Let me say upfront that I was and am an ardent President Obama supporter. But I have been very disappointed that we are not hearing enough about the housing crisis. I have a personal interest as our home has been on the market for months. We are not in foreclosure, thank goodness. But we have had to move to another state for family reasons. We are renting in our new state and still paying our mortgage on our home that is up for sale in our old state. Needless to say we are struggling. I was so hopeful that President Obama would attack this housing crisis immediately with passion and determination. I have not seen it and I am very dismayed. Housing is at the root of this economic decline. I am no economist but surely there are brilliant economic minds that can come up with a plan to try to straighten out this housing mess. Reduce interest rates to 4 or 4.5% - buy up the bad loans - do something - NOW!!! I want to see some urgency in the Obama Administration on housing. In my humble opinion this is the core issue which must be dealt with immediately. HOUSING should be the PRIORITY issue in any stimulus package!
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Summers Time
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The plan is to create a government "bad" bank, one that could issue its own paper, even if (as might be likely) the major buyer is the U.S. government. It's just a new rug to sweep catastrophe under.
And all of this will take place as the Federal Reserve, looking for new ways to add liquidity to the desert, considers buying U.S. Treasuries that foreign investors may be growing wary of holding.
We're not only inventing the rug, we're inventing the money to pay for it.
At some point, foreign investors may indeed become very skeptical of lending us money, at least in instruments denominated in dollars. They may doubt our ability to invent, build, grow and prosper—to create real wealth. They may think we are too weak to generate the real profits and real tax revenues necessary to pay it all back.
I doubt the wisdom of the doubters. Personally (and I'm an optimist about my country) I would never bet against our own resilience.
But it's Summers's job to worry about the consequences of failure. In President Obama's White House, Summers is the macroeconomic equivalent of National Security Advisor. He established and now runs a morning Oval Office briefing similar to the long-standing one on global military and intelligence. Given the nightmarish state of the world (and the American) economy, the president is tending to ask to hear from Summers first, and I'm wondering what he's telling Obama about the odds.
If there is no rug, and no money to pay for it, and if too much printing and borrowing risks leading us to doom, Summers must say so. What are the odds that, if circumstances call for it, he will step up?
Well, I know the guy. He is brilliant—and blunt.
I'd say the odds are pretty good: about 70-30.
© 2009
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