Time to hunker down?

A new study out reports that Americans are moving from home to home at a rate not seen in years. In fact the last time this few of us moved around this little it was 1962 and there were far fewer of us then.

It was only a few months ago that we were still treated to a nightly onslaught of programs on TLC about people moving into new houses with a celebratory display of ikea wares. But that was then, this is now. Now, there is no moving up. Now, we are hunkering down.

Of course hunkering down is both a symptom and a cause of greater economic stress. A symptom as people who are worried about their financial future (even if they have jobs) start to hedge their bets by staying put in homes that they might have deemed too small, or in neighborhoods felt to no longer be desirable. That of course is one more factor in the ongoing meltdown in the housing market. Add it to the constrained credit markets and you start to see why even with a growing stock of ever cheaper homes on the market there are fewer shoppers.

But this immobility is also a cause of further stress. As people hunker down, both by not moving or shopping for smaller goods and services, they depress multiple sectors of the economy. To lure shoppers in, merchants and professionals lower their prices. Buyers then start to sense a pattern of sinking prices and realize that by holding off on a purchase a bit longer they will have greater buying power and their money will be worth more. Welcome to the wide world of deflation.

Deflation is, oddly enough, a situation where money becomes worth more. Spain is now in the early stages of what might be a deflationary spiral as prices come down in an attempt to spur business. But with little disposable income, no one is buying. Merchants, suppliers, professionals and factories shed staff, fewer can buy anything at all.

Of course the upside to deflation is that for anyone who has cash in hand it will be a buyers paradise- so hang on to your piggy bank. The US is unlikely to face such a fate however since the Fed has also said that it will issue up to one trillion dollars of debt to cover losses in various financial firms and housing loans. That is in effect printing another trillion dollars, something that in normal times would trigger inflation- where money loses its purchase power. Will the Fed, and the Obama administration be able to hold this balancing act until the bottom strikes and we start to move back up? Time will tell, but there is always the memory of the stagflation 70's to keep us up at night.

College for All?

There are several articles (Salon, NYT) in the last week or so describing the new playing field in post-secondary education. Namely, private colleges (their endowments shrunken like dried fruit) are very excited by candidates who can pay full fare. If that sounds a tad old fashioned- well perhaps it is. Old fashioned in an elitist, whites only kind of way.

What should be interesting is how the public universities react to this. Each year the best public institutions are flooded with applicants. As more qualified, but non-rich, applicants set their sights on Cal instead of Harvard (or even Drexel) the competition will increase. That will have a knock-on effect into the next tier of schools (Davis, KU, etc) where those students who were on the back edge get tossed back into the smaller state schools.

At the end of this little food chain are the community colleges and third tier state schools. What they lack in name recognition they make up for in value. Community Colleges in California are $20/credit, unsurpassed value in America.

Now, the real question is whether state governments (and the Feds) will step forward to maintain or even increase the number of opportunities for students in the coming years as Cornell and Yale wait for their broker statements to recover.