July, 2011 archive

At Asia Times, Mike Davis theorizes that the economies of the European Union, the United States, and China are headed for a collision (he also makes a side trip to the hot rod tales of Henry Felsen, many of which I read). Like almost everything in Asia Times, it’s worth a look.

What caught my eye particularly is this:

In addition to making everything else, China now seems to making its own homegrown banksters, who are adopting the tactics of our own U. S. variant and feeding-frenzying a real estate bubble:

In effect, a shadow banking system has arisen with big banks moving loans off their balance sheets into phony trust companies and thus evading official caps on total lending. Last week, Moody’s Business Service reported that the Chinese banking system was concealing one-half-trillion dollars in problematic loans, mainly for municipal vanity projects. Another rating service warned that non-performing loans could constitute as much as 30% of bank portfolios.

Real-estate speculation, meanwhile, is vacuuming up domestic savings as urban families, faced with soaring home values, rush to invest in property before they are priced out of the market. (Sound familiar?) According to Business Week, residential housing investment now accounts for 9% of the gross domestic product, up from only 3.4% in 2003.

It sounds a lot like the U. S. real estate market, circa 2005.

This can’t be good.

Mary Winter, writing at the Denver Post, takes a look at “strategic defaulters”–persons who walk away from their mortgages because the houses are under water–and asks, “Just who broke a promise with whom?” (emphasis added):

Most officials condemn these so-called strategic defaulters — homeowners who technically can afford to make payments but opt not to. “Any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation,” said former Treasury Secretary Henry Paulson Jr.

But Paulson had it backwards.

Wall Street bankers, not homeowners, failed to honor their obligations. Bankers took excessive risks, designed loans to generate the greatest number of fees for themselves, pushed no-down and predatory loans on unqualified and financially illiterate customers, and paid lip service to modifications.

When housing collapsed, bankers took $175 billion in taxpayer bailouts and, to show their gratitude, promptly handed out $33 billion in performance bonuses to their executives.

The BBC explores the new home of the homeless: cheap motels.

I drop down into Albuquerque, into Joy Junction, which in the red dusk looks like a scene from Steinbeck. There are 300 homeless people staying here, all families.

Jeremy Reynalds, an expat Brit who runs the place, tells me frankly that the mainstay of the place are people with drug, alcohol and domestic violence issues. But as the years of crisis have dragged on, there is a new phenomenon – the homeless middle-class.

Sam Uretsky digs them out, in the Progressive Populist:

The rudiments of macroeconomics date back to Genesis 37: 25-36, the story of Joseph and the Pharaoh, when Joseph increased taxes by collecting grain during the years of plenty and redistributed the grain during the years of famine. Unfortunately, the Republicans under President Bush didn’t build up a surplus, or even maintain a balanced budget, when they had control, but the answer to improving economic conditions remains stimulation through deficit spending, even if the nation’s indebtedness continues to grow. The alternative, cutting spending, will simply cost more jobs and drive the economy further down. President Obama’s role should be to use the bully pulpit to teach economics 101 and explain why bad times are the right time to spend. He didn’t, and walked into the trap.

’nuff said.

Under 400k:

Jobless claims fell by 24,000 to 398,000 in the week ended July 23, Labor Department figures showed today in Washington. The level of claims was fewer than forecast, as the median estimate of economists in a Bloomberg News survey called for a drop to 415,000. There were no special factors associated with the decrease other than the usual volatility that occurs each year in July, a Labor Department spokesman said.

(snip)

The four-week moving average, a less volatile measure than the weekly figures, fell to 413,750 last week from 422,250.

The number of people continuing to receive jobless benefits dropped by 17,000 in the week ended July 16 to 3.7 million.

I’m putting on my “analyst” hat (I’m clearly as qualified as the next guy) and predict the number will be up next week.

If I get it wrong, maybe someone will offer me a job as a forecaster. Getting it wrong seems to be the main qualification.

Foreclosure-based jobs are secure jobs:

Down in Florida – two state Prosecutors – Theresa Edwards and June Clarkson – uncovered rampant foreclosure fraud perpetrated by big banks using robo-signers to kick thousands of families out of their homes illegally. But as the prosecutors were preparing their cases against the banksters – they were inexplicably fired by Florida Attorney General Pam Bondi. Why? Because, as they allege, they were going after banksters TOO aggressively.