Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Housing Market

U.S. Economy Goes Negative in the First Quarter

This article first appeared online at TheNewAmerican.com on Friday, May 29, 2015: 

The Commerce Department reported on Friday that the U.S. economy shrank at an annual rate of 0.7 percent, a sharp downward revision from its previous tepid estimate that it would grow by 0.2 percent.

It caught most mainstream economists off guard once again, with many predicting positive growth right up until Friday, and more remaining doggedly optimistic that growth will return. Economists polled by the Wall Street Journal just 10 days ago were holding to a 3-percent growth rate in the economy for 2015, while analysts polled by the AP just prior to the release on Friday were still predicting growth of between 2 and 2.5 percent for the year.

Paul Ashworth, chief U.S. economist at Capital Economics, is waiting for evidence that growth will return in the second quarter:

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China Export Shipping Declines by Two-thirds

This article first appeared online at TheNewAmerican.com on Thursday, May 7, 2015: 

Two weeks ago the Shanghai Containerized Freight Index (SCFI), which tracks shipping rates from Shanghai to the world, fell off a cliff: down a breath-taking 67 percent from a year ago. Wolf Richter thought it was a statistical fluke.

It was no fluke. In the next two weeks the SCFI for Northern Europe fell another 14 percent, an all-time low. Wrote Richter: “Something big is going on in the China-Europe trade.”

The collapse is being echoed by other indexes reflecting the breathtaking decline in China’s exports. For example

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China’s Economy Headed for a Hard Landing

This article first appeared online at TheNewAmerican.com on Monday, February 9, 2015:

The China bubble is imploding at an accelerating rate and has caught Wall Street economists off guard, according to the Wall Street Journal on Sunday.

Why they should be surprised is hard to fathom, given the predictions offered for months on end about the ending of the great Chinese economic “miracle.” As recently as three weeks ago, Minxin Pei, professor at Claremont McKenna College and professional observer of the Chinese economy, said, “If the official Chinese data should be believed at all … China’s GDP growth at 7.4% in 2014 … could have been worse.”

Indeed, it probably was.

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Economic Forecasting is a Dangerous Business

This article first appeared at The McAlvany Intelligence Advisor on Monday, February 9, 2015:

English: New York Yankees catcher Yogi Berra i...

Yogi Berra

Nearly everyone has an opinion about forecasting and its dangers. Some, like Yogi Berra, will tell you, “It’s tough to make predictions, especially about the future.” Others, like John Kenneth Galbraith, will say, “The only function of economic forecasting is to make astrology look respectable.” Still others will warn about setting either the exact event, or its timing. Do either one, they say, but not both.

Apparently the forecasters enlisted by the Wall Street Journal last week to give their best estimates of growth in China weren’t listening, or didn’t care. Or perhaps they believe in Keynesian miracles alongside those of the Tooth Fairy.

Nevertheless, when asked about import and export growth in China for the month of January, they missed reality by a country mile. The Journal tallied up the results and their seers and prognosticators concluded that

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Oil Patch Activity Is Starting to Slow

This article first appeared online at TheNewAmerican.com on Friday, January 9, 2015:

U.S. Steel

In a letter to his union workers at U.S. Steel’s pipe and tube plant in Lorain, Ohio, Tom McDermott, president of United Steelworkers local 1104, was blunt:

The company has suddenly lost a great deal of business because of the recent downturn in the oil industry. What appeared just a few short weeks ago as being a productive year … has most abruptly turned sour.

So sour that U.S. Steel is idling 614 or its 700 workers in Lorain, along with all 142 of its workers in its Houston, Texas plant.

This is likely to be just the beginning. Even as U.S. Steel poured hundreds of millions into its gamble that producing “oil country tubular goods,” or OCTG, would reverse years of losses, other steel makers have done the same:

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IMF’s Toolkit Inadequate for Next Housing Bubble, Official Admits

 

Bubbles.

This article was first published at The McAlvany Intelligence Advisor on Monday, June 16, 2014:

Last month, the Financial Times saw what’s coming: Housing prices rose last year at the fastest rate since 1995, setting the stage for the next global bust. Eleven countries they were watching had year-over-year rises in double digits, adding:

Even Germany, known for its stable housing market, is prompting concern, with the Bundesbank warning that valuations are as much as 25 percent too high in [some] big cities.

It admitted great concern that regulators won’t be able to do anything about it, either, just like last time:

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Chinese Economist at IMF warns of Global Housing Bubble

Board of Governors - International Monetary Fu...

Board of Governors – International Monetary Fund (IMF) (Photo credit: Wikipedia)

The false assumption that regulators can be safely counted upon to steer economies – local, national or global – to full employment with minimal inflation while avoiding booms and busts was unknowingly exposed in the latest yelp from the Deputy Managing Director of the International Monetary Fund (IMF), Zhu Min. In Chinese, his name means “people rule” or “democracy” but his ideology is firmly rooted in the Keynesian fallacy that economies can be successfully managed by experts without assistance or input from the common folk.

In announcing that the IMF has launched a new website, Global Housing Watch, Min delights in thinking that the world’s economy can be driven by looking through the rear view mirror. He said:

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Fed Transcripts from 2008 Reveal Experts to be Clueless and Confused

English: President Barack Obama confers with F...

President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

Followers of the Fed have carefully analyzed the 1,865 pages of transcripts it released in February of its eight regularly scheduled meetings and six emergency meetings in 2008 and have concluded that these experts were clueless and unaware of the opening economic abyss yawning before them. Even the New York Times was forced to admit, following its review of the documents, that

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Economists miss again: economy growing more slowly than anticipated

There’s an old saw about the purpose of economists is to make weather forecasting look good. The Commerce Department just reported this morning that in the first quarter the gross domestic product (GDP) of the country grew at an annualized rate of 2.5%, substantially below economists’ estimates of 3.2%. And looking past the headlines,

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3 percent down payment mortgages are back

You probably saw it on the news last night: Fannie Mae turned a profit last quarter, the first profit since the real estate bubble burst in 2007. Yahoo explains why:

Lenders are increasingly approving

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Mortgage Re-Defaults Soaring

Mortgage

(Photo credit: 401(K) 2012)

This headline makes nothing but sense: “Modified-Mortgage Defaults Soar 24%…”. Of course they will default…again. What has changed? You loan a deadbeat more money, that’s more money you’re not going to get back.

That’s not to characterize everyone who defaults on a mortgage as a deadbeat. I’m referring to those who received loans to buy homes that they never should have purchased in the first place because their previous credit was so bad. But in Clinton’s rush to put everyone into a home, even if they couldn’t afford it, he (with help from his friends) created a bubble.

That bubble burst in 2007, and the Fed has been trying to reinflate that bubble ever since. One of the ways is by forcing its banks to re-finance those deadbeats in order to get the bad loans off their books. It now is obvious that such an effort failed miserably. And it is likely to

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Obama Moving to Hawaii if He Loses

English: President Barack Obama signs H.R. 847...

President Barack Obama in Kailua, Hawaii, January 2, 2011. (Photo credit: Wikipedia)

According to World News Daily Obama has real estate agents working on a $35 million property in the “high rent” district in Kailua, the Beverly Hills section of Hawaii. And author Corsi thinks it’s because Obama expects to lose in November:

Very quietly, Obama’s chief financier, Penny Pritzker, has entered the Hawaii housing market to buy a retirement home for the president and his family that will be available not in 2016, but in January 2013, according to a confidential source within Pritzker’s Chicago organization.

Pritzker is a rich liberal, heiress to the Hyatt Hotels fortune, and she’s having trouble with

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The Unintended Consequences of Low Interest Rates

Interest rate vs money balance

Interest rate vs money balance (Photo credit: RambergMediaImages)

Complaints from savers about low rates of return on their money have reached the business page of the New York Times. According to the Times, when Bill Taren, a retiree living near Orlando, Florida, learned that his credit union would pay just 0.4 percent interest on his savings, he decided to take the money out of the bank and put it into his mattress because, he said, “at least there we can see the cash.”

It was worse for Julie Moscove of Fort Lauderdale, Florida. Over the last four years, she has watched her interest income drop from $2,000 a month to $400 a month. She said, “It’s ridiculous. I cut coupons now.”

And Dorothy Brooks has been forced to go back to work in order to supplement what’s left of her retirement income, after being retired for the last 10 years:

I got hit a couple of years ago pretty badly in the stock market, so now my savings are weighted mostly toward bonds. Now both investments are terrible. And I can’t put my money in a money-market account because that’s crazy. That just pays nothing.

Keynesian economic policies allegedly designed (and sold to the American people) to stimulate the economy are actually having the perverse effect of

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The World is Waiting for Jackson Hole

Liar Ben Bernanke

Liar Ben Bernanke (Photo credit: Ondrej Kloucek)

Federal Reserve Chairman Ben Bernanke is expected to give his annual Jackson Hole speech on August 31 while the world waits in anticipation. They are likely to be disappointed.

In past years the invitation-only event hosted by the Kansas City Fed in Jackson Hole, Wyoming, has been an opportunity for Bernanke to suggest future Fed policy actions. In 2010 he said that a second round of stimulus—called QE2 for Quantitative Easing Round Two—was likely, and in November of that year the Fed began its purchase of another $600 billion of long-term debt securities.

Since then little has changed: Unemployment remains significantly above eight percent, the housing market remains largely moribund, gross domestic product remains barely positive, and consumer confidence is waning.

Some investors are expecting nothing but a repeat of Bernanke’s talk in Jackson Hole last August when he said: “The Federal Reserve will certainly do all that it can to help restore high rates of growth and employment” but “most of the economic policies that support economic growth in the long run are outside the province of the central bank.”

Which was a banker’s way of saying, “We’re

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Withholding Tax Scam Exposed

Forbes: The Rise of The 1099 Economy: More Americans Are Becoming Their Own Bosses

Phoenix may well be on its way to recovery. Brookings recently estimated its rebound since the Great Recession to be the fifth best of the nation’s 100 largest metro areas. Its unemployment rate has dropped from 12% in 2010 to around 7.5% in May 2012. Bankruptcies have fallen dramatically and the housing market is clearly on the mend.

taxes

taxes (Photo credit: 401(K) 2012)

This is good news for a city that has been pummeled during the Great Recession. What’s especially good news is that as employers are continuing to get and stay lean, they find it’s better to hire “contract” labor rather than hire permanent employees: less hassle, no “hire and fire” issues, no overhead costs or health or retirement benefits.

And contract labor is likely to work just as hard as, perhaps harder than, an employee who may feel like he can relax a little, knowing that his paycheck is coming on Friday. The independent contractor knows his paycheck may not—unless he performs.

There’s another aspect to the “1099 culture” shift that is taking place: people are discovering, perhaps for the first time, just how much government is taking out of their paychecks. For the first time, they must file their own tax returns and often are chagrined to learn what their real tax liability is.

And that leads to another point: it’s a lot harder for the IRS to check up on all those 1099s. W-2 employees have taxes deducted automatically. Essentially, their employers are acting as agents of the IRS. Not so for 1099 people.

As Judy Morris notes:

1099 income is a whole lot harder for governments to trace and enforcement becomes a huge problem for the government.  Precisely because 1099 tax revenues don’t consistently and reliably flow to the government in a timely manner, the government is at a disadvantage because it no longer has employers functioning as efficient and immediate tax collectors.

The economic calamity has also spawned a massive distrust of the government.  Folks are simply fed up with paying taxes.  When government is perceived a corrupt to the core and no longer offers value to taxpayers, taxpayers will seek ways to just opt out of the system.  And thus, the underground economy is born.

All of this is to the good. In my opinion one of the most pernicious parts of government is the withholding tax. The growing 1099 economy is exposing it, perhaps for the first time to those who once were W-2 employees.

CalPERS Made a Paltry 1 Percent in Past Year

Stock Market

Stock Market (Photo credit: Ahmad Nawawi)

Monday’s report from the California Employees’ Retirement System (CalPERS) contained two numbers that are spelling out the death spiral of that plan: too little money making too little returns. How bad are the returns? According to the report, the plan made a paltry one percent in the past year (July 2011 – June 2012), far below what’s needed for the plan to be able to keep its promises to its beneficiaries

Joe Dear, the plan’s chief investment officer, sang a familiar refrain when he tried to explain the plan’s poor performance:

The last twelve months were a challenging period for all investors as the ongoing European debt crisis and slowing global economic growth increased market volatility and reduced equity returns. It’s a clear reminder that we must remain focused on performance, risk and internal controls in today’s financial environment.

It’s going to take much more than that to bring his plan back from the edge of oblivion. The plan, the largest public pension plan in the country, currently covers 1.6 million Californians but has only $233 billion in assets. At present it is paying out an average of $3,065 every month to each recipient who retired in the last year, but since the plan is at least 50 percent underfunded it won’t take long for those recipients to start seeing substantial cuts in those checks.

The problem is two-fold: The plan is underfunded because the state hasn’t been able to

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Obama Economic Recovery Still Underwater

President Barack Obama signs the Tax Relief, U...

For proof that the Obama “recovery” remains unimpressive compared to previous recoveries, Cato Institute scholar Dan Mitchell gathered evidence from a number of sources to make his point.

President Obama promised that at this point in the recovery unemployment would be down to six percent, but it remains stubbornly above eight percent if one believes the government numbers. At least five million people who lost their jobs in the recession are still unemployed or underemployed. The number of Americans living below the poverty level has set a new record. Government spending is virtually out of control with annual deficits now admitted to be above $1 trillion for the foreseeable future. Higher taxes are coming unless the Bush tax cuts are somehow permitted to remain in force. And the housing market is still looking for a bottom.

But according to President Obama everything is coming up roses: More than three million jobs have been created in the past two years and the Dow Jones Industrial Average just exceeded 13,000, nearly doubling from under 7,000 in March 2009.

Thanks to the Minneapolis Federal Reserve’s interactive website, the Obama recovery can easily be compared to (and contrasted with) 10 previous recessions all the way back to 1948. Whether looking at jobs or at economic output, the performance under Obama has lagged behind each of the previous recoveries very significantly. As noted by Mitchell, “Under Obama’s policies…we’ve just barely gotten back to where we were when the recession began…[and] the jobs chart is probably even more discouraging…. [It] is still below where it started.”

On February 2, 2012, Phil Gramm and Mike Solon wrote in the Wall Street Journal:

Never before in postwar America has…employment still been lower four years after a recession began….

If in this recovery our economy had grown and generated jobs at the average rate achieved during the 10 previous postwar recessions…13.7 million more Americans would be working today….

President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today…some 16.9 million more Americans would have jobs.

The negative impact of the Obama administration’s policies is also evident when America’s economic performance is compared to that of

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Bernanke Befuddled

Ben Bernanke

In a moment of unexpected and unsettling candor, Federal Reserve chairman Ben Bernanke, in his testimony on Tuesday before the House Financial Services Committee, said that he really doesn’t know what’s happening to the economy. In his best professorial manner and without blinking an eye, the chairman said, “In light of somewhat different signals received recently from the labor market than from indicators of final demand and production…it will be especially important to evaluate incoming information to assess the underlying pace of the economic recovery.”

Admitting that the labor market is “far from normal” made it clear that he was uncertain about what “normal” actually means. With the same number of people working (about 130 million) today as were working 10 years ago (with a much smaller population) the new normal may be different from whatever the chairman might perceive it to be. Part of the problem is in the counting and part is in the vast technological improvements that have permanently replaced low-level workers.

When it comes to counting, the Bureau of Labor Statistics has difficulty in keeping score, noting two primary indicators of unemployment: U3 and U6. U3 is more politically palatable as it is lower than U6. U6 may be more realistic, however, as it counts not only people out of work but also those working part-time who would rather be working fulltime, along with those discouraged and not looking at all.

Despite being unsure of what all the “somewhat different signals” really mean, Bernanke was ready to predict the future: “With output growth in 2012 projected to remain close to its longer-run trend [a weak 2.3- to 2.6-percent annual growth in the economy], FOMC (Federal Open Market Committee which Bernanke chairs and rules] does not anticipate further substantial declines in the unemployment rate over the course of the year.”

He also predicted that despite the enormous bout of monetary stimulus employed allegedly to reinvigorate the moribund economy, inflation would

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Fed’s “Independence” Threatened by Bernanke?

English: A frame from a screencast from the US...

With the publishing of a “white paper” about the housing market, Fed Chairman Ben Bernanke has rankled some Republicans that suggestions made appear to have transgressed some line of propriety that separates monetary policy, fiscal policy, and the Fed’s “independence.”

The study, prepared by his staff and signed by the chairman, decried the inability of the housing market to get back on its feet despite continued efforts by both Congress and the Fed to restart it. Bernanke wrote:

The challenge for policymakers is to find ways to help reconcile the existing size and mix of the housing stock and the current environment for housing finance. Fundamentally, such measures involve adapting the existing housing stock to the prevailing tight mortgage lending conditions—for example, devising policies that could help facilitate the conversion of foreclosed properties to rental properties—or supporting a housing finance regime that is less restrictive than today’s, while steering clear of the lax standards that emerged during the last decade. Absent any policies to help bridge this gap, the adjustment process will take longer and incur more deadweight losses, pushing house prices lower and thereby prolonging the downward pressure on the wealth of current homeowners and the resultant drag on the economy at large.

This crossed the line, according to Senator Orrin Hatch (R-Utah), who wrote a scathing letter to the Fed chairman: “I worry that…your…housing white paper…treads too far into fiscal policy, and runs the risk of being perceived as advocacy for

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Obamanomics, the State of the Union, and Reality

English: President Obama just about to deliver...

In his State of the Union address President Obama touted the “rebound” in the economy, taking credit for his administration’s policies in its recovery. He pointed to two years of job growth and the fastest job creation since 2005 but without putting such results in context.

Among the first to take umbrage at such omission was James Sherk, writing for the Heritage Foundation: “In normal economic times they [the results]would represent healthy growth, but in the aftermath of the worst recession in two generations they represent a historically slow recovery. New jobs have been created—but not nearly enough.”

This was echoed by the Congressional Budget Office (CBO) in its just-released study which noted, 

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2018 Bob Adelmann