Krugman, the economic touchstone

If you're like me, you try to follow the news about the economy, digest it, wrap your head around it, all in real time. But its the economy and you ain't THAT bright so eventually you start lagging behind. Admit it.

When you find yourself swirling, lost in that economic punchbowl of confusion, I invite you to read Paul Krugman, if you don't already. His interview on Salon.com on Friday was one of those great opportunities to catch up. Some choice thoughts on the idea du jour that we should just let these failing businesses fail:

There's kind of a weird double-think involved in arguments that the slump should be allowed to follow its natural course. It's true that classical economics says that we should let market forces do their work; but classical economics also says that severe recessions can't happen [my emphasis]. This idea that we must not intervene is based on a worldview that is refuted by the very fact that the economy is in the mess it's in.

A sign of economic movement in home sales

According to this report from NPR this morning, home sales in southern California were up dramatically in September.  Southern California has had one of the highest forclosure rates in the nation, so what we're seeing here is bargain shoppers getting into the market at what could now be the nadir of the mortgage meltdown.

What does this mean?  These figures are from a period before the credit freeze that spurred Congressional action and a rollercoaster DOW, so we'll have to see how buyers fared in October when there was apparently no credit to be had.  Still, with 2 weeks left in the month, credit markets are thawing and it will be interesting to see if lenders think these So. Cal. purchases are a safe enough bet.

If we're lucky, the credit freeze will have been a blip, and people who have had some money but didn't jump 2 years ago will finally be able to take the home-ownership plunge.  That will begin working the bad mortgages through the system and get home values back on an upswing.  

There is still the question of what all this means to those who were forclosed upon, some who lied in order to get financing on homes they couldn't afford in the first place, but others who were handed or encouraged to take more than they could afford.

But for the grace of God...  The other day my husband and I were recalling our first tentative peerings into the world of home ownership, contacting a mortgage broker to find out if there was anything out there we could afford.  See, this is the thing: blame the buyer all you want for getting into a bad mortgage, but most of us do not understand the ins and outs of mortgage rates, terms, and conditions.  We rely on advice from the people who are experts: bankers and mortgage brokers.  Our broker told us we could afford up to 1/2 our monthly income on a mortgage - and would be approved for it.  With no down payment.

Fortunately husband and I are skittish creatures, prone to suspicion and fear.  We said thanks but no thanks to that huge offer and took something a little more modest.  (We're liberals to the core - always thinking "conserve".)  However, many people trusted their lenders and took the plunge.  Whose fault is it that they're now drowning?