Word: economisters
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...raises the question as to whether the government should be offering low mortgage rates all the time, not just during a crisis," says Laurence Yun, chief economist of the National Association of Realtors, which has been pushing for a plan to lower mortgage rates for the past month. Yun predicts lowering 30-year fixed mortgages to 4.5%, from their current rate of 5.5%, would produce an additional 500,000 home sales in the next year. "We need to do this because the economy will not stabilize until home prices stabilize," says Yun. "The way to do that...
...another troubling note, some economist question whether the lower mortgage rates would even boost sales or home values. A 2006 study of mortgage rates and New York City housing prices going back to 1975 by Lucas Finco of Quadlet Consulting found no correlation between lower mortgage rates and higher housing prices, or vice versa. "The relationship between mortgage rates and home prices is pretty obscure," says Jack Guttentag, a professor emeritus of finance at the Wharton School of Business...
...Economist warns about "the perils of incrementalism." Nobel Prize--winning economist Joseph Stiglitz cautions that we must not let "latter-day Hooverites" stop us from thinking "big--very big." Stiglitz himself is thinking "at least $600 billion to $1 trillion," which is pretty big. Paul Krugman, another Nobel economist, says there is an "intense debate" over how big the stimulus should be. Krugman doesn't offer a number, but he makes it clear that he is not going to be outbid...
Near as I can tell, these guys are all dressed up for battle with no one to fight. Who are these latter-day Hooverites? What prominent economist is out there opposing a stimulus? What politician has said he or she will pass up the opportunity to vote for spending a few hundred billion in a big hurry? Harvard professor Gregory Mankiw, who chaired George W. Bush's Council of Economic Advisers, noted puckishly in the New York Times that he has children, whereas John Maynard Keynes--the intellectual godfather of the idea that government spending can jolt...
...there a downside here at all? Maybe these economists (and the Economist) think the downside is obvious, but it obviously isn't obvious, or we wouldn't have run up what seemed until a few weeks ago to be the very large deficits of the past 30 years. Unless there is a downside, why stop at a trillion? Why choose between cutting taxes and spending on infrastructure? Heck, let's do both. Party...