And a Happy Thanksgiving to you too!

You know, I guess there’s a lot we could argue about in terms of whether the economy is recovering or going downhill or what, but we do have a lot to be thankful for.

I’ll more thoughts on that in my Mortgage Market Week in Review – Thanksgiving Edition…….

Sign up for it by sending an e-mail to mortgagemarket@aweber.com.

It’s free!

Tom Vanderwell

Just in Time for Holidays: Another Dire Economic Forecast – Economy * US * News * Story – CNBC.com

David Rosenberg, who used to be Merrill Lynch’s chief economist and now works for Gluskin Sheff of Canada, told CNBC Tuesday that the US economy is mired in an economic crisis that shows only scant signs of abating.

“We’re in a form of Depression,” Rosenberg said in a live interview. “Depressions…typically happen after a prolonged period of credit excess morphs into a collapse and you get asset deflation. We had asset deflation and we had a contraction in private-sector credit.”

Rosenberg is just the latest well-known expert—including New York University’s Nouriel Roubini and Pimco bond fund’s Mohamed El-Erian—to warn that the economy remains mired in either no growth or slow growth that will last several years.

Technorati Tags: Mortgage Market, Thanksgiving

Paul Volcker on the Economy

An interesting interview with Paul Volcker…..

Technorati Tags: Paul Volcker, Economy

A Good Description of Today’s Economy…..

Meditations on a Sour Economy

This article appeared in The Holland Sentinel (a local paper) over Thanksgiving weekend and I thought it was worthwhile repeating.  The author is the former president of Hope College, a local private college (and a rival to my alma mater).  Read the entire thing, but here’s some “highlights….”

As I write this commentary, it appears that we are entering times comparable to the Great Depression…..

So what can I offer in this brief article? I have simply posed five questions, added a few thoughts, all with the hope that these may be helpful to individuals, families or other groups as they seek to thoughtfully and creatively reflect on the times in which they live and their personal situations.

In these times of economic uncertainty, what are the key things that I/we cannot control?

What are some things that I/we can control?

Thought: Most of the things we cannot control are external.  The things we can control rise out of who we are at the very center of our being, our character and the narrative, values and priorities of our lives.

What can I/we give up, do without or change that will enhance the overall situation without diminishing the basic qualities of the life to which I/we aspire?

Thought: I tend to buy the books I want to read. During the Depression there were two libraries we used extensively: the public library and our church library. We never wanted for books to read.

Is this the time for me/us to show deeper gratitude for the things that I/we do have?   What might these things be?   In what creative ways can we express our gratitude?

Thought: One memory I have of the Depression years is the generosity of people who had very limited resources. There was always someone in greater need.

Is this the time to start a new endeavor or venture? Go back to school; take piano lessons; start a business?

Is this the time to think more deeply about the foundation or basic direction of my/our lives?

Thought from C.S. Lewis: “God whispers to us in our pleasures, speaks to us in our conscience, but shouts to us in our pain.”

Final thought: The technology, culture and social values of these days are quite different from the era of the Great Depression, but the deeper dimensions of what it means to be human have changed little.

Many options are open to us; the choices we make are important.

Tom here again – I just want to throw a couple of thoughts on top of what Gordon VanWylen offered:

• Those of us who have the privilege of working and interacting in a Web 2.0 world are blessed with relationships and opportunities that we wouldn’t have had otherwise.
• We also have the ability to see the struggles that others are facing and know that we aren’t alone in our battle with the struggling markets.
• It’s important that we be optimistic and use the gifts that we’ve been given well.

I hope you find this thought provoking.   I know I did.

Tom Vanderwell

Ask not what your country can spend for you…..

Thanks to my friend Greg Swann at Bloodhound Realty for tipping me off to this video…..

Enjoy!

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US debt puts strain on dollar – The Financial Times

In the short term an expected equity market rally, quite plausibly the beginning of a cyclical, although not secular, bull market should bring an end to the dollar’s recent “repatriation rally”. The inverse correlation of the dollar and the S&P 500 is well established and not expected to break any time soon, given the global macroeconomic backdrop. The short term trend should be further reinforced by the broken financial system which impairs the US economy’s ability to releverage and mutes the strength of its cyclical recovery. The inability to releverage precludes the US from leading the global economy out of this recession. That also reinforces the dollar’s short term unattractiveness.

In the medium term, the US economy faces significant, albeit not insurmountable, structural problems. In particular the interaction of a heavily indebted economy with a broken financial system suggests a decade of poor domestic economic growth as savings are rebuilt and trust in the system restored. The US is a debtor nation and owes the rest of the world more than $2,000bn (up from $750bn as recently as 2000). Indeed both the household and the government sectors have been dis-saving in recent years – a trend that now needs to reverse. All of which suggests an extended period of sub-par domestic economic growth.

FT.com / Markets / Insight – Insight: US debt puts strain on dollar.

Tom here…..

Translation – the short term – once the stock market turns around, the value of the dollar will drop.  The “broken” financial system is going to make it very hard for the US to begin being a leader in lending again and get things moving and rebuild the economy.

Translation – medium term – we’re in a tough spot, our system is structurally in trouble.   When you combine an overly in debt economy with a broken financial system, we’re in for a long road ahead.

Back to the article…..

There are two distinctive policy choices for an overly indebted economy when confronted by a breakdown in the financial system. Which is chosen can have a significant impact on the long term outlook for the currency.

Policy choice 1 – do nothing and allow the economy to work itself out with a severe recession or even depression, with a cleaning out of the system as weak companies fall into bankruptcy, leaving strong companies and a base from which to build recovery.

Policy choice 2 – use all policy tools available to attempt to stem the downturn.

Choice 1, not surprisingly, is considered politically unpalatable as millions of people lose their jobs and many companies go bust. Choice 2, while seemingly more palatable, carries far greater risk. If it doesn’t work it sows the seeds for a decade or more of disappointing growth as savings are rebuilt slowly and the pain of the adjustment prolonged. If it does work it sows the seeds for significant inflation……

Currently, US policymakers are halfway through policy choice 2. Interest rates have been cut aggressively and are now almost zero. Politicians are about to embark on their second fiscal stimulus. The banks have been recapitalised. The government has started buying and guaranteeing distressed debt. Finally, the Federal Reserve has begun in earnest to use its balance sheet (in a sterilised manner) to step into the absent shoes of the private sector in the financial system. The Fed’s balance sheet has expanded from $900bn just three months ago to $2,200bn today.

A failure of the initial set of policies to reflate the economy is likely to lead to the next, more risky, set of policy choices – those involving unsterilised intervention. Given the breakdown of trust in the financial system, the lack of savings by the US and the continued deleveraging of balance sheets, however, those initial policies, aimed mostly at supporting the economy through creating credit (rather than increasing savings) seem destined to fail.

Tom here again…..

Policy Choice #1 doesn’t work.

Policy Choice #2 is what we’re working on.

When you look at what our government has done so far, we’re attempting to do policy #2, but it’s not working so far.   Why?   I think that he says it quite well:

“Supporting the economy through creating credit (rather than increasing savings) seem destined to fail.”

I’ll be writing more on that later, but did you hear that?   We need to stop trying to create more credit and instead set up programs where we reward savings and end up with a much healthier society.

What do you think?

Tom Vanderwell

Granholm to advise Obama on economy in transition

Michigan Gov. Jennifer Granholm and former U.S. Rep. David Bonior of Mount Clemens are among 17 people appointed to help advise President-elect Barack Obama on the economy during the months before he’s sworn in.

WOODTV.com & WOOD TV8: Grand Rapids news, weather, sports and video | Granholm to advise Obama on economy in transition.

Those of you who are from Michigan will know what I mean.   Having Granholm advise Obama is an interesting choice seeing the direction that Michigan’s economy has taken while she’s been governor.

Tom Vanderwell