Frozen Conventional Wisdom

by Don Boudreaux on October 3, 2008

in Current Affairs, Financial Markets, Government Intervention, Housing

This report in today’s Christian Science Monitor is typical of many such reports of late in taking George W. Bush at his word that credit markets are "frozen" and that, without a bailout, the economy will tumble into the abyss.

But read this report carefully and it’s difficult to find evidence in it of any such freezing.  Credit markets have tightened, to be sure, but they emphatically are not frozen.

Here are some of my favorite selections from this report:

Not everyone has felt the squeeze yet. Home buyers with good credit can
still get mortgages, although it may require more footwork. The
interest-rate gap between commercial bank lending and Treasury bills
has eased from record levels a few days ago.

(Note the "yet."  Why presume that people with good credit will eventually be unable to get mortgages and other lines of market-justified credit?)

And

Nationally, only 63 percent of consumers applying for a car loan are being approved compared with 83 percent a year ago, says Art Spinella, president of CNW Marketing Research in Bandon, Ore.

"Only 63 percent…."  This doesn’t seem to me to be anything remotely close to evidence that ordinary Americans are being "frozen" out of access to credit.

And today Toyota announced zero-percent financing on 11 of its models.

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