Samuel Brittan:
Total nominal demand should be rising fast enough to support a sustainable rate of real growth, but not so fast as to generate runaway inflation


Fannie and Freddie

John H. Makin

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Bank of International Settlements (BIS)
On the one hand, on the other hand

– Det är både så att ekonomin dämpas och att vi har ett pris- och lönestegringstryck i ekonomin,
och då gäller det att balansera med den avvägningen så att vi både förstärker produktionskapaciteten och stärker upp efterfrågan något, säger Anders Borg.
Ekot 2 augusti 2008

On the one hand, the BIS called for world interest rates to rise
in order to deal with a "clear and present threat" from global inflation while,
on the other hand, it warned that the global economy may be close to a "tipping point" into a "slowdown
severe enough to transform the current period of rising inflation into a period of falling prices."
John H. Makin, August 1, 2008

The fundamental reason that the earnings reports of U.S. banks and investment banks continue to contain "negative surprises" is the steady and accelerating decline in U.S. home prices.

The second-quarter earnings reports of U.S. banks have embedded in them a wide variety of assumptions regarding the actual and prospective path of U.S. home prices, which in turn determine the value of mortgage assets on the banks' balance sheets.

The details regarding a proposal for continued funding of Fannie Mae and Freddie Mac through a Treasury-sponsored financing effort, outlined to Congress by Treasury secretary Henry Paulson on July 15, remain murky.

But given the massive scale of Fannie Mae and Freddie Mac operations--their combined guarantee of mortgage-backed securities amounts to $5 trillion, almost half of the $12 trillion national mortgage market--the cost of such a guarantee remains a serious issue. The Congressional Budget Office (CBO) has estimated a cost of $25 billion with a range of zero (if the facility is not used) to $100 billion if mortgage conditions worsen.

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