Are Americans Too Far Under Water? (CNN.com): “Alan Greenspan believes household balance sheets are cleaner after a long economic slowdown, promising stronger consumer spending in the near future. But other economists worry those sheets might need another run through the wash. ... According to research by Northern Trust economist Paul Kasriel, in every recession since World War II the ratio of household debt to assets has fallen. In the most recent recession, however, the debt/asset ratio skyrocketed, setting a record high of more than 18 percent in the first quarter of this year. Kasriel also undercut the good news of the housing boom, pointing out that, even as homes have gotten more valuable, homeowners are giving more and more of the pie to mortgage lenders -- the ratio of homeowners’ equity to total home value dropped in the first quarter to its lowest level since World War II, according to the latest Fed data.”
Household Balance Sheets are Improving? (Northern Trust): “Chairman Greenspan evidently has access to second quarter flow-of-funds data that the rest of us mere mortals do not. And with the rise in the stock market in the second quarter, household net worth undoubtedly increased, as the chairman stated: ‘Overall, during the first half of 2003, the net worth of households is estimated to have risen 4-1/2 percent--somewhat faster than the rise in nominal disposable personal income.’ Based on Fed-published data through the first quarter of this year, however, it would be a stretch to say that the prospects for a resumption of strong economic growth have been enhanced by steps taken in the household sector over the past couple of years to restructure and strengthen balance sheets... Notice that the ratio of borrowing-to-income hit a post-WWII high in the fourth quarter of last year.”
No Model for Iraq (Economist.com): “THE Bush administration is considering asking Congress for a further $1 billion to spend on aid in Afghanistan. Congress had approved the spending of $3.3 billion on both aid and military assistance over four years in the autumn of 2001, but only a fraction of that has been spent so far... This state of lawlessness has allowed the widespread cultivation of the opium poppy, from which heroin is made. Afghanistan produced a peak of 4,500 tonnes in 1999, but production collapsed to just 185 tonnes in 2001 following a crackdown by the Taliban. However, it has since soared again, and the United Nations reckons that the country will produce 3,400 tonnes this year, almost three-quarters of world production.”
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