Alan Greenspan Out of Hiding Again, Home Prices Up a Bit, Jefferson County Finally Goes for Bankruptcy, and Ron Paul Provides the Perfect Analogy

Every time former Fed chairman Alan Greenspan comes out of the hole he should be hiding in to offer some of that wonderful financial advice he used to literally bring the global economy to its knees, I am always amazed that any self-respecting publication actually allows him to have a say in anything.  Though I would love nothing more than to never hear a word from this man again, I even have to admit that he makes some sense in his latest Financial Times column:

What is not conjectural, however, is that American policymakers, in recent years, faced with the choice to assist a major company or risk negative economic fallout, have regrettably almost always chosen to intervene. Failure to act would have evoked little praise, even if no problems subsequently arose; but scorn, and worse from Congress, if inaction was followed by severe economic repercussions. Regulatory policy, as a consequence, has become highly skewed towards maximizing short-term bail-out assistance at a cost to long-term prosperity.

Sorry Greenspan, it doesn't take a genius to figure out that bailing out what is essentially bad behavior leads to the perpetrator to keep engaging in it.  While Greenspan's overall point in the article is good, he does make mention of the $1.6 trillion in excess reserves being stored at the Fed. He refers to them as a "buffer" being used by the banks to retain easy capital.  The new Case Shiller Home Price data seems to suggest otherwise:

New York, July 26, 2011 – Data through May 2011, released today by S&P Indices for its S&P/Case-
Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed a second consecutive month
of increase in prices for the 10- and 20-City Composites. The 10- and 20-City Composites were up 1.1%
and 1.0%, respectively, in May over April.

The money supply is expanding, whether or not it means the housing market has finally bottomed off remains to be seen.  I can't help but notice that a modestly busy shopping center near the Harrisburg International Airport is going through major renovations after construction on it ended a few years ago.  There is a Members 1st Credit Union building coming close to being fully constructed in Middletown after the plot of land it is on was empty for over a year.  A new low-income apartment complex has sprung up in my neighborhood even though there is still a decent amount of houses that are for sale.  On top of all this, the Blockbuster that went out of business in Middletown now has a "coming soon" sign for a new business.  I suspect Bernanke's printing press at work, but that will remain to be seen.  Since I mentioned Greenspan's article, I should also point out Jonathan M. Finegold Catalan's great Mises Daily article today "Greenspan's Fatal Conceit."

While Middletown seems to be okay with attracting capital for building projects, it looks like Jefferson County, Alabama is doing the adult thing and finally biting the bullet, via Bloomberg:

Jefferson County, Alabama, which may vote in two days to file a record U.S. municipal bankruptcy, hired attorneys who represented Orange County, California, when it sought protection from creditors in 1994.

Now if only Mayor Thompson and the rest of the PA legislature would grow up and let Harrisburg do the same thing, I wouldn't have to read about the side show going on in the paper anymore. Zerohedge has this map posted today on Pew Center estimates of pension obligations for each state:

Whether or not this is new data from the report Pew put out a year ago on pensions, I don't know.  Still, the map is quite handy to see which states are screwing over both their taxpayers and state workers.

While Obama and Boehner went back in forth the kabuki theater that is the debt ceiling debate last night, Ron Paul, in true Ron Paul fashion, makes the perfect analogy for the debt ceiling: the pesky neighbor!

Imagine you had a pesky neighbor who somehow took out a mortgage on his house in your name and by some legal trickery you were obligated to pay for it. Imagine watching this neighbor throw drunken parties, buy expensive cars, add more rooms to the house, and hire dozens of people to wait on him hand and foot. Imagine that he also managed to take out several credit cards in your name. One by one, he would max them out and then use your good name and credit to obtain another credit card, then another and then another. Each time, this neighbor would claim that he needed the new credit card to pay interest on the other maxed out credit cards. If he defaulted on those cards, your credit score would be hurt and when you wanted to buy something for yourself, it would be more difficult to get a loan and the interest you paid would be higher. Imagine that you mulled this over, and time after time, said nothing as he filled out more credit applications so he would not have to default on the other debt taken out in your name. Meanwhile, another shiny new Mercedes appears in his driveway. At what point do you think you might get tired of this game? And, even though you are left with no really good options, do you think you might eventually tell him to go ahead and default, just stop spending your money!

While Congress will undoubtedly raise the debt ceiling very soon, check out this latest Rasmussen poll on our elected "leaders" in Washington:

Voter approval of the job Congress is doing has fallen to a new low - for the second month in a row.
Just six percent (6%) of Likely U.S. Voters now rate Congress' performance as good or excellent, according to a new Rasmussen Reports national telephone survey.

And of course the obvious question is, who the hell is the 6% that actually like what Congress is doing?

I will end with this trailer for the new movie on the financial crisis entitled Margin Call:

A few things to look for in this movie:

• An oversimplification of the crisis which places the blame completely on Wall Street
• The non-mention of the Federal Reserve's role in the crisis
• The brief mention of the role Fannie Mae and Freddie Mac played in the crisis
• The wonderful job the federal government did with privatizing profits and socializing losses

It will be capitalist bashing Hollywood gold at its finest.