Weekly Economic Update 06-26-26: New Home Sales; Personal Income & Spending; and PCE Inflation

Inflation continues to rise, and government checks support consumer income and the savings rate.

The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents. 

It was a light week on the economic data front, but before we get to the numbers, a word on Alan Greenspan, who passed away Monday at the age of 100.

For those of us who came of age watching the Fed, Greenspan *was* the Fed. He took the chair in August 1987 — two months after I graduated from high school and just weeks before the market dropped 22.6% in a single day on Black Monday — and he didn’t hand it off until 2006. Eighteen-plus years, four presidents from Reagan to the second Bush, five terms. Nobody is going to match that run.

Longtime readers know I am not in the habit of canonizing central bankers, and Greenspan’s record is genuinely a mixed one. On the credit side, he presided over the long boom of the 1990s, one of the great expansions in American history, and he kept the plumbing working through the 1987 crash, the 1998 collapse of Long-Term Capital Management (LTCM), and the dot-com unwind. He earned the “maestro” label, even if he never much liked it.

But here is the part of the story that gets glossed over in the obituaries: a fair number of the fires Greenspan rushed in to put out were ones his own policies helped start. The line everyone remembers is “irrational exuberance” — December 1996, a dinner speech, wondering aloud how anyone could know when asset prices had run ahead of reality. It was a remarkable thing to say, mostly because he spent the next several years doing the opposite of acting on it. He cut rates and flooded the system with liquidity after the 1998 LTCM scare, and that easy money helped pour gasoline on the very dot-com mania he’d warned about — a bubble that then burst on his watch and forced him to cut again. And when he took rates down to 1% in 2003 and held them there, he set the table for the housing boom that became the 2008 financial crisis. Greenspan himself, testifying in 2008, conceded he’d found a “flaw” in his understanding of how markets police themselves. The maestro, it turned out, had been conducting with the punch bowl in one hand.

So, a complicated legacy — brilliant, careful with his words, but far too willing to keep money cheap and credit flowing. Even so…rest in peace to a giant of the profession.

Which, fittingly, brings us to housing — the corner of the economy where Greenspan’s cheap-money era left its deepest scar, and the place where the Fed is still trying to thread the needle today…