The Blog

A Black Friday To Be Thankful For?

Early signs are promising.

11:00 PM, Nov 27, 2009 • By IRWIN M. STELZER
Widget tooltip
Single Page Print Larger Text Smaller Text Alerts

Share prices are up, and--more important to more people--the housing market seems to be stabilizing. Most indexes of home prices have either turned up or stabilized modestly this year, and inventories of unsold homes are down. And sales of new and existing homes rose in October, the former by 5.1 percent over last year, the latter by 23.5 percent to a level not seen since before the housing market collapsed.

We are in a world in which some see a glass half-full, others one that is half-empty. Economists are expecting growth of 3.2 percent in 2010, which is a major improvement over this year's miserable performance. But it is only about half the rate at which the economy grew when past recessions ended. Profits are up, and economists are predicting a further gain of 12.4 percent next year, but much of the gain comes from cost cutting rather than rising sales: that can't go on forever. The housing sector is recovering--good news--but, here is the inevitable bad news, the rise is due in large part to subsidies to new home buyers, recently extended but due to expire in May, and to low mortgage rates, a function of the fact that the Fed is printing money and the government is buying up some 80 percent of all mortgages.

Confusing, certainly. Americans are thankful that the financial system has not collapsed, as we feared at this time last year. And remain worried. Warren Buffett puts it this way, "The financial panic is behind us, the economic spill-off is still with us." Now, attention is turning to longer-term reform of the economic system (the good news) by hysterical populist politicians (the bad news) who just might destroy the system in their effort to save it.

Irwin M. Stelzer is a contributing editor to THE WEEKLY STANDARD, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).