KeNo's Housing and Economic Portal: Friday November 4 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Blame the Fed for the Financial Crisis - (online.wsj.com by Ron Paul) To know what is wrong with the Federal Reserve, one must first understand the nature of money. Money is like any other good in our economy that emerges from the market to satisfy the needs and wants of consumers. Its particular usefulness is that it helps facilitate indirect exchange, making it easier for us to buy and sell goods because there is a common way of measuring their value. Money is not a government phenomenon, and it need not and should not be managed by government. When central banks like the Fed manage money they are engaging in price fixing, which leads not to prosperity but to disaster. The Federal Reserve has caused every single boom and bust that has occurred in this country since the bank's creation in 1913. It pumps new money into the financial system to lower interest rates and spur the economy. Adding new money increases the supply of money, making the price of money over time—the interest rate—lower than the market would make it. These lower interest rates affect the allocation of resources, causing capital to be malinvested throughout the economy. So certain projects and ventures that appear profitable when funded at artificially low interest rates are not in fact the best use of those resources. Eventually, the economic boom created by the Fed's actions is found to be unsustainable, and the bust ensues as this malinvested capital manifests itself in a surplus of capital goods, inventory overhangs, etc. Until these misdirected resources are put to a more productive use—the uses the free market actually desires—the economy stagnates.

Small investors shun California's tax-free bonds - (www.latimes.com) Individual investors, who had snapped up as much a 80% of state bonds last year, put in orders for just 22% of an $1.8-billion issue this week. Paltry yields are the primary reason. When California offered tax-free bonds for sale in recent years, the state could always count on robust demand from yield-hungry individual investors. Suddenly, many of those investors seem to be on strike. This week, individual investors put in orders for a modest 22% of the state's offering of $1.8 billion in tax-free bonds to finance infrastructure projects. By contrast, those buyers had snapped up 28% of the state's previous debt sale, in September. And in November they sought nearly 80% of the bonds California offered for sale. The state still was able to complete this week's sale because institutional investors, such as mutual funds, stepped up to buy what individuals left on the table. But the relative dearth of orders from small investors is costing California taxpayers: With big investors pressing for higher returns, Treasurer Bill Lockyer was forced to boost interest rates to get the deal done Wednesday.

Supercommittee’s lack of progress on debt reduction raises alarms on Hill - (www.washingtonpost.com) With a Thanksgiving deadline fast approaching, a powerful congressional panel devoted to debt reduction is running in rhetorical circles, unable to break the impasse over taxes that has long blocked aggressive action to tame the national debt. Though the committee’s 12 members have been meeting for nearly two months in closed-door sessions, lawmakers, aides and others involved in the process say they have yet to reach consensus on the most basic elements of a plan to restrain government borrowing. There is no agreement on the scope of their ambitions: Should they aim to meet a savings target of at least $1.2 trillion over the next decade or “go big” with savings of $4 trillion or more? Nor is there agreement on a benchmark against which to measure those savings. And while individual ideas for savings abound, the committee has yet to assemble a comprehensive framework that would demonstrate its ability to produce a plan of any size before the Nov. 23 deadline. Committee members say there is still time to cut a deal and have congressional budget analysts assess it. But the lack of progress is raising alarms on Capitol Hill and beyond as lawmakers and other observers grow increasingly worried that the panel is running out of time.

New York State’s First-Half Revenue Falls $392 Million Short of Estimate - (www.bloomberg.com) New York tax collections for the first half of the fiscal year missed projections by $391.9 million, state Comptroller Thomas DiNapoli said. Personal income taxes, the largest source of revenue, were $16.5 million short of the forecast in the financial plan updated Aug. 2, DiNapoli said in a statement. Business-tax revenue in the general fund missed estimates by $338.1 million. “If these trends continue, the state may need to adjust its revenue projections downward,” DiNapoli said. New York joins California and Florida in reporting revenue below forecasts this month. U.S. states are projecting combined budget gaps of $31.9 billion in fiscal 2013, according to the National Conference of State Legislatures in Denver. Even though New York revenue fell below forecast, general- fund tax collections from April 1 through Sept. 30 rose $2.7 billion, or 14.2 percent, from the same period last year, DiNapoli said. Unlike most states, where fiscal years begin July 1, New York starts its budget on April 1.

Student loans outstanding will exceed $1 trillion this year - (www.usatoday.com) Students and workers seeking retraining are borrowing extraordinary amounts of money through federal loan programs, potentially putting a huge burden on the backs of young people looking for jobs and trying to start careers. The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Boardreports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards.