High Rate Of Home Sale Cancellations Is Bad News For Housing Market

This graph shows that the number of home sales that end up as cancellations has risen dramatically. Some of the cancellations are the result of lower appraisals and the inability to get a mortgage. The largest reason for cancellations is simply other things besides the other two reasons. I suspect that it would also include other problems in the mortgage seeking process. Many applications for mortgages are never submitted if factors are discovered which would result in a rejection by Fannie Mae or Freddie Mac which are the purchasers of the majority of mortgages. This is not good news for the housing market.

The Economist Can't Find The Purported Moral Decline In The US

The GOP primary campaign has been blaming moral decline in America for its problems and it has accused the Obama administration for policies that contribute to moral decline. This article looks for the evidence of moral decline in the US and fails to find many examples. It finds that the US has done well in most of the areas that are used to index moral decline. It does find that the percent of children born to unwed mothers has increased in the US but this has also occurred in other countries. The article concludes by stating that conservatives and liberals must disagree on the definition of morality.

The Economist did a good job of digging up the evidence that contradicts the idea that morality in the US has been in a state of decline. It does not appreciate, however, what is really going on in the primary campaign. The GOP candidates make things up, with the help of right wing think tanks, in order to feed its base what its wants to hear. The believe that the devil is at work in America, and they have been taught by the evangelical clergy, and by supportive media outlets, that Obama and liberals are the tools of Satan. The GOP has blended this brand of fundamentalism, with economic fundamentalism about a very limited role of government in the economy, to develop its base. They count on this part of its base for votes, while the benefactors from its economic policies fund their campaigns. This strategy has worked well for them in the South and in much of rural America. On the other hand, it has had a devastating effect on politics in America. It has made the GOP candidates look like fools in primary campaign to the rest of world as they pander to this part of the GOP base by making things up. It has also made it almost impossible for Congress to develop sound policies. Cooperation with the devil is not well received by its base.

BP Will Pay $7.8 Billion In Damages For Gulf Accident

BP agreed to pay $7.8 billion to individuals and businesses who were damaged by the Deep Water Horizon explosion in the Gulf. That is on top of $8 billion in claims already paid for damages by BP and $14 billion that it spend on clean up. BP has yet to settle with federal, state and local governments. That amount may exceed the amount paid to private litigants.

BP and its contractors have still not agreed on how to allocate the costs associated with the accident. Its clear, however, that BP and its contractors were negligent. BP has had a reputation in the oil industry for cutting corners on accident prevention, and for taking large risks. Its management, and its shareholders, benefited from the risky behavior as long as nothing went wrong. The cost of this settlement will exceed whatever value that BP's shareholders received in return for cost cutting and risky behavior that BP had employed to increase past profits. This is another example of how the incentive system, that rewards management for increasing short term profits, ends up harming shareholders in the long run. Ironically, increasing shareholder value has been the stated objective of BP management.

An Economist Critiques WSJ Article On Global Warming Denial

The WSJ recently published an article that raised uncertainties about global warming and argued that the economic costs of dealing with an uncertain problem were too high. The WSJ used research by William D. Dordhaus, an economist from Yale to support its claims. In this article Dordhaus claims that the WSJ did not use his data properly and he argued that the uncertainties about global warming's harm to the environment and to the economy bolstered the need to take precautionary measures. He also argued that cap and trade and other economic methods to deal with global warming were efficient ways to deal with the problem.

Spain and The Netherlands Report That 2012 Deficit Reduction Targets Will Not Be Met

Spain and The Netherlands indicated that they will not be able to meet their budget deficit reduction targets this year. Spain is committed to meeting its 2013 target but a sputtering economy creates problems. Tax revenues fall faster than cuts in government spending.

Gas Prices Are Rising Because Supply and Demand For Oil Determines Gas Prices

The political noise machine operated by Fox News and others is attempting to blame the increase in gas prices on the Obama Administration. This article explains the real reason for the increase in gas prices. The price of gasoline is closely related to the price of crude oil. In turn, the price of crude oil is a function of supply and demand. Oil producers are operating near capacity, but demand for oil has been increasing faster because of rapid growth in emerging market countries. That is driving oil prices up and oil prices will continue to rise because the supply of oil is growing slower than the demand for oil. Get used to higher oil and gas prices, we can't repeal the law of supply and demand.

An Explanation of Why Austerity Is Needed In Europe

This article provides a detailed analysis of the eurozone crisis and the plans underway to deal with Greece, in particular, and the need for structural reforms in many eurozone countries which are needed to stimulate economic growth. The structural reforms are made politically possible by the imposition of austerity plans in return for needed financial support to peripheral economies. Affected governments have leeway to manage fiscal policy to deal with their particular needs without blindly adhering to debt to GDP goals. In other words, austerity is not being imposed to punish the sinners, and nobody believes in expansionary austerity. Austerity is the means by which needed structural reforms can be implemented. Countries, like the US, which has a business cycle problem, and little need for structural reform, should use fiscal stimulus to deal with the business cycle.