Monday Links Shift Demand

10 States Where An Absurd Percentage Of The Population Works For The Government – TBI

Greece’s bloated public sector employs the same share of population — 14.1% — as America’s. Some US states are much worse, giving public jobs to nearly 25% of the workforce.

Lost Decade, Here We Come – Paul Krugman

It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.

But don’t we need to worry about government debt? Yes — but slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt.

Real estate creating double-dip recession? Lasner

Friedman: Asked if there’s a precedent , Friedman replied, “Does anyone speak Japanese?” He added: “I think we’re going through some version of what Japan went through with the lost decade.” He said that decisions by banks to extend troubled loans — a process called “extend and pretend” — will just prolong the time it takes for “failed properties” to work their way through the foreclosure process. Saying he recently visited Disneyland, he likened the commercial market to one Magic Kingdom realms: “It’s Fantasyland.” ”We’re not taking the medicine that we need to take,” Friedman said. “To me, it feels like Japan. We’re prolonging the pain.”

Fannie Mae’s Duncan Says Homebuyer Tax Credit Shifted Demand – Businessweek

“Temporary tax credits change behavior temporarily,” Duncan said today at a National Association of Real Estate Editors conference in Austin, Texas. “It’s simply shifted demand forward.”

Euro ‘will be dead in five years’ – Telegraph

The single currency is in its death throes and may not survive in its current membership for a week, let alone the next five years, according to a selection of responses to the survey…

A Good Crisis, Wasted - Tim Duy

It is official. The rest of the world assumes the economy can pick up were we left off in 2006, with the US as the driver of global demand. And it is apparent there is little US policymakers can or will do to counter the trend. Once again, crisis – and along with it the opportunity to rebalance global growth – is wasted.

Is bulldozer the best option for some boom-time housing? – WaPo

The idea is being discussed by economists, but Duncan said he doesn’t know of any policymakers who are considering it. “It’s un-American to think about tearing down housing,” he said. “But we have a long history of ghost towns.”

Manhattan Empty Condos May Be Rentals as Leases Reign – Bloomberg

The relationship between home prices and rents typically remains steady within a market, Miller said. In Manhattan, the average apartment, adjusted for inflation, cost 8.1 times annual rent from 1991 to 1997, according to Miller Samuel data. That means that in those years, buyers in Manhattan concluded that the long term benefits of owning an apartment — tax savings and property appreciation — were worth an initial investment of eight times the cost of renting.

Then in 1998, Manhattan prices began a decade-long climb, with year-over-year values rising by 10 percent or more in most quarters. By the second quarter of 2008 apartment prices peaked at 22.4 times annual rent, according to Miller Samuel data.

Big increase in mortgage foreclosures predicted for this year – Miami Herald

“The second wave of toxic loans is about to hit,” said Sharga, whose Irvine, Calif.-based company tracks foreclosure filings.

Extraordinarily Large Band-Aids – John Hussman

A dollar spent by the government is always a dollar taken from somebody and diverted from some other activity. The only question is whether the dollar spent is more productive, or satisfies a more desperate human need, than the alternative activity would. If not, the spending is hostile to economic growth and public welfare. There is no free lunch. At best, what people call “stimulus” can only occur if the dollars spent by government are more productive than they would have been if they were allocated privately. I cannot imagine how allocating public funds to the same reckless stewards of capital that made the bad loans in the first place can possibly be a productive use of capital.

Why Banks Try to Make Borrowers Feel Like Sinners When They Can’t Pay off Their Mortgages – AlterNet

This belief that personal responsibility does not extend to bankers creates an unfair and irrational moral burden on borrowers who find themselves in over their heads. A full 80 percent of the general population believes that it is not acceptable for a borrower to stop paying his or her mortgage, even under conditions of financial distress. Even more astonishing, 61 percent of borrowers who have already missed payments on their mortgage believe the same thing.

Bankers intentionally propagate this insane ideology in order to profit from it.

10 U.S. Cities Where It’s Cheaper To Buy Than Rent – HuffPo

Banks Say No. Too Bad Taxpayers Can’t. – NYT

Surprise, surprise: banks don’t want to repurchase these loans. So when Fannie or Freddie identify problem mortgages and request repayment, a battle royal begins. Banks may argue, for example, that the repayment requests have flaws of their own.

But for us as taxpayers, watching this battle from the sidelines, one growing concern is how aggressively Fannie and Freddie will pursue their requests. If banks refuse to buy back flawed loans, taxpayers will have to cover more of the losses.

Debtors’ Prism: Who Has Europe’s Loans? – NYT