It’s Friday, and I have Manhattan real estate on my mind. It’s hard not to, since I’ve spent the past few days here. Vacancies are at 20 year highs and prices are down, but that doesn’t stop hope from springing eternal: [Embedding is disabled, but check out this Bloomberg video here.]
It was perversely funny that Bloomberg was speculating that the bonuses were going to "heat up" the housing market. Sure, they said that a third of people on Wall Street said they were expecting bigger bonuses, but there are a lot fewer people on Wall Street than there were last year. In fact, the Wall Street Journal declared last month that the financial sector was "essentially in a state of emergency".
I’m on a plane back to Austin today, but feel free to weigh in on this or anything else happening out there. This is an open thread, so let us know what’s on your mind.
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Any time that bonuses to a relatively small group of people can materially affect the price of something as widespread as housing – well, perhaps those bonuses are a bit too large.
Unfortunately, they don’t tell you why this is happening (see below). They don’t provide the missing link. The reason banks are not lending is that government is liquidating its position in American society. When one of the parties in 50% of transactions in this country, is a government entity, this matters.
Watch out for this decoupling of government from society in the United States. We are totally unused to it after 70 years, so people don’t know how to react. We are now in a race to the bottom in every economic field, from commodities to currencies.
What the figures below mean, is that we are just that much closer to our political crisis. People don’t remember that the crisis of the 1930s was fundamentally a political crisis. It was only resolved (by West Coast Hotel) because the relatively low rate of elite unemployment meant only moderate change was necessary. How much change will be necessary to resolve this crisis?
The chess game for power (as Goebbels called it) gets under way:
MARKETWATCH:
U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payroll or refinance their maturing debts.
According to weekly figures provided by the Federal Reserve, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace.