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V and I have a nuanced understanding of the commercial air travel market after two years of distance dating. Still, it’s stunning to see United adding a $15 charge for each piece of checked baggage on each domestic flight. CNN.com does the reporting.

There is, of course, a great tendency to abuse the checked baggage allowance. I’ve stood in line behind people looking to ship everything short of the kitchen sink.  But there are some things that you can only get across the country by checking in (wine) and this new policy certainly hurts a class of travelers.

The more deleterious effect may be on the struggle to fit carry-ons into the overhead compartments. I’ve seen some folks try to stuff small elephants above their heads.

Other airlines have cut down check-in allowances of course. Delta has gone from two bags to one for basic travelers (though the Silver Medallion folks get three for free). It has also upped its fees for pet transportation, which we found out the hard way. American Airlines announced a similar fee in May.

The fee should apply to one in three customers United says. The company expects to make $225 million in the first year from the added fee.

Got this today from my elementary school librarian:

Bernanke and Paulsen went before the Senate Banking Committee today to say that the economy is slowing down but a full-blown recession is unlikely. Big Ben also said he’s not afraid to push the rate-cut button if the economy starts to free-fall.

Perhaps more interesting was what the senators had to say during the meeting, from CNN:

Sen. Charles Schumer, D-N.Y., suggested the problems in credit and financial markets pose a greater threat to the economy than a slowdown in consumer spending.

“Aren’t you underestimating, not giving enough attention to, the severity of the problem in the credit markets?” asked Schumer. He said Wall Street executives he’s talked to “seem much more worried” about credit woes than Paulson and Bernanke.

No question who butters Schumer’s bread. It’s not the first time he’s said nasty things to Bernanke either. He did a chicken little dance back in November (read our coverage). But as Bernanke has pointed out before, the current downturn is hitting financial institutions a lot harder than the rest of the economy. Fed Governor Mishkin already said that Wall Street’s losses weren’t going to be Fed priority numero uno back in November (read our coverage).

Dean Calbreath has a neat editorial comparing the current “credit crisis” to that of the great depression.

When FDR took office, the nation was seeing an average of 1,000 foreclosures a day.

During his first year in office, Roosevelt created the Home Owners Loan Corp., or HOLC, to help debt-laden borrowers pay off their mortgages. The HOLC took borrowers out of their high-interest loans and put them into 15-year loans – financed through federal bonds – with rates fixed at about 5 percent. Unlike many government bureaucracies, this was specifically designed to be a short-term program, intended to extend loans for three years and then oversee those loans for an additional 15 years.

With the HOLC and the Federal Housing Administration, the Roosevelt administration virtually created the long-term loan, which soon evolved into the 30-year, fixed-rate mortgage.

It’s unlikely such a plan could pass today’s government–but no matter how dire times seem, they’re not as bad as the great depression days. At least not yet…

[Image from AMNY.com]

James Surowiecki returns with a strong column on employment data in the January 21st edition of the New Yorker Magazine after a nearly month-long hiatus.

His always-insightful column takes on Wall Street’s obsession with economic data–despite the huge variance baked into the estimates. From his piece:

…the payroll report has a sampling error of as much as plus or minus a hundred thousand jobs (which means that, instead of gaining eighteen thousand jobs last month, we may have lost eighty-two thousand), while the household survey’s error margin is even bigger, at plus or minus four hundred thousand jobs. The payroll numbers are also subject to big Continue Reading »

Economists from investment bank Goldman Sachs say the housing slump and recent credit market turmoil will spill over into the broader economy this year and push the economy into recession if it isn’t there already.

“The latest data suggest that recession has now arrived, or will shortly,” said Goldman economists Jan Hatzius, Ed McKelvy, Andrew Tilton, and Seamus Smyth said. “The unemployment rate has now risen by more that 1/3 percentage point from the cycle trough. Historically, this has invariably been associated with recession, typically starting immediately and almost always within three months.”

Their prediction is that the Fed will cut rates to 2.50 percent from its current 4.25 percent. More at Forbes.com and Businessweek.

President Bush offered his opinion that the state of the economy is unclear, but whatever Democrats were planning to do about it was wrong.

Seriously. I couldn’t make this stuff up: “recent economic indicators are increasingly mixed,” he said [via NYT]. More from the NYT story: Mr. Bush is sticking to the theme of warning against doing anything that would harm the economy at a precarious time. He emphasized that Democrats should not increase wasteful spending or raise taxes, and that they should pass three pending trade agreements to boost the export sector, which right now is the strongest part of the economy.

When asked what Bush himself would do, his staff gave a characteristic response: ask us again when we get back from an eight-day tour of the middle east.

[Image from Lolpresident]

“Agflation,” or the inflating price of agricultural commodities, is hitting the transitional economies of Eastern Europe and the Baltics like a punch in the chest.

It’s not something we think of too much in the western world. Food makes up only a small part of our consumption basket. But when the price of butter goes up 65% in three months in Bosnia and Herzegovina it can lead to serious unrest.

The central bankers of the countries most affected often see their hands tied. They’ve pegged to the Euro (a prerequisite for joining the EU) and can do little if anything to fight the inflation.

The Transitions Online site has an interesting story about the problem.

[Image from IAState.edu]

The Federal Reserve’s Beige Book, a collection of anecdotal reports from the 12 Fed Bank districts, tells of a cooling economy in advance of the FOMC meeting on December 11.

Seven of the 12 districts reported slower growth, according to MarketWatch’s read of it. Forbes.com talked to John Lonski, the chief economist at Moody’s Investors Services, who said: “It’s consistent the markets view of slower economic growth that provides the Fed with more than enough room to cut interest rates in order to assure an adequate supply of financial capital.”

“Demand for residential real estate remained quite depressed, with only a few tentative and scattered signs of stabilization amidst the ongoing slowdown,” the Beige Book says, and Reuters reports.

The report shouldn’t be much of a surprise. Bernanke said the economy was slowing earlier this month (read our story on what he said).

The data in the Beige Book is current as of November 16. You can download the Book yourself here.

[Image from the Fed]

Christmas trees are expected to cost an average of 20% more this year according to agriculture officials in Massachusetts. The reason? See the stats from the Boston Globe’s website:

There are several reasons for the rise, including increased fuel prices, added demand, and a weak dollar that makes trees imported from Canadian farms more expensive.

Last year, 28.6 million real Christmas trees were sold in the United States at an average price of $40.50, according to the National Christmas Tree Association. Americans also bought 9.3 million fake trees at an average price of $68.

The average cost of a tree last year was 27 percent higher than in 2001, when trees cost $31.90. In a spot check of tree retailers in Massachusetts, tree prices ranged yesterday from about $25 for a 5-foot balsam fir to nearly $100 for a 10-foot Fraser fir.

How’s that for an effect of the falling dollar on inflation? Our plan this year is to buy a Christmas tree after Christmas and in advance of the new year. We’re hoping for a post-holiday price cut, but I’m not particularly optimistic.

Blogger “Macro Man” has a great post that’s both funny and scary. It’s a blog post from the future, three years out, when the dollar is worth nothing, the economy has lost steam, gasoline is at $5 a gallon and Hillary is in the White House. A small excerpt of his brilliance:

So yeah, I kind of wish that it was still 2007. Hell, I wish it could be 2007 forever. Instead, I’m stuck here in 2010. Crappy job, crappy paycheck, crappy TV. I mean, it’s a four year old 42” plasma! I can’t remember the last time I had a TV that old in my family room, and I certainly can’t remember the last time all my stuff was this far behind the latest technology. I guess my only consolation is that none of my buddies have gotten a new TV, either. No one can really afford it. For the first time in our lives, we really have to worry about saving.

Still, it’s not all doom and gloom. A couple of months ago I treated the wife to a nice weekend away while her folks looked after the kids. Who’d have ever thought that Clemson would win the NCAA tourney last year? But hey, with 75 bucks on them at 50-1, I’m not complaining. Yeah, I know $3750 is chump change these days, but at least we could afford two nights at a pretty good Holiday Inn and a nice dinner at Applebee’s.

It’s all kind of weird, though, when you think about it. Most of us have never been outside America, never seen how the rest of the world lives. I suppose we all just assumed that a weaker dollar could bring nothing but more jobs and more money. But I guess when you buy a lot of stuff from the rest of the world, a weaker currency makes it more difficult to afford things.

So, too, when Hillary threatened China with those tariffs. Who’d have thought that some guy ten thousand miles away could make a decision that would make it more difficult to borrow money here in the Heartland of America. Not me, that’s for sure. I have to say one thing, though. I felt a little burst of nostalgia when Hillary started the Whip Inflation Now program…it really took me back to my childhood.

Well, I suppose that’s enough of my yakking. I’d better get back to work. It’s more than my job’s worth if this report doesn’t make it to Abu Dhabi by tomorrow morning.

Fed Chairman Ben Bernanke told congress to expect slower economic growth in the coming months, that the effects of the housing market meltdown hadn’t hit bottom and that the Fed would continue to watch for inflation. From the NYT’s story: Mr. Bernanke suggested that the two rate cuts in September and October should be enough to prevent a recession, though he quickly added that the central bank will be watching for new signs of trouble.

Bernanke said the economy had demonstrated a great deal of resilience over the past several months but that spikes in oil price were brewing inflationary pressures.

The overall message to congress: stay cool, things will get a little worse though, stay cool and things should be fine.

Of course nobody in congress wants to hear this. Legislators, the arbitrators of fiscal policy, want to do something–anything–to get things going. Just listen to what Senator Schumer said right before Bernanke came in front of the legislators, as reported by the WSJ:

“I’m very concerned that there may be a bigger storm on the horizon. Quite frankly, I think we are at a moment of economic crisis stemming from four key areas: falling housing prices, lack of confidence in creditworthiness, the weak dollar and high oil prices. Each of these problems alone would be enough of a threat to our economic well-being. But taken together, they are essentially the four horsemen of economic crisis.”

That’s a dude that’s jonesing for something to do. More here:

“I’m very concerned, Mr. Chairman, that none of the regulators, including the Federal Reserve, are acting quickly or boldy enough to deal with the risks we’re facing. A laissez faire hands off attitude might be appropriate if we had any one of these crises alone. But, confronting all of these problems at once should be a call to action because the danger we face is so much greater.”

So the match is on. Bernanke is called on to something (anything!) to turn the economy around. Congress is like a kid with a cold, begging the doctor to give him some pills when the best thing to do is just be cool.

[Thanks to Crossing Wallstreet for the picture.]