, saying that, "We're looking at the mortgage-origination process, we're looking at the securitization process, we're looking at rating agencies, we're looking at disclosure issues, we're looking at capital issues and regulatory issues in the weeks ahead."

If it were done by honest decent and competent people, it would still be too late, but in this case it's being done by Bush and His Evil Minions^™, which means that it's primary goal will be two fold, preventing meaningful regulation, and benefitting Bush, His Evil Minions^™, and his campaign contributors.

The auction bond failure rate is nearly 70%, and appears to be getting worse, which means that at this critical time, with revenues falling, cities and states will find raising money for projects much more difficult.

In real estate, we now have mainstream press using phrases like, "Housing in 'deepest, most rapid' decline since Great Depression", the alt-A crash is well and truly starter (Alt-A are not quite prime, typically credit scores over 700), and we have Ben Bernanke saying that housing woes could persist for years.

Additionally, we are about to see the revenge of the 2005 bankruptcy law, with filings up 18% from January, and 28% from the year before.

We are about to see the negative effects of the law, which were predicted when it was initially proposed.

BTW, all is not quiet in the ever entertaining world of the monoliner bond insurers. Ambac has announced a reorganization, where it will exit the mortgage securities market and raise $1.5 billion in new capital.