Some progress this week by the authorities has helped mortgage rates fall to the 5.75 percent area for the first time since January. However, the improvement is limited to vanilla "agency" loans, the jumbo and even agency ARM markets still broken. The credit crunch is still alive, growing tighter, and the financial system is unstable.

Meanwhile, there is also still an economy out there, very much alive. It is deteriorating, but at a remarkably gentle slope. Industrial production slipped 0.5 percent in February, but 80.9 percent of capacity is in use, a half-dozen points above the last, shallow recession. The weekly total of new claims for unemployment insurance is crawling up to the 375,000 range, about right for recession onset, but not spiking.

The break in commodity prices this week may not hold, but even if it doesn’t it’s likely a foreshock of the real thing to come. Gold and oil each lost 8 percent of value since Tuesday, and overall indices are off 10 percent; even the almighty euro has begun its overdue fade.

Aside from the thumbtack-in-shoe sensation while driving past a foreclosure sign or pulling into a gas station, the most difficult aspect of this time is sorting through misinformation to find bits of reality. The commodity/currency break, if durable, will silence all that yammering about inflation, stagflation, dollar-to-hell-in-handbasket, and gold gold gold GOLD!, and let us move on to real concerns and solutions.

Progress and the authorities

Although Federal Reserve Chairman Ben Bernanke is certain to have understood the danger in the credit crunch from its onset in August, he has throughout appeared reactive, always late and surprised by the failure of the prior measure and next ugly development. Rather like a man who has parked his car on a hill and left it in neutral: As it began to roll, he walked alongside, puzzled, unable to grasp the need to jump back in to put on the brake. As speed has gathered, he has tossed his coat, then a few books, then briefcase under the wheels, buying time but losing ground to momentum.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.


***


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