Economics Update

Well, Fannie Mae just posted a $2.3 billion loss, cut its dividend, and is will no longer buy and resell Alt-A mortgages.

That sound you hear is the housing market seizing up, and it does look like mortages will be getting more expensive, and given that the spread between LIBOR and Treasury Bills, the so called "TED Spread", remains at near historic highs, I don't really see any unfreezing in the near to medium future.

However, the the US dollar is on a tear right now, and a strong dollar attracts investment, which means that there is more money out there to lend, which might make loans cheaper.

I still think that current interest rates are unsustainably low, but YMMV.

Oil and gasoline are down, as are commodities like copper, silver, and gold.

This points to declining inflation, good news, but only because there are real signs of a deep, hard recession, which is bad news.

The fact that Productivity growth has slowed points to a slowdown too.

I wonder what the moderation in commodities will do to wholesale inventory numbers, which have been up because of price appreciation in said commodities.

BTW, a monoliner insurer just went belly up. ACA Capital Holdings Inc. just terminated $65 billion in credit default contracts, and turned itself over to creditors.

BTW, as a result of the IndyMac implosion, people are starting to split their bank accounts among multiple banks, to ensure that they are all completely covered by FDIC insurance.

I think that we are seeing a generational shift in the attitudes of people about finance and investing.