There was an article about the housing mrkt in the last 130 yrs on yahoo.com. Do you know where I can find it?

[Owen K]

[Mark Powers]

The turbulence in global markets over the last week spread from a French bank, BNP Paribas, over holdings of U.S. subprime mortgages. But France’s exposure to subprime market pales in comparison to the British position.

Wachovia global economist Jay Bryson says in a report on foreign economies’ exposure to the U.S. mortgage market that the United Kingdom could have the largest holdings of U.S. subprime mortgages among foreign countries.



Treasury Department data (available only through June 2006) on foreign holdings of U.S. mortgages show that China tops the list at more than $250 billion, and Japan comes in a close second at about $200 billion. But corporate mortgage-backed securities (where subprime mortgages sit) accounted for a small fraction for each country’s holdings — about $10 billion for China and $20 billion for Japan.

The U.K. held $44 billion in corporate mortgage-backed securities, accounting for the bulk of its exposure to U.S. mortgages and making it “most at risk from the aftershocks” of the U.S. subprime debacle, Bryson writes. Still, that’s little more than 1% of total long-term debt securities held by British residents. That may be one reason the Bank of England opted to stand pat as the European Central Bank and Federal Reserve scrambled to calm markets.

As for the turmoil in the rest of Europe? The 13 euro-zone countries own about $280 billion in U.S. mortgage securities, including about $15 billion from France, Bryson estimates. That is less than 2% of total long-term securities owned by euro-zone residents. And subprime mortgages account for about 10% of the total U.S. mortgage market. “Direct exposure to U.S. subprime mortgages would probably represent an almost negligible percentage of all euro-zone debt holdings.”

Despite the fundamentals, he notes, Russia’s total public sector external debt totaled just $150 billion in 1998 yet led hedge funds to collapse and global markets to freeze up. “Should extreme risk aversion à la autumn 1998 take hold, capital markets could grind to a halt again, causing the global economic outlook to darken considerably.” –Sudeep Reddy

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More related contentAugust 15, 2007, 3:22 pm
Consumers Key to Offsetting Weak Business Spending
Business investment will rise at a modest 2.5% rate this quarter, far below the second quarter’s 8.1% rate, according to projections by the G7 Group.

The research firm’s G7 Investment Index, which forecasts nonresidential fixed investment using GDP growth trends and investment surveys, says consumer spending would need to accelerate significantly after a soft second quarter to compensate.

A 2.5% capital-expenditures increase (a seasonally adjusted rate) would be below the long-run average of about 5% and “would be viewed as somewhat disappointing by the Federal Reserve,” the firm says in a note to clients. “Policymakers would prefer to see and indeed had expected to see stronger gains in investment spending than the index is forecasting. That is viewed as a critical element in the outlook to help offset some of the continued weakness in housing activity.”

The firm notes that some Federal Reserve officials believe the weak housing market has held back construction-related equipment spending. Recent credit market turmoil can make companies “a bit more cautious,” but shouldn’t prevent companies from undertaking investment projects.

After the latest housing and market troubles calm, there is room for improvement, the firm says. Capital spending as a share of GDP stood at 10.6% in the second quarter, below the 11% to 12% it has reached at similar stages of past business cycles. –Sudeep Reddy

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More related contentAugust 15, 2007, 10:51 am
Economists React: Inflation Isn’t the ‘Beast’
Economists weigh in on the July consumer-price data, which showed a modest increase in the headline number due to falling gas prices and a jump in core prices amid increases in costs for apparel and medical care.

Inflation is not the beast that is devouring the economy. It is nowhere near so. Whether this report eases some of the FOMC members’ fears is unclear, but it should. Given the chaos in the markets continues, it will be interesting to see if any of the Fed members start speaking about what they think is going on. To me, the risk remains the economy not inflation but I doubt the Fed will change course before the September 18th meeting without an even more major deterioration in financial conditions. –Naroff Economic Advisors
The 12-month change comparison for August is easy, but then, the momentum on total inflation will shift substantially higher [starting in September]. –Ken Mayland, ClearView Economics
Lodging costs continued to rise rapidly — up 6.7% over the last four months. This pattern may not continue much longer because “real” spending on hotels and motels has been falling… Overall, however, this report corroborates rather than contradicts the Fed’s expectation that inflation will moderate. However, only a continuing pattern like this over several months can “convincingly” establish the Fed’s forecast. –David Resler, Nomura Securities
We still believe that core inflation will show some mild moderation over coming months due mainly to an underlying deceleration in [owners’ equivalent rent]. Of course, if the recent severe tightening of credit conditions were to persist, there will eventually be a negative spillover effect on the economy which could also help to cool price pressures. –Morgan Stanley Research
Today’s report represents the third consecutive increase in the three-month annualized change, which now runs at 2.5%. The pattern gives backbone to the Fed’s continued insistence that a “sustained moderation” in the inflationary environment may not yet have taken hold. –Kenneth Beauchemin, Global Insight
The question is not whether core inflation will force a tightening or allow an ease, but whether the central bank will be forced to ease in the coming days to shore up the financial system. –Stephen Stanley, RBS Greenwich Capital
These numbers certainly do not imply runaway inflation, but they do suggest that the inflation rate may edge higher in the months ahead… With a large amount of evidence showing that the economy is weakening, the Fed will have to make a decision as to whether it will place a greater priority on its inflation target or sustaining a healthy economy. –Dean Baker, Center for Economic and Policy Research
Also of interest We expect inflation to continue to moderate, and continue to believe that the FOMC will drop their inflation bias — but not cut the funds rate — at their September meeting, barring of course widespread catastrophe stemming from the credit markets… While offering investment advice is not our domain, and what follows is just a thought not a recommendation, to us the best investment is staring right at us from the depths of the CPI report. Yes, don’t have a cow, just go out and buy one. Or two. After all, with prices for dairy and related products soaring month after month, cows would seem to be just as good of an investment as anything else out there today. –Richard Moody, Mission Residential
Compiled by Phil Izzo

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More related contentAugust 15, 2007, 9:48 am
Secondary Sources: Good Fear, SWFs, Investing
A roundup of economic news from around the Web.

Fearing a Lack of Fear: Writing for the Financial Times, Martin Wolf defends St. Louis Fed President William Poole, who recently said that the Fed shouldn’t intervene unless market turmoil threatens to upset wider economic stability. Mr. Wolf says that the recent jolt of fear to the markets is a positive thing. “Financial markets, and particularly the big players within them, need fear. Without it, they go crazy. Moreover, it is impossible for outsiders to regulate a global financial system riddled with conflicts of interest and dominated by huge derivatives markets, massive trading by highly leveraged hedge funds and reliance on abstruse mathematics and questionable statistical models. These markets must regulate themselves. The only thing likely to persuade them to do so is the certainty that the players will be allowed to go bust.” Meanwhile, Matthew Lynn of Bloomberg offers five reasons to welcome a credit crunch. Among them are the realization that underlying fundamentals are strong and a chance to see how risk is spread over a global scale.
Defending Sovereign Wealth Funds: On his blog, Dani Rodrick says concerns about sovereign wealth funds are overblown. “Given their existing holdings, foreign governments already have all the power in the world to create the kind of havoc [critics] worry about. If they want to use their assets for non-economic ends–to pressure governments, to cause economic harm, to exercise political clout–they can in fact do so much more easily by dumping government securities and playing with currency and bond markets.”
Classic Investing Theory: In the New York Times Economic Scene column, David Leonhardt looks at a classic theory that advises looking at long term value investing. He notes that while relatively low price-to-earnings ratios have been touted as an indication of the underlying strength of the market, looking at P/E over a longer period of time doesn’t paint as bright a picture. “Based on average profits over the last 10 years, the P/E ratio has been hovering around 27 recently. That’s higher than it has been at any other point over the last 130 years, save the gr