Deceleration Nation: The Contrary Recovery, Government Regulation And Housing Finance Reform

Confounded Interest ^ | 12/02/2013 | Anthony B. Sanders

[whitedog57]

It appears that the Corker-Warner housing finance bill is still leading in the reform derby, despite its obvious problems and omissions (like protecting the property rights of current investors). Anyone remember the beating General Motors bond investors took in the government bailout of GM?

Corker-Warner does little to fix any housing market problems that exist. And that is because housing legislation can’t cure what ails the economy: decreasing labor force participation and real median household income.

Here is a chart of three economic indicators with clear downward momentum: civilian labor force participation (blue), the US homeownership rate (red) and real median household income (green).

homessss

These downward indicators compliment the declining M1 Money Multiplier and M2 Money Velocity.

m1m2vel120213

Why? There are enormous excess reserves in the Fed system that aren’t leaking out to Main Street. And The Fed’s Balance sheet has exploded! (in terms of size).

m1fedbal

Fortunately, house prices and the S&P500 have risen despite the negative economic indicators.

cssp500

This is a contrary economic recovery with declining labor force participation, homeownership and real income. Perhaps Congress would be better served trying other legislation to unleash the economy. But if we want housing finance reform, Corker-Warner isn’t the way to go.

Dodd-Frank and the Consumer Financial Protection Bureau tie lenders’ hands rather than free them to counter the declining M1 Money Multiplier and M2 Money Velocity. AND regulation increases the cost of borrowing.

To quote Eugene Levy from “National Lampoon’s Vaction” about government regulation, “If you think you hate it now, wait until you drive it.”

levycar

[whitedog57]

Only the House of Lords (Senate) would increase cronyism while the economy is sputtering.

[humblegunner]

Here is a chart

Where?