Economic Stories of Relevance in Today's World -- June 5, 2011

US house price fall 'beats Great Depression slide - The Independent on Sunday - By Stephen Foley - June 1, 2011 - The ailing US housing market passed a grim milestone in the first quarter of this year, posting a further deterioration that means the fall in house prices is now greater than that suffered during the Great Depression...  The brief recovery in prices in 2009, spurred by government aid to first-time buyers, has now been entirely snuffed out, and the average American home now costs 33 per cent less than it did at the peak of the housing bubble in 2007. The peak-to-trough fall in house prices in the 1930s Depression was 31 per cent – and prices took 19 years to recover after that downturn... The latest Case-Shiller house price index was just one of a slew of disappointing economic data from the US yesterday, which suggested ebbing confidence in the recovery of the world's largest economy. The Chicago PMI manufacturing index showed a sharp slowdown in the pace of expansion in May, missing Wall Street forecasts and sending the index to its lowest since November 2009.



Why housing is in a depression - Commentary: New data says the double dip is even worse than the 1930s - Marketwatch - Brett Arends - June 1, 2011 - And the Case-Shiller data masks huge variations in housing markets. Prices have collapsed many suburbs, exurbs, rural areas, and in well-known disaster sites like Miami, Las Vegas and Phoenix. Meanwhile the declines have been much milder in places like Manhattan or Boston. Some high-end real estate is actually selling well. The buyers have money... Is there a silver lining to this? Well, maybe... If you can get the financing, housing is now cheap. Really cheap. Capital Economics reckons housing is now 24% undervalued, and is the cheapest it’s been in thirty-five years... With mortgages rates on the floor, and inflation surely brewing down the road, housing in many parts of the country looks like a good deal. But you’ll have to be patient to see the biggest rewards. Capital Economics says, back in the Depression, it took 19 years for house prices to recover to their previous peaks.


Dreaded Double-Dip Is Here - Greg Hunter - USA Watchdog - June 1, 2011 - Another one of my favorite people to quote is economist John Williams of Shadowstats.com. He has been warning about a sinking economy for months and has been saying any good news is nothing more than “bottom bouncing.” In his most recent report, Williams said, “Most major economic reports in April disappointed consensus expectations and either were flat or negative for the month—including real retail sales, industrial production, housing starts and durable goods orders. Where first-quarter GDP growth slowed versus the fourth-quarter, the stage is set for the GDP to turn negative, again, sometime in the next two quarters, reflecting what would become an official double-dip recession.” Housing has been an unqualified disaster with housing starts and new home sales off 75% from the 2005 peak. Existing home sales are off nearly 30%, and of the homes that are sold, nearly 40% are foreclosures. Four in 10 homes sold as distressed properties do not signal a healthy economy—just the opposite... So, where are we headed? Well, all this bad news is going to push the Fed to print more money to keep the banks from going under. QE2 is supposed to end June 30, but the consensus of experts I quoted said it won’t be long before there is QE3. It will be either overt or covert, but it will be instituted. A double-dip in housing could start a daisy chain of very bad news for the big banks exposed to derivatives and residential real estate. (I wrote about this a few months back. Click here for the complete original post.) Williams agrees, and in his latest report he said, “The Federal Reserve is a private corporation owned by commercial banks or banking interests. The Fed’s primary job is not to generate sustainable economic growth, nor to contain inflation, but rather to keep the banking system sound and healthy. Accordingly QE1 and QE2 likely were targeted primarily at addressing systemic solvency issues, with the Fed using the weak economy as cover. As the systemic solvency crisis continues and/or intensifies, an overt or covert QE3 likely will be in place by third-quarter 2011, under the cover of a deteriorating economy. The broad inflation and economic outlooks discussed in Hyperinflation Special Report (2011) continue unabated.”...   Williams thinks there is going to be a “great collapse” between now and 2014. Yes, the dollar and the entire financial system could go down in a giant hyper-inflationary ball of fire. The buying power of the buck will be completely wiped out. Please keep in mind, more than $12 trillion in liquid assets are held outside of the U.S. A stampede out of the dollar could trigger a hyperinflationary event at any time. At the very least, count on increasing inflation in everything but housing.


Half of Last Month's New Jobs Came from a Single Employer — McDonald's - The Weekly Standard - Mark Hemingway - Jun 3, 2011 - According to the unemployment data released this morning, the economy added only 54,000 jobs, pushing the unemployment rate up to 9.1 percent. However, this report from MarketWatch suggests the data is much worse than that.... McDonald’s ran a big hiring day on April 19 — after the Labor Department’s April survey for the payrolls report was conducted — in which 62,000 jobs were added. That’s not a net number, of course, and seasonal adjustment will reduce the Hamburglar impact on payrolls. (In simpler terms — restaurants always staff up for the summer; the Labor Department makes allowance for this effect.) Morgan Stanley estimates McDonald’s hiring will boost the overall number by 25,000 to 30,000. The Labor Department won’t detail an exact McDonald’s figure — they won’t identify any company they survey — but there will be data in the report to give a rough estimate....    If Morgan Stanley is correct, about half of last month's job growth came from the venerable fast-food chain. That is hardly the sign of a healthy economy.



Offshoring has Destroyed the US Economy - Nobel Economist Michael Spence Says Globalism Is Costly For Americans - GlobalResearch.ca - by Dr. Paul Craig Roberts - May 31, 2011 - These are discouraging times, but once in a blue moon a bit of hope appears. I am pleased to report on the bit of hope delivered in March of 2011 by Michael Spence, a Nobel prize-winning economist, assisted by Sandile Hlatshwayo, a researcher at New York University. The two economists have taken a careful empirical look at jobs offshoring and concluded that it has ruined the income and employment prospects for most Americans...  All of this was over the heads of “free trade” ideologues, who threw accusations such as “protectionist” at Sir James, Roger Milliken, Herman Daly, Ralph Gomory, Charles McMillion, and myself. These “free trade” ideologues are economically incompetent.  They do not know that the justification for free trade is based on the principle of comparative advantage, which means that a country specializes in those economic activities in which it performs best and trades for those goods that other countries do best. Instead, the ideologues think that free trade means the freedom of capital to seek absolute advantage abroad in lowest factor cost.  In other words, the free trade incompetents have never read David Ricardo, who formalized the case for free trade...  Other economists, especially those high profile ones in high profile academic institutions, were bought and paid for. http://www.informationclearinghouse.info/article28189.htm  In exchange for grants from offshoring corporations these hirelings invented “the New Economy,” in which everyone would prosper as a result of getting rid of “dirty fingernail jobs.”  The New Economy wouldn’t make anything, but it would lead the world in innovation and in financing what others did make.  The “new economists” were not sufficiently bright to realize that if a country didn’t make anything, it couldn’t innovate... To find a Nobel prize-winner documenting the high cost of globalism to developed economies is extraordinary. For the Council on Foreign Relations to publish it suggests that the Establishment, or some part of it, suspects that its hubris has run away with its fortunes, and that different thinking is needed to restore the US economy.


The Federal Reserve Cartel: The Eight Families - Global Research - Dean Henderson - June 1, 2011 - The Four Horsemen of Banking (Bank of America, JP Morgan Chase, Citigroup and Wells Fargo) own the Four Horsemen of Oil (Exxon Mobil, Royal Dutch/Shell, BP and Chevron Texaco); in tandem with Deutsche Bank, BNP, Barclays and other European old money behemoths. But their monopoly over the global economy does not end at the edge of the oil patch... According to company 10K filings to the SEC, the Four Horsemen of Banking are among the top ten stock holders of virtually every Fortune 500 corporation.[1]... So who then are the stockholders in these money center banks?... This information is guarded much more closely. My queries to bank regulatory agencies regarding stock ownership in the top 25 US bank holding companies were given Freedom of Information Act status, before being denied on “national security” grounds. This is rather ironic, since many of the bank’s stockholders reside in Europe.... One important repository for the wealth of the global oligarchy that owns these bank holding companies is US Trust Corporation - founded in 1853 and now owned by Bank of America. A recent US Trust Corporate Director and Honorary Trustee was Walter Rothschild. Other directors included Daniel Davison of JP Morgan Chase, Richard Tucker of Exxon Mobil, Daniel Roberts of Citigroup and Marshall Schwartz of Morgan Stanley. [2]...


Pinks Slips Coming For 450,000 State and Local Government Employees in 2012 - SHTFplan.com - Mac Salvo - May 26, 2011 - In June of 2010 we noted that well known financial sector analyst and the woman who blew the doors open on the 2008 mortgage crisis, Meredith Whitney, was forecasting that two million government employees would see their jobs cut over coming years because of fiscal problems....  It’s happening....   Over 300,000 jobs have been cut in fiscal year 2011, and that number is about to increase 50% going into 2012:


War Zones: As The Economy Dies, Murders, Shootings, Robberies And Looting Erupt All Over America - Before It's news - Wednesday, June 01, 2011 - As the U.S. economy falls apart and millions of Americans descend into despair we are seeing some really shocking things start to happen all over America.  The mainstream media keeps telling us that crime is under control, but they are also the ones that keep telling us that we are in the midst of an "economic recovery".  Unfortunately, the truth is that the economy is slowly dying.  Today, an all-time record 44 million Americans are on food stamps.  That number is 18 million higher than it was just four years ago.  When people can't get jobs and when people feel deprived they get desperate.  The incidents that you are about to see and read about below are very disturbing.  Many American communities are rapidly turning into war zones.  Sadly, it is mostly young people that are involved in the crimes and the violence that are now sweeping America....   Yesterday, I wrote an article entitled "18 Signs That Life In U.S. Public Schools Is Now Essentially Equivalent To Life In U.S. Prisons", and there were some readers that objected to the article because they said that the youth of today are so wild that if you don't use extreme measures they will just be completely out of control....    John Adams, the second president of the United States, once made the following statement: "We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution was made only for a religious and moral people. It is wholly inadequate for the government of any other."....    Today, we have an incredibly wicked and immoral government that is governing a population that cannot even agree on what "right and wrong" are anymore.


John Williams of ShadowStats.com - May 31, 2011