If it looks like a duck, smells like a duck, guess what? It IS a duck. Feel free to replace "duck" with "recession".
There's no longer any doubt that the economy has entered a recession, and there are many different perspectives of how long it will last and how severe it might be. All the rhetoric is nothing more than speculation -- in other words, whose crystal ball do you believe in the most?
As the new Obama transition contemplates its options on how to effectively stimulate the economy, it knows our future may well be in their hands. We are buoyed by the voices in the transition team offering input. Paul Volcker, fomer chair of the Federal Reserve, in particular has had hands-on experience with acute situations in our economy. It was Volcker who cured the economy of its systemic inflation before he handed the reigns over to Greenspan in 1988.
There were a few encouraging econonews releases this past week. Infloation on both the wholesale and retail levels made meaningful contractions in October. This tells everyone, including the Federal Reserve, that inflation is no longer a threat and that the Fed can focus all of its attention on getting the economy going again. It needs something, as initial claims for jobless benefits rose to the highest levels in years for the week ending November 7. On Thursday, the Prez signed a bill that extends unemployment benefits for those whose benefits have been exhausted. Extensions can go an additional 20 weeks in areas with unemployment rates above 6%.
On the housing scene, we heard from the Nat. Association of Home Builders this past week. Its monthly survey of homebuilder executives yielded an index that was lower than anything they have ever published before. While housing starts and new permits contracted, a bit more tightening is needed so inventory levels can be worked down to more sustainable levels.
Perhaps the best news of the week was the decline in home loan rates by roughly 1/8% relative to the prior week's closing level. As we look ahead to the upcoming weeks, we expect to see home loan rates continue on its downward "glide" path. Stay tuned!
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