My Mortgage Blog

Take a deep breath. Two. Un-clench your hands. Let loose your shoulders. Look out at a brilliant fall sky. Leaves. Breathe again, but for scent.
     
Put this global financial political… whatever-it-is… put it down. Back away from it, and look at it from a long ways off.
     
Domestic US growth is marginal, but not recession. New weekly unemployment claims are steady near 400,000, no new wave of layoffs. Purchase mortgage applications are too low to work off excess inventory, but they are stable. The Chicago Fed's national index is a minus-43, below the long-term trend line at zero in their index but far above the minus-70 that would mark recession. Orders for durable goods were flat in August, but held the huge July gain.
     
Flat and soggy, but hardly over the cliff that you'd think from listening to media, and especially people in financial markets. These are normally the Pollyannas of the airwaves: upon any devastating flood, nuclear accident, or outbreak of war, they've got a loopy grin and a new investment for you to buy. Note how strange it is that finance types all sound ready to get in a warm tub and open an artery.
     
People in markets rarely get their panties in a wad all at the same time. Yet the brightest -- Roubini, Schiller, Shiller, Wolf, Goldman Sachs itself, Soros -- are engaged in depression leap-frog, every day finding some new reason that the world will be unable to save itself. Risk-averse markets become a self-fulfilling prophecy, imploding.
     
The most immediate threat is Europe. In 1999 Europe embarked on a common currency to remove the trade-inhibiting risk of volatile rates of currency exchange. That minor problem, easily hedged, has created an entirely new and gigantic one: the euro nations must synchronize not just their borrowing and trade, but their entire economic cultures. I don't think it will happen, but it may -- but whichever, this talk of "global depression" as the inevitable result of breakup and/or austerity is nuts.
     
Italy knows how to run Italy, odd as it is, and France can run France, and so for each of them. Germany does not know how to run Spain, nor Ireland how to run Germany. If the union blows, back these nations will go to dealing with their own affairs. Separation would be a relief.
     
Financial types howl, "It's all so inter-connected that taking it apart will be the end of life on earth!" Translation: we don’t know how to trade it, and we can't figure out who is exposed and how much. The European Commission in Brussels, the nascent pan-European government that ain't gonna happen, says every day that the euro must survive and of course it will because nothing is wrong -- useless freeloaders trying to keep their paychecks running. Poor Angela Merkel, a scientist trained in Soviet East Germany, hopelessly unprepared, neither wants change nor can grasp its elements, clutches at status quo.
     
Europe has no voice. Change is going to come, briefly chaotic, but rationalizing a hopelessly irrational situation. However, the Euro is only 12 years old, and the status quo ante is hardly a mystery lost in ancient times. The lurch will be quite something, but the locals know what they are doing.
     
The economic situation here is different, but the problem is the same. No voice. No voice at all. No one to explain, to trust. The most powerful forces in Great Depression recovery were FDR's grasp of the essential -- nothing mattered but the economy -- and his voice. My Okie parents and grandparents spoke for the rest of their lives about gathering in front of the RCA when FDR would speak. "Nothing to feah but feah itself!"
     
Here, as in Europe, the locals know what they're doing. Every state and town is doing what it must to get its budget under control, to raise revenue as it can, and to look after its citizens.
     
From a safe distance, staring at this predicament, please do not mistake the temporary incapacity of the largest governments for an inability to manage our affairs. We go on. We adapt. Collective arrangements come and go.