Many of you know of my fondness for everything involving airlines. A term that has long been used by those who investigate airline tragedies is “event cascade,” describing the collection of errors and flaws that produce the dramatic results - broken airliners, empty seats sitting under a stormy sky, and a picture of a plastic baby doll. Sometimes, I’ve wondered if every airliner has a plastic baby doll on board just “in case.” You can’t count on the passengers to always have one, but there it is.
Fortunately, we’ve been in a long period of safe airline travel. What has been drawing our attention of late, aside from the bright and meaningless carnival rides that is our election campaigns, is a pair of economic stories - gas prices and housing prices. Both seem to be headed in opposing directions, and there are a lot of rumors floating around to point out who’s to “blame.”
In the housing business, it’s the evil, greedy “mortgage brokers.” In the gasoline business, it’s the evil, greedy “Big Oil companies.”
When an airliner crashes, there are mistakes upon oversights, upon misjudgments, upon bad communications, upon ill fitted parts, upon weather.. without any one of these elements, the airliner may have made it home safely. In either the gasoline prices or the housing crisis, the situation is analogous - perhaps had it not been for one thing, we wouldn’t be here. But, there have been a huge combination of things that brought us to where we are.
On the business of gasoline price, here is a terrific article in Salon magazine that explains away the many rumors of greedy oil giants, stupid environmentalists, peak oil and Chinese oil consumption to show WHY the price of gas is where it is. It’s straight forward and rational, and worth a read.
On the business of the housing crisis, several more articles providing further perspective into just how complex this all has been, and how wildly different forces have combined to bring a housing bubble to burst in our country, but also in many other countries around the world.
First, how a huge increase in money supply developed world wide, and how it “pushed” the relaxation of credit standards that resulted in the housing bubble. Excerpted from a new book in Newsweek, this article blows away a US perspective on where money is “grown.” This money pushed the credit markets around, much as an overloaded trailer pushes the car that’s towing it.
Next, a discussionof the credit market fundamentals that produced our situation, and how dealing with it as we’ve been dealing with it is not the answer. Points to note here, there are many similarities with the Great Depression of 1929-1938, and how the response of the Fed and the Feds is both inadequate and consistent with how the banking crisis of 1933 was exacerbated by nearly identical moves back then. Not for the faint of heart, this article took me a lot of stopping and starting to make sure I was comprehending what I was reading.
This article discusses how the structure of the banking system was changed after the 1933 banking crisis and then changed back during the 1990s. While the article has a definite slant, it has a clear and concise description of the political changes. Read even more about the Gramm-Leach-Bliley Act here.
More as it happens - just found another article on Gramm-Leach-Bliley, which is even more pointed than the first.