Economy, Unemployment, Housing

Alan Greenspan spent an hour on CNBC's Squawk Box this morning and expressed an opinion that borders on the obvious.  He said that the nation's emergence from the economic downturn depends on higher employment levels, and that employment levels cannot return to a reasonable level until the housing industry resumes building a large number of homes.  Until housing recovers, there will not likely be employment recovery. 

There are few who disagree that unemployment levels, the housing industry, and the general economic condition of this country are dependent on each other.  There is some disagreement on which is the cause of what, but that does not affect the fact that each is either the cause or effect of the other.  There is some disagreement on the role of government in improving the situation, divided first into those who feel that government should do nothing, and those who say government should do something.

Of those who feel that government should do something to mitigate the current downturn, there is wide difference of opinion on what actions should be taken.  One point of agreement shared by almost everyone is that most of what has been done so far was ineffective or worse.

There has been a lot of effort put forth by the current administration to correct the abuse of derivatives in the lending industry.  There has been legislation that we hope has not many unintended consequences.  At the same time, there has been action taken to slow down the number of foreclosures on the market.  Much of the loan modification initiative by the government is designed to slow the rate of distressed homeowners' return to renting.  Low interest rates, substantially the result of federal suppression of rates, has kept mortgage payments affordable for some adjustable debtors. 

Although the actions designed to prevent further spikes in inventory have had some effect, nothing is being done to heal the housing industry's wounds.  The problem still remains, how to get more owner occupants to buy homes from builders and/or other owner occupants.  Of all the words coming from the banks of the Potomac, all sides have apparently agreed to remain silent on this issue.