Explaining Southern California's economy

Can the Federal Reserve end the foreclosure crisis?

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AP Photo / J. Scott Applewhite

The Federal Reserve Building in Washington, DC.

The economist Peter Morici, who has been extremely critical of the Obama adminstration's economic policies of late, has taken a look at the housing crisis and doesn't see much hope. He does see one way out, however. But it's an exceptionally unlikely way out:

Currently, the rate on five-year adjustable rate mortgages is about 3.2 percent. If the Fed could get the investors who buy Fannie and Freddie bonds to accept interest rates of minus 3 percent, then young folks could be offered mortgages with appropriately negative interest rates. To accomplish that feat, the Fed would have to buy all those bonds itself-that's right the Fed would finance all federally guaranteed mortgages and write off 3 percent a year. I can just hear Ron Paul now.

Morici makes this argument in the context of discussing why it makes little sense for young people to buy houses right now (unfortunately, I can't link to his piece, as it isn't on his website yet). He refers to Ron Paul, a Texas congressman and noted libertarian, because Paul is no fan of the Fed

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Unemployment preview: Ahead of Friday's official data, the outlook is grim

The official August employment numbers will be released by the BLS tomorrow. But a few other notable sources have already provided data:

Meanwhile, the economic consensus is expecting something in the neighborhood of 100,000 jobs added to non-farm payrolls. 

The economist Peter Morici, who's been hammering away at the jobs problem for over a year now, summed up an unpleasant situation rather nicely at CNBC:

The economy must add 130,000 jobs each month to accommodate a growing adult population seeking work.

The key factor stifling jobs creation is sluggish GDP growth, which only advanced 1.3 percent in the second quarter and 0.3 percent in the first. Businesses can’t hire and pay new workers without more customers.

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