The latest record-setting data point to continued slowing
|January 20, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
The latest record-setting data point to continued slowing
Some hands play a better hand that they’re dealt
Some things Obama can change, some nobody can, like the economy’s need to make land affordable again. So, what should a well-meaning new president do? Implement geonomics. Shift taxes and subsidies so prices are no longer distorted and people get fair amounts of work and wealth. The latest numbers show how serious the situation is. We trim, blend, and append seven 2009 articles from: (1) Bloomberg Jan 13 on fingers by Elizabeth Lopatto; (2) Reuters Jan 8 on unemployment by Lucia Mutikani; (3) Thomson Financial News Jan 14 on foreclosures; (4) BBC Jan 8 on the Bank of England; (5) MarketWatch Jan 9 on South Korea by Chris Oliver; (6) MarketWatch Jan 15 on mortgages by Steve Kerch & Amy Hoak; and (7) the AP Jan 16 on deflation by Jeannine Aversa.
by Lopatto, by Mutikani, by Thomson, by BBC, by Oliver, by Kerch & Hoad, and by Aversa
- Long Ring Fingers May Point to Wealth in Traders
The longer the ring finger of a stock trader, compared with the index finger, the bigger his pay is likely to be, on average 10 times more.
Traders with a higher ratio made $90,956 compared with those having a lower digit ratio averaging $1 million.
The digit ratio reflects how much testosterone an unborn baby was exposed to in the womb. Later as adults, the hormone creates feelings of confidence and encourages risk-taking.
JJS: While boldness is needed, taking risks is not; geonomics works. Meanwhile, other indicators point to an economy needing succor.
Unemployment benefit rolls swelled to 4.61 million, a 26-year high, in the last week of December. That was the highest since 1982 November. Job loss has occurred across a wide spectrum of sectors. Worried about wages, consumers have cut back on spending. Retailers, including market leader Wal-Mart, reported poor sales.
- Foreclosure Activity Up 81% In 2008
One in 54 homes went through at least one foreclosure during the past year. Compared with 2007, foreclosures were up 81% in 2008. In December, foreclosure filings were up 17% over the previous month. Due to state legislation, foreclosure activity in the fourth quarter was down nearly 4% from the previous quarter. Yet it is still up nearly 40% from the fourth quarter of 2007, despite moratoria enacted by both Freddie Mac and Fannie Mae.
JJS: With few seeking mortgages, banks worldwide have had to accommodate. Which should be good news. Once loans become affordable again, those hoping to own homes will have a chance.
- Bank of England cut rates to its lowest ever
The reduction brings interest rates below 2% for the first time since the Bank of England was founded 315 years ago in 1694. The Bank has now reduced rates four times from October’s 5% level.
- South Korea cuts interest rate to record low
The Bank of Korea slashed interest rates by half a percentage point, bringing its key rate to record low 2.5%. Its the fifth cut in the past three months. South Korean exports contracted 17.4% in December from a year earlier. Industrial production slowed in November for the fifth straight month.
- US mortgage rate drops to below 5%, a record
For the first time, the benchmark 30-year mortgage fell to 4.96% in the week ending Jan 15. It was the lowest rate recorded by Freddie Mac, since its survey began in 1971. It came after the Federal Reserve launched its mammoth plan to buy up bad mortgages. It was the 11th consecutive week of declines. Mortgage rates have declined nearly 1.5 percentage points since October, creating a savings of about $184 per month on a $200,000 loan. A year ago the 30-year averaged 5.69%.
The 15-year fixed-rate mortgage, a popular refinancing choice, is now 4.65%. Last year at this time it was 5.21%. Many people won’t be able to take advantage of low rates because they owe more than their home is worth. While rates are low, the fees for them are rising.
JJS: In general, costs are falling, since fewer are buying consumables.
- Deflation, or slowed inflation
Consumer prices tumbled again in December, 0.7 percent, the third straight month prices fell. For all of 2008, prices inched up 0.1 percent, the smallest increase since 1954.
This despite June when consumer prices spiked 1.1 percent, the second-fastest pace in a quarter-century. Then oil hit record highs and food prices marched upward.
For the year, energy prices fell 21.3 percent. Food prices, however, rose 5.9 percent.
Average weekly earnings, after adjusting for inflation, rose 2.9 percent last year, an improvement from 2007 when earnings fell 1 percent.
JJS: The media, most economists, and the Federal Reserve and other policymakers label a falling cost of living as a bad thing. They blame the falling prices for declining profits, forcing businesses to slice capital investment and lay off workers. However, since costs for business fall at the same time, a more likely explanation is the simple fact that more people cannot afford to shop as much.
Why does the economic establishment want you to fear deflation — an affordable lifestyle — and relax your guard toward inflation? Could be an honest mistake. However, inflation works to the advantage of big wheelers and dealers. The value of their assets gets inflated. Using such for collateral, they can borrow more to speculate more. And the dollars they use to pay back loans are worth less and easier to come by. Since its a hard slow process for employees to negotiate higher salaries, higher prices for output means fatter profits.
Leave it to geonomists to follow the money trail.
Jeffery J. Smith runs the Forum on Geonomics.
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