Economists? I agree with what Johnny Carson said so many years ago — “If we laid all the nation’s economist end to end, it would be a good idea.”

This ’stimulus’ is politically motivated on its best day. It’s not supply side which annoys me. If we don’t make the tax cuts permanent we’re all gonna be on long term ‘bailing duty’ before long.

I’d love meeting with you — and the sooner the better.

Your posts and comments have a definite BawldGuy bent to them as it relates to length. Who am I to find fault with that?

Seriously, I agree that the effects of the drastically lowered Fed Funds rate will not be fully understood until the summer (possibly later). I also think they will contribute to an inflationary cycle of greater concern. (The Fed stayed on the brakes too long and has now stayed on the gas too long. As a side note, the economist that Brian discusses in his latest post and I reference in mine [sorry, but I do not know how to link to them from here] suggested that most of the current real estate problems can be traced back to the Fed [under Greenspan] staying on the gas way too long at the turn of the century. Of course, this economist’s objective was to assign enough blame that homeowners and Realtors would feel no responsibility, but that is a comment best left to one of those posts).

What may save us from staggering inflation is the timing you suggest. The effects of these rate cuts will be felt just about the time the true housing/lending problems are announcing. We have only seen the tip of the iceberg and the press is (as usual) on the wrong scent. (”sub-prime crisis” - Catchy title but what a joke. No crisis here… not yet.)

As long as I am wayyy up here on my soap box, I will suggest that the stimulus package is more accurately called a reelection package. Giving people back a part of the money you took in the first place, historically speaking, has done next to nothing for the economy. People use the money to pay down debt which is no stiumlus at all. Tax cuts provide stimulus, but congress cannot even agree to maintain the ones we have so… another tangent.

I too am looking forward to the comfort and ease that San Diego should feel related to the lifting of the conforming rate limit. As for Brian (or the Great and Powerful Oz as I think I will begin to call him), he is never not busy. That guy creates more ideas by breakfast than I can assimilate in a day. You and I should sit down over a beer sometime and I will tell you about the man behind the curtain

The liquidity + lower Fed rates probably, as you would surely agree, not be felt ’till the end of the second quarter or summer. By then that along with the (hold yer nose here) stimulus package will kick in, and the 3rd quarter will surprise many, maybe even you and Brian.

The conforming limits? Lenders will do what makes them comfortable regardless of what you correctly called an arbitrary ceiling having been lifted. I think you called that pretty well.

That said, most borrowers will be rock solid relative to previous underwriting policies. This alone will provide much of the comfort to which we both allude. In San Diego it’s my bet Brian will be busier than a one-legged guy in a butt kicking contest.

I find myself in the company of Brian here - not bad company - and I have to disagree with you (actually I do not have to, but I am going to because it is good fun). We do not recognize a recession until we have had two down quarters in a row. But we were most assuredly in a recession during those quarters just as I believe we are now. As a matter of fact, it takes almost a full quarter for the statistics to be seen so by the time we recognize a recession it has been close to 9 months and we are already most likely pulling out of it. This partially explains why we commonly blast the Fed for their over reactions. There is a lag in reading the numbers and a lag in reaction to the Feds actions, yet the expectation is immediate.

On another fun note: the increase in conforming loan amounts you mention is long over due and will help many homeowners here in SoCal and elsewhere. But it will also hurt a little. The conforming rates that we are seeing now will go UP. There will be a meeting in the middle of current conforming rates and Jumbo rates. In the end it is somewhat academic what arbitrary ceiling we call “conforming”. Investors must still buy these packaged loans and they are going to perform their own risk analysis followed by demanding a rate of return they find comfortable.