New home sales for July, announced Thursday, were down 21.6% from the previous July, confirming that the real estate bubble of 2001-05 has ended. Nevertheless, conventional wisdom remains that the housing market is due for only a modest correction, before resuming its strength – after all, the United States hasn’t seen a nationwide house price […]

The collapse of the Doha round of trade talks in July raised fears that the world might be about to descend into 1930s style autarky, with a huge negative effect on prosperity. Unless things get very much worse, that’s unlikely in trade as a whole, if only because the historical memory of the 1930s remains […]

The difficult Israeli campaign against Hezbollah in Lebanon, the continued sectarian violence in Iraq and the attempted terror attacks on transatlantic flights have combined to throw a remarkable gloom onto the world geopolitical outlook. This gloom has clear economic costs, to which we need to adjust.

The Federal Open Market Committee meeting Tuesday is likely to be a difficult one. The political and economic pain from rising interest rates is beginning to bite, and it’s going to get worse. Meanwhile, there’s no sign of a decline in inflation, nor is there likely to be, as real interest rates remain near zero. […]