A roundup of economic news from around the Web.

• Greenspan on Recovery: Writing for the Financial Times, Alan Greenspan says there won’t be a sustained economic recovery until home prices stabilize. “Is this the beginning of a prolonged economic recovery or a false dawn? There are credible arguments on both sides of the issue. I conjectured over a year ago on these pages that the crisis will end when home prices in the U.S. stabilize. That still appears right. Such prices largely determine the amount of equity in homes — the ultimate collateral for the $11 trillion of U.S. home mortgage debt, a significant share of which is held in the form of asset-backed securities outside the U.S. Prices are currently being suppressed by a large overhang of vacant houses for sale. Owing to the recent sharp drop in house completions, this overhang is being liquidated in earnest, suggesting prices could start to stabilize in the next several months — although they could drift lower into 2010.”
• Pay Cuts: The Economist looks at how wages are faring in the recession. “Higher inflation in the early 1980s and 1990s meant employers could simply freeze wages or raise them more slowly than prices to achieve real cuts in pay. This still dented employees’ standard of living but without the humiliation of a smaller paycheck. Now inflation is lower (in fact, negative because of a big drop in fuel costs). So, in the absence of big increases in productivity, wage cuts may be less avoidable. With households carrying big debts, falling incomes could heighten financial stress and, at worst, initiate a cycle of wage and price deflation.”
• Hedge Funds: Simon Johnson of the Baseline Scenario says that the hedge fund industry is making a political mistake by not embracing the new regulatory environment. “If hedge funds dig in too deeply with “the crisis was not our fault” position, that is just asking for trouble — and to be scapegoated — down the road. It would be much smarter to get out ahead of the political dynamic, and to propose ways to measure, control, and regulate risk. Voluntarily keeping hedge funds “small enough to fail,” without endangering the system, would also make sense – particularly if accompanied by a complementary political strategy that emphasizes that it is big banks that have done almost all the damage.”

Compiled by Phil Izzo