"Prices must adjust to economic reality"

From the Stockton Record:

Doldrums - a sluggish state in which no development or improvement occurs - is the word for the California economy during the next 18 months to two years, according to the economic experts at the UCLA Anderson Forecast who released their quarterly report this morning. "We have a no-growth forecast for the next 12 months," University of California, Los Angeles, economist Jerry Nickelsburg said Tuesday....

Nickelsburg said Anderson Forecast economists have been regularly predicting an overall slowdown in the state's fortunes, but it's become "a little slower than we expected. We did not expect the problems to be as pervasive as they have turned out to be."

From the Contra Costa Times:

This current statewide slump began in late 2007 as a "mild recession," states a new report by the Stockton-based Business Forecasting Center at University of the Pacific. "The shallow but long downturn (in California) will extend into the spring of 2009 as the United States and much of the world joins the state in recession," the UOP report said.

The new problem that has emerged is the housing-related ailments that plague the economy throughout the state have begun to infect industry sectors other than real estate, said Jeffrey Michael, director of the UOP Business Forecasting Center. The first half of the downtown was housing-related. California is entering into the second half of its downturn as more industries tumble, Michael said.

From the Sacramento Bee:

For Becky Green, a single mom living with her grandparents, Jeff Young, a contractor without any houses to build, and Susan Case, who yearns to return to bartending, the Red Hawk Casino is an employment jackpot waiting to pay out. Monday, all three were among 500 people at the second day of the casino's job fair in El Dorado Hills seeking work as waiters and waitresses, housekeepers, slot technicians and other positions. So far, more than 14,000 people have applied for 1,750 jobs at the Shingle Springs Indian casino scheduled to open in December.

From the Manteca Bulletin:

The year-round education program at Manteca Unified will be history after this school year. Trustees Tuesday agreed to take the elementary sites in the Weston Ranch community off year round....

In the past, Manteca Unified found YRE necessary in Weston Ranch because schools were impacted from the staggering growth in the area. But much has changed since then. The area has witnessed a decline in student enrollment due in part to the high number of home foreclosures, in turn, forcing families to move away.

From Inman News:

In the Stockton, Calif., area, which has been a national foreclosure hotspot, Glenn M. Race of Prudential California Realty said that he has seen a slowdown in the response to buyers' offers for bank-owned properties (REOs) that have completed a foreclosure process. "It seems like (banks) are hedging their bets that the government will bail them out so they won't have to go through the sales process," he said.

And there are prospective buyers who "seem to be overwhelmed with the bad news and fear has temporarily paralyzed them into waiting. Many buyers have said, 'What's next? Let's hold off until we find out.' "

From the Merced Sun-Star:

The San Joaquin Valley may be the epicenter of the home mortgage meltdown, but regional lawmakers remain leery about the $700 billion bailout package now being crafted on Capitol Hill...The congressional caution largely tracks what the lawmakers have been hearing from residents. The trend is all in one direction. Democratic Sen. Dianne Feinstein said that "virtually all" of the 12,000 e-mails and telephone calls her office has received have come from people opposed to the White House bailout proposal.

From the Sacramento Bee:

[Republican Rep. Dan] Lungren said administration officials have convinced him that something must be done, but he added: "It bothers me very much - the idea that somehow we're capitalists when you're making money and we're socialists when we have losses."
...
Republican Rep. John Doolittle...says the federal government cannot afford to be "the automatic savior" for every U.S. company facing financial peril...Doolittle, of Roseville, joined 30 other House Republicans who sent a letter to Paulson and Federal Reserve Chairman Ben Bernanke, asking them to stop using federal funds to save private firms. While "no one wants to be the ones who says no to a fiscal rescue," they wrote, bailouts that delay short-term financial pain can ultimately cause much more damage to the economy in the long run.

Ron Paul on CNN:

When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their money as possible, even if it means lowering prices drastically. This lowering of prices brings the economy back into balance, equalizing supply and demand. This economic adjustment means, however that there are some winners -- in this case, those who can again find affordable housing without the need for creative mortgage products, and some losers -- builders and other sectors connected to real estate that suffer setbacks.

The government doesn't like this, however, and undertakes measures to keep prices artificially inflated. This was why the Great Depression was as long and drawn out in this country as it was. I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality.