Of Green Shoots and Broken Windows

Of Green Shoots and Broken Windows

BY RICK ACKERMAN ON SEPTEMBER 23, 2009 4:12 AM GMT · 0 COMMENTS

Our memory stumbles whenever we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery.  Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth. Does “recovery” square with the reality that you, personally, see all around you?  Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told.  How many of the 50 million homeowners who are underwater on their mortgages, for instance,  jumped for joy when it was reported yesterday that home prices in the U.S. rose 0.3% in August?  Optimists would say it’s the trend that matters, but realists would point out that at that rate, it will take a decade for prices merely to return to where they were before the housing market collapsed.

Someone in the Rick’s Picks forum said the news media were in cahoots with the government to sell us on the idea that America’s worst downturn since the 1930s has ended. Speaking as a former newspaper reporter and editor myself, I have a more boring theory — that journalists are simply too lazy intellectually to pursue a story line that doesn’t perfectly fit the Administration’s script. With some cursory background reading in Econ 101, they could nail Greenspan and Bernanke to the wall for their lies and sometimes startling economic ignorance. But that would be a far more difficult story to write than the ones that flow so easily from the government’s press releases and speeches. Journalists’ other big problem is that 95% of them are hard-core liberals for whom Big Government, warts and all, will always be the answer.

Bastiat’s Parable

Many of the reporters I’ve known have been very intelligent, but where economics is concerned, they seem incapable of understanding Frederic Bastiat’s so-called broken window fallacy. Bastiat’s parable, written in 1850, describes (from Wikipedia) “a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.”

And so it is for all those who continue to see Government as America’s economic benefactor, nay savior. Would someone please explain to such as the New York Times, the Wall Street Journal, and other zealous purveyors of green shoots where, exactly, the fallacy lies.

by Rick Ackerman
Posted originally September 23, 2009

OUR MEMORY STUMBLES WHENEVER we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery. Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth.

Does “recovery” square with the reality that you, personally, see all around you? Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told.

How many of the 50 million homeowners who are underwater on their mortgages, for instance, jumped for joy when it was reported yesterday that home prices in the U.S. rose 0.3% in August? Optimists would say it’s the trend that matters, but realists would point out that at that rate, it will take a decade for prices merely to return to where they were before the housing market collapsed.

Britain is Sleepwalking towards a Decade of Economic Misery

Britain is sleepwalking towards a decade of economic misery

Despite the hype about recovery, there is no real evidence that the recession is over, says Liam Halligan

By Liam Halligan
Posted originally 25 Aug 2009

The recession is over. The stock market is powering ahead, business confidence is rising and – joy of joys – house prices are looking up. Sit back, relax and bask in the late summer sunshine. The UK is about to enjoy a spectacular V-shaped recovery.

Worried about your debts? Fear not, we’ll have ultra-low interest rates for years to come. The world’s leading central bankers just said so. No need to save, then – we Brits can borrow and spend our way out of trouble. Again.

I’m not, by nature, pessimistic. I’d really like to say the economy is out of the woods. If I could see signs of genuine growth, I’d shout about them from the rooftops. But I can’t honestly say I do. Instead, I see lots of stockbrokers, estate agents and other vested interests talking up “imminent recovery” with no reference to fundamental economic realities.

While desperately wanting to believe the “green shoots” brigade, ordinary households are struggling to remortgage and otherwise viable firms still can’t access working capital. Amid the City’s summer euphoria, the wider economy continues to haemorrhage jobs – with all the associated fiscal fall-out, to say nothing of the human misery.

Having enjoyed a six-day rally, UK shares have just hit their highest level since Lehman Brothers’ collapse last September. This latest price surge is the centrepiece of claims we’ll soon return to the sunlit economic uplands.

Yet this stock market upswing is based on little more than hype. Shares have risen in part due to firms imposing one-off cost savings – such as cutting their head count – but mainly because of unprecedented Government intervention.

Any beneficial impact of our wildly expansionary fiscal and monetary stance will soon be over. Once the sugar rush fades, and global investors are back from their summer break, asset prices will start reflecting the far more significant downsides of the UK’s reckless policy of printing money and racking up ever more Government debt.

Whatever the “news” from the latest self-serving business surveys, output shrank by a shocking 0.8 per cent between April and June. All parts of the economy remain in recession, apart from the public sector. After five successive quarters of contraction, UK output is down almost 6 per cent since the spring of 2008 – more than double the depth of the early-1990s recession.

Once an economy has nose-dived for more than a year, the annual pace of decline obviously slows. But our so-called leaders now point to this arithmetical inevitability as “evidence” that their counter-productive policies are working. “Imminent recovery” is being used as an excuse to put off the tough fiscal and regulatory measures we need to rebalance our finances and avoid a repeat of the sub-prime fiasco.

Banks continue to hold the rest of the country to ransom, refusing to extend credit on reasonable terms, despite replenishing their balance sheets off the back of taxpayer largesse. They remain unwilling to lend normally, even to each other. That gums up the wheels of finance, starving credit-worthy firms and households of badly needed cash. This inter-bank torpor stems from fear of counter-party risk, with banks still sitting on billions of pounds of toxic liabilities which they refuse to reveal.

A braver government, a wiser government, would have forced the banks to fess up to these losses before splashing the bail-out cash, so purging the system and allowing a genuinely restructured banking sector to dust itself down and 
start again.

Such “creative destruction” isn’t pretty, but it’s what makes capitalism work. The grim truth is that meaningful economic recovery will elude Britain as long as we remain burdened by our newly created, Japanese-style “zombie banks”.

This is the heart of the problem – yet politicians don’t want to know, so scared are they of annoying the banking deities and jeopardising future political donations. Our banks are feasting on a diet of taxpayer cash, while charging usurious rates on extremely limited lending books. Britain, meanwhile, sleepwalks towards a lost decade.

Claims that we’re in for a rapid recovery rest on two myths. The first is that we can “spend our way out of recession” and fix the public finances later. As the economy has stagnated, the national accounts have bled ever more red ink. In July, usually a surplus month as tax revenues roll in, we saw a record-breaking £8 billion deficit. Corporate tax receipts were down a staggering 38 per cent on the same month last year.

In any downturn, the public finances suffer as tax and spending pull in opposite directions. But the bank rescues and ongoing Government profligacy are tearing our balance sheet apart. We’re now issuing more government debt as a percentage of GDP than any other major economy. The UK is on course to borrow more than £200 billion this year, twice as much as France and Germany. Since March, the Bank of England has spent £130 billion of funny money created by quantitative easing (QE), the vast majority of it buying back gilts from the market. That’s our dirty secret: without the prop of QE, we’d already have seen repeated gilt auction failures, with the UK unable to roll over its debts.

Despite the talk of recovery, sterling just hit a three-month low. It can’t be long before the currency markets rebel – something that can’t be covered up by QE.

The second myth is that we face impending “deflation” – which is used to argue not only that QE is justified, but also that the Bank of England will be able to keep interest rates low for years to come.

Where is this deflation? The credit crunch has been in full swing since the summer of 2007. Yet only in the past two months has Consumer Price Index (CPI) inflation even fallen below the Bank’s 2 per cent target, let alone risked going negative.

That’s despite the fact that CPI grossly understates inflation anyway. And had VAT not been cut last December, even the CPI would still be above 3 per cent – with the Bank writing public letters explaining why it’s so high.

Oil prices just hit $75 a barrel, their highest level this year. Given that crude plunged below $40 last autumn, continued high oil prices will add mightily to inflation in the coming months. And that’s on top of unprecedented monetary expansion. Higher inflation will make it even harder to sell the hundreds of billions of pounds of gilts set to be issued over the next 18 to 24 months. Higher inflation will also make it impossible for the Bank to keep rates low.

Meanwhile, our decade-long borrowing binge means that, for years to come, the UK will fritter away a huge chunk of our national income in debt-service, rather than productive investment.

I want the UK to recover as much as any Telegraph reader. But unless we face reality, and end the stop-gap measures that are making our predicament even worse, genuine recovery will be pushed further into the future. So enjoy the economic summer sunshine while it lasts. It could well be the lull before yet another storm.

Liam Halligan is chief economist at Prosperity Capital Management

by Liam Halligan
Posted originally in The Daily Telegraph
25 Aug 2009

THE RECESSION IS OVER. The stock market is powering ahead, business confidence is rising and – joy of joys – house prices are looking up. Sit back, relax and bask in the late summer sunshine. The UK is about to enjoy a spectacular V-shaped recovery.

Worried about your debts? Fear not, we’ll have ultra-low interest rates for years to come. The world’s leading central bankers just said so. No need to save, then – we Brits can borrow and spend our way out of trouble. Again.

I’m not, by nature, pessimistic. I’d really like to say the economy is out of the woods. If I could see signs of genuine growth, I’d shout about them from the rooftops. But I can’t honestly say I do. Instead, I see lots of stockbrokers, estate agents and other vested interests talking up “imminent recovery” with no reference to fundamental economic realities.

While desperately wanting to believe the “green shoots” brigade, ordinary households are struggling to remortgage and otherwise viable firms still can’t access working capital. Amid the City’s summer euphoria, the wider economy continues to haemorrhage jobs – with all the associated fiscal fall-out, to say nothing of the human misery.

Pressure (Countdown) Toward Breakdown

Pressure (Countdown) Toward Breakdown

by Jim Willie CB

home:  Golden Jackass website

subscribe:  Hat Trick Letter

Jim Willie CB, editor of the “HAT TRICK LETTER”

An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold.

The Paradigm Shift continues to displace the power centers and introduce new ones. Those bright souls who ignore the shift will be well prepared for systems that soon do not stand. The Americans are the last to know, oblivious to the global shift in progress. They continue to seek a return to normalcy, when old conditions are as gone as a baby’s innocence during teen years. The crux of the matter is that the United States is no longer in control of its fate. Meetings with creditor nation leaders result in new orders given, and new policy directives enacted. Comparisons are made to China, but they too are a distraction. China can embark on its own path, can stimulate with huge sums of money, since they have actual savings. The US has massive debts, as insolvency has infiltrated to destroy systems pertaining to banking, home mortgages, federal operations, and industry. The nation is as hollowed out as its leaders are compromised. The major theme of this decade is USGovt leaders working hidden agendas for personal and family gain within a syndicate in full view to see.

For those looking to dismiss the rumors of a widely orchestrated plan to shut down the US banking system, for whatever stated or actual reasons, perhaps attention should be directed at the US Dept of Homeland Security (HSA) and the Federal Emergency Mgmt Agency (FEMA). Not only are they spanning the nation in making tentative preparations for a series of bank holidays, but they are working to enlist the police forces at the state and city level under the federal law enforcement system, in addition to the national hospital system. Anecdotal stories stream in from around the country, impossible to ignore. Who knows what legal grounds or unfolding events precede such a development? Watch a turf battle perhaps between HSA and the FBI. To be sure, tremendous stress is at work within USGovt agencies, ministries, and elsewhere. My focus is primarily on the financial impacts, never to be swayed by official stories and pronouncements. Mine is not a concern for over-arching networks of power in control, but for breakdowns of the individual systems. Let the billionaires fight among themselves, as our role is to protect our own wealth and to avoid congames.

SHOCKS, STRESSES, BREAKDOWNS, PLANS

Back to reality on US soil. Many reports have come to the effect that at the end of August, a financial breakdown is due, and a shutdown of US banks is planned. We await the trigger events with mystery and intrigue as overtones. Some on Wall Street, arrogant to the end, believe that widespread awareness prevents the actual unfolding of events. They are suffering from a terminal disease though, as they believe they are in control. They are not. The USGovt creditors are in control. The August Hat Trick Letter reports have identified five major factors pointing to a severely stressful period of time at the end of August and into September. The FDIC is scheduled to release its Second Quarter Report that could reveal up to 1000 banks expected to croak, surely enough to exhaust their rescue fund by between 20-fold and 100-fold. Tin cups are heading to the USCongress committees. The USGovt federal limit must be extended again, and Treasury Secy Geithner has requested a $12.1 trillion limit. That limit must be extended sometime again soon, like before next spring 2010. Maybe September 15th and March 15th could be declared Debt Limit Extension dates officially, and make them national holidays. The nation could celebrate debt. Details are in the report, but surely not a blow by blow outline, since a crystal ball is not an office feature.

To be sure, many tripwires are laid out from the systemic complexity and lost control, not to mention haphazard design and frenzied defense. A massive juggling act is taking place, as US bank and political leaders are juggling more balls, and heavier balls with each passing month. The risk of accidents is rising exponentially from incredible backroom movement of massive funds to avert disasters on a weekly basis. WHEN IT COME THE ACCIDENTS, PLANNED EVENTS, OR UNEXPECTED RESPONSES TO MINOR DISTURBANCES WITHIN THE SYSTEM, TREMENDOUS COLLATERAL DAMAGE WILL ARRIVE, BUT THE PRECIOUS METALS WILL STAND TALL AND ENDURE EFFECTIVELY, EVEN THRIVE. See gold, silver, and platinum, at least. The broken parts and ‘bad apples’ are likely to be eliminated in a flash. We will see. People will be hurt, and life savings will take hits. Even communication lines will be interrupted. Power structures will dissolve. We are approaching historically unprecedented times. The signs are omnipresent, often ignored.

My best sources of information report that some unexpected deep shocks are coming from USGovt creditor nations. They are simply fed up, frustrated, and astonished at the manner of lost control, spiraling debts, and blatant monetization amidst lies in denial of that same monetization. The USTreasury auctions now have domestic hidden elements, and  global hidden monetization elements. The USFed is purchasing through Permanent Open Market Operations the bonds grabbed by the primary dealers. Some of the auctions are actually underbid, and fortunately for the statistics, the bid/cover ratio includes obligated dealer bids. The USFed liberally uses its USDollar Swap Facility to enable strong bids by foreign central banks, except that they are highly likely coming from USFed accounts on foreign soil, or else from money lent by the USFed itself. Warning after warning have come not to monetize, not to debauch the USDollar currency, not to permit skyrocketing deficits. Yet they continue, and worse, little if any reform or actual stimulus has occurred. Mainly what we witness is more channeled funds to the big banks, more coverage of credit derivative fires, and more announcements of bond support. See the $1.25 trillion support for Fannie Mae bonds, aka USAgency Mortgage Bonds. The Green Shoots have now been dismissed as a marketing ploy. The Stress Tests have now been dismissed as a marketing ploy. The Stimulus Plan has now been dismissed as a marketing ploy. The only USEconomic recovery will be a statistical recovery. A Jobless Recovery is a recovery for stocks and a redemption for the bankers. Main Street continues to be discarded.

The next shock is most likely to come from USGovt creditors, the holders of vast sums of USTreasury Bonds. They are ready to begin a salvage operation, whether coordinated or not (who knows?), that results in massive sales well over $100 billion in magnitude, maybe several hundred billion$ worth. They have stated to the USGovt their concerns about lost valuation, lost integrity, and continued threat of debasement. They are frustrated that not only are USGovt deficits enormous and unprecedented in size, but further expansive programs like Health Care are in planning stages. The creditors regard the US political and banking leaders as living in a world divorced from reality, and thus require shock treatment. USTreasury Bonds have become a liquidation currency. Actions in the Persian Gulf and European region indicate that USTBonds are being used in liquidation and distressed sales on a truly massive scale. The failed Dubai construction projects are involved in the former, the Chinese expansion (some say carpetbaggers) are involved in the latter. Details appear in the August HTLetter reports. My forecast made in September 2008, almost one full year ago, of a USTreasury Bond default has been almost uniformly mocked, denigrated, and dismissed as an impossibility. Get back to me in a few months! In fact, the widespread restructuring of USTreasurys by the creditors is a massive global project underway. The shift from long-term to short-term USTreasurys by the Chinese is but one piece. The conversion by several parties to hard assets is another. Eventually, the USGovt will work toward a formal writedown in the debt and a conversion to property, industrial plant, energy and mineral rights, farmlands, and more. That will constitute the default, but it will be denied.

As a last footnote, never overlook the continued urgent Chinese initiative to ‘spend’ their USTBonds quickly, for useful tangible purposes, before any damaging sequence of events occurs. Simon Black (aka the International Man) wrote, “I have been spending a lot of time this week talking to my sources in China, one of whom is inside one of the country’s sovereign wealth funds (SWF). He also indicated that the SWF analysts were working around the clock trying to put deals together. For China it is a race against the clock for how fast they can convert their $2 trillion in USDollar holdings into strategic assets, namely oil and gold. At today’s deflated prices, putting together a really good billion dollar deal is a difficult thing to do. Putting together 2000 of them is impossible. Doing it before the dollar collapses? Not a Chinaman’s chance. And they know it.”

USDOLLAR, USTBOND, AND GOLD

The USDollar is clearly the weakest link stress point. In fact, the battle for gold has morphed into a bilateral quiet war between the United States and China. The US has debts and a powerful military, with retained control of the US$ Printing Press, not to mention significant institutions of financial controls and levers. The Chinese have a staggering savings account, in the form of a few key sovereign wealth funds, with ongoing trade surplus accumulation, and a shiny new industrial sector. The USGovt pours out new USTreasury Bonds to cover its debts. The Chinese exact severe but hidden terms for continued credit support. For instance, just two tidbits. The Chinese in a recent White House visit ordered that Ben Bernanke not be renewed as USFed Chairman. He insulted the Chinese in a Beijing trip a few years back, and has lied through his teeth on monetization of debt securities. The Chinese also ordered that the bruhaha with Union Bank of Switzerland end, since Beijing requires continued Swiss services in managing its gold & silver bullion. My sources of information are not Reuters and USGovt news releases. Lost sovereignty is a process, not an event! More details in the August HTLetter reports.

Whatever the machinations in the new World Financial War, watch the performance of the USDollar, the USTreasurys, and Gold. They are each signaling significant changes in the near-term, as in the next several weeks or few months. In my basic view, the breakdown in the US$, the rise in the 10-year TNote yield, and the breakout over $1000 in gold will all occur when China decides to make them happen. It is on their timetable, not ours.

The US$ DX index experienced a critical bearish moving average crossover in July, mentioned in past public articles. The attempt to rebound off 77 lows has been met with very strong 79 resistance, like a brick wall. The goofy story that the USEconomy will lead the European Economy out of the recession is patent nonsense. Today’s news reported that the EU contracted by the same 0.1% in its Gross Domestic Product, the economic growth. Thus the Euro rally has lifted its exchange rate back to 143 again, and the USDollar has lost its vaporous momentum. This chart is worth reviewing almost on a weekly basis. The next stop will be 77, serving as a speed bump, with thin support to offer. Then later, when the threat to the USGovt debt structure is obvious to all, the US$ DX index will find the bottom at 72, which will be scraped for a time. Eventually though, the monetary crisis will blossom and hit the front page of newspapers, rather than recovery in fragmentary notices, and the DX index will find a low by next year around 60-65. Talk will surface of a shot in the arm, a boon to exporters, except that the US industrial sector is thoroughly hollowed out. Can anyone remember the benefits promised from Low Cost Solutions from shipping US industry to China from years 2002 to 2005? What moronic mythology propaganda! We are witnessing the fruits of that grand corporate initiative now.

The USTreasury Bond is buidling pressure of its own. Shown is the ‘TNX’ that indicates the 10-year USTreasury Note yield. It is caught in a rising trend. The cylicals point upward, and the moving averages are rising. The 4.0% level is a the line in the sand, it seems. Any USEconomic recovery, even a tepid one, even a phony one, will likely be accompanied by a surprising rise in price inflation. The Exit Strategy for the US Federal Reserve is best described as a man trying to emerge from a StraitJacket; they have none. Drain the liquidity and force an economic collapse from credit constriction, hardly a workable plan. The alternative is more of the same, incredible volumes of continued debt issuance, and eventual spillover. The Deflation Knuckleheads have been quiet in recent weeks. They failed to notice that the rising US stock market, seen in the Dow Jones Industrial Index and S&P500 Index, is actually evidence of price inflation. It is not evidence of recovery of any sort. The next USEconomic shock is the rising cost structure from a declining USDollar, whose billboard warnings are totally overlooked by economists.

Prepare for a gold rally and breakout. Patience is key, to be amply rewarded. A major gold reversal since last autumn is still in progress. Remember: the longer the wait before breakout, the bigger the breakout, and the fewer the beneficiaries riding the train. With so many rebuffs at the $1000 mark, few expect that level to be overcome. It will be surpassed when China gives the word: GO. Notice the rising moving averages, the positive cyclical, and the rising near-term trendline. Pressure has continued to build for a few months, almost enough to bore the observer and reader. So be it! It adds up to a breakout that will be more powerful than anticipated by so-called experts. Perhaps one of several trigger events will push gold over the $1000 mark. Perhaps a perception of US banks being dead again. Perhaps a massive USTreasury dump event on the global stage. Perhaps a surprising military event in the Middle East. Perhaps simple summer vacations and lack of desk defense. Maybe some political return to prudence. It almost does not matter, since time might be the ultimate determinant.

STRESS POINTS TOO NUMEROUS

Jobs continue to be lost, with exaggerations and deceptions rampant. Seasonal adjustments and continued Birth-Death Model hokum continue to be relied upon. The end of the General Motors plant shutdown, and the magnificent but costly ‘Clunker’ rebate program do not a recovery make. Almost half a million people fell off the state unemployment insurance system in July, which was hailed as evidence of a recovery. The home prices continue to fall, but less quickly. The home loan delinquencies and foreclosures continue unabated, up 7% from June to July alone. The USGovt has become the pathetic new Subprime Lender of last resort, statistical details provided in HTLetter reports. The ugly story in the housing market is the hidden overhang of bank-owned (REO) properties, which bankers withhold from the market. So the home inventory figures are much worse than reported. The people and investment community desperately want a recovery to occur. Their lack of economic savvy permits them to be betrayed and misinformed consistently. They do not realize that debt cream cannot heal debt wounds from deep knife cuts at the hands of job loss and home equity loss. They do not realize that redemption of worthless mortgage bonds held by the big banks does not constitute a reform of the banks, who still hold deeply impaired bonds on their balance sheets, or rather off their balance sheets. They do not realize that ballooning USGovt deficits have failed to rebuild or revive American industry, which still lies in China. Nationalization is not Reconstruction. No, they come from the herd known as Homo Ovinus, the sheeple species. Thanks to John Mauldin’s column for this artful work.

Plummeting tax revenues come when President Obama and USCongress pile up major deficits, from stimulus plans, from bank rescues, and expansion of health care. The numbers are worse than fiction. Tax receipts are on pace to drop 18% this year, the biggest single-year decline since the Great Depression. An Associated Press analysis provides details on the recession’s impact and federal insolvency. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever. Thus pressures build for more hidden monetization, and more retaliation by creditor nations.

The service sector, which makes up nearly 90% of the USEconomy, unexpectedly shrank at a faster pace in July than in the previous month. So economic activity continued to decline last month despite the propaganda promulgated by prattle specialists. The Institute for Supply Management (ISM) reported Wednesday that its non-manufacturing index declined to 46.4 last month from 47 in June. It was the first decrease since March. Readings below 50 indicate contraction, while readings above 50 represent expansion. Their report monitored business activity, employment, order backlogs and new orders, including those for export. They all declined slightly more in July than the previous month.

DeutscheBank forecasts 48% of all US mortgage loans to be underwater by 2011. Ouch! Borrowers of loan products with already high underwater rates will only grow worse. By 2011, DBank predicts 89% of Option ARM borrowers will be underwater, up from 77% in 2009. That is correct, 77% of current Option ARM mortgages are stuck with negative equity, upside down. That is a recovery??? No! It is the source of further home price declines, to any analyst that features a brain stem. They expect the rate of underwater subprime borrowers to increase from 50% to 69%, and underwater Alt-A borrowers to increase from 49% to 66%. Then there is the commercial mortgage wrecking ball soon to hit the financial bank structures. The $3.5 trillion commercial real estate market is eroding. Defaults are doubling on loans for apartment buildings, office buildings, housing complexes, strip malls, hotels, hospitals. A staggering amount of loans must be rolled over this year into refinancing, or else go bust with liquidation to follow. Prices in commercial real estate have fallen about 39% from the peak in mid 2007, according to the MIT Center for Real Estate, with no signs of improvement or abatement.

FDIC Chairman Sheila Bair believes up to 500 more banks could fail, according to conversations between US senators and Bair from recent meetings. That story received little if any coverage. The real number is 1000 banks, from Bair’s own conversations. Little banks are dropping like flies, and we are due for a big bank to fail very soon. No need to guess, since accidents will be random among the crippled edifices. The biggest bailed out banks merely invest in USTreasurys, capturing easy profits from the steep yield curve. Lastly, prepare for a big surprise. AIG will soon be forced to reveal it is bankrupt again, encountering another painful failure, despite all its falsified reports of revival. It is dead, even after $180 billion in aid. AIG has been busy conducting a shell game to move assets from recently audited subsidiaries to the next subsidiary to be audited, in order to hide its neverending bust played out. It is a veritable Black Hole under the USGovt roof. For each and every sector of the ailing defunct landscape, one can safely said THAT AINT RECOVERY, FOLKS!! Stimulus, rescue, bailouts, nationalizations, and more USDollar ruination lie directly ahead. Gold will thrive in the coming months, as panic sets in

by Jim Willie CB, editor of the Hat Trick Letter
Posted 13 August 2009
home: Golden Jackass website

An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold.

THE PARADIGM SHIFT CONTINUES to displace the power centers and introduce new ones. Those bright souls who ignore the shift will be well prepared for systems that soon do not stand. The Americans are the last to know, oblivious to the global shift in progress. They continue to seek a return to normalcy, when old conditions are as gone as a baby’s innocence during teen years. The crux of the matter is that the United States is no longer in control of its fate. Meetings with creditor nation leaders result in new orders given, and new policy directives enacted. Comparisons are made to China, but they too are a distraction. China can embark on its own path, can stimulate with huge sums of money, since they have actual savings.

The US has massive debts, as insolvency has infiltrated to destroy systems pertaining to banking, home mortgages, federal operations, and industry. The nation is as hollowed out as its leaders are compromised. The major theme of this decade is USGovt leaders working hidden agendas for personal and family gain within a syndicate in full view to see.

For those looking to dismiss the rumors of a widely orchestrated plan to shut down the US banking system, for whatever stated or actual reasons, perhaps attention should be directed at the US Dept of Homeland Security (HSA) and the Federal Emergency Management Agency (FEMA).