Posted by: Tom Keene on September 23, 2010
“The U.S. FHFA house price index fell to its lowest level since September 2004 suggesting, that price expectations need to be stabilised soon otherwise weak asset liability ratios will lead to a deflationary adjustment of household liabilities,” BNP Paribas Research, London.
Where are we? Housing is obviously not great, but the above sentence gets your attention. Deflationary adjustment? Say, what?
HPIMLEVL INDEX GPL Q ROLL Here is the House Price Index, 1991 - 2010. We are back to autumn 2004. Various and sundry moving averages (not shown) are concave down. The chart is semi-log with a slope ~2000 to 2005 that is different than 1993 to 2000.
SPCS20 INDEX GPL Q ROLL Here is the 20 MSA Case-Shiller Index, 2000 - 2010. It’s back further, to 2003. Note the modest, and I mean modest recovery. Obviously, if the index rolls over in a manner like the above Housing Index that would lead to an “adjustment.”
NWORVALU INDEX GPL Q ROLL Here and below are two views of our national net worth assumed to be a proxy for households (although it also includes non-profits and believe it or not “domestic hedge funds”). The above chart is semi-log 1949 - 2010. It is sobering. You can see a little blip in 1974, and that’s a big blip upper right where we go flat in the early 2000s and then rollover in unprecedented fashion in recent years. It’s so 19th century.
NWORVALU INDEX GPL Q ROLL Here is a close-in view with a 20-year regression. We are 2-deviations below trend. We are $10 trillion off trend, roughly 69% of a year’s nominal GDP.
Larry Does ec10
One of the memorable moments for Bloomberg on the Economy was Professor Summers and I packed into a tiny Davos room, interviewing him (delicately) on the language of economics. It is different than “normal” language and certainly the language of the non-mathy set. Here is a must-read walk-through of how economist’s think. Its a bit heavy lifting, but it’s Mark Blaug.
Take Nothing For Granted
Andre Meier provides a wonderful essay on inflation, disinflation and deflation. This is mathy, but we all survive as we are…well-anchored.