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ECONOMICS AND ESOTERICA FOR A NEW PARADIGM

Posts Tagged ‘Housing Market

Gold and silver: We were right – they were wrong

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by Brandon Smith of Alt Market
Posted July 25, 2011

ONLY NOW, AFTER THREE YEARS OF ROLLER COASTER MARKETS, EPIC DEBATES, and gnashing of teeth, are mainstream financial pundits finally starting to get it. At least some of them, anyway.

Precious metals have continued to perform relentlessly since 2008, crushing all naysayer predictions and defying all the musings of so called “experts”, while at the same time maintaining and protecting the investment savings of those people smart enough to jump on the train while prices were at historic lows (historic as in ‘the past 5000 years’).

Alternative analysts have pleaded with the public to take measures to secure their hard earned wealth by apportioning at least a small amount into physical gold and silver. Some economists, though, were silly enough to overlook this obvious strategy. Who can forget, for instance, Paul Krugman’s hilarious assertion back in 2009 that gold values reflect nothing of the overall market, and that rising gold prices were caused in large part by the devious plans of Glen Beck, and not legitimate demand resulting from oncoming economic collapse.

To this day, with gold at $1600 an ounce, Krugman refuses to apologize for his nonsense. To be fair to Krugman, though, his lack of insight on precious metals markets is most likely deliberate, and not due to stupidity, being that he has long been a lapdog of central banks and a rabid supporter of the great Keynesian con. [And he a Nobel Prize winner!] Some MSM economists are simply ignorant, while others are quite aware of the battle between fiat and gold, and have chosen to support the banking elites in their endeavors to dissuade the masses from ever seeking out an alternative to their fraudulent paper. The establishment controlled Washington Post made this clear with its vapid insinuation in 2010 that Ron Paul’s support of a new gold standard is purely motivated by his desire to increase the value of his personal gold holdings, and not because of his concern over the Federal Reserve’s destructive devaluing of the dollar!

So, if a public figure owns gold and supports the adaptation of precious metals to stave off dollar implosion, he is just trying to “artificially drive up his own profits”. If he supports precious metals but doesn’t own any, then he is “afraid to put his money where his mouth is”. The argument is an erroneous trap, not to mention, completely illogical.

Numerous MSM pundits have continued to call a top for gold and silver markets only to be jolted over and over by further rapid spikes. Frankly, it’s getting a little embarrassing for them. All analysts are wrong sometimes, but these analysts are wrong ALL the time. And, Americans are starting to notice. Who beyond a thin readership of mindless yuppies actually takes Krugman seriously anymore? It’s getting harder and harder to find fans of his brand of snake oil.

Those who instead listened to the alternative media from 2007 on have now tripled the value of their investments, and are likely to double them yet again in the coming months as PM’s and other commodities continue to outperform paper securities and stocks. After enduring so much hardship, criticism, and grief over our positions on gold and silver, it’s about time for us to say “we told you so”. Not to gloat (ok, maybe a little), but to solidify the necessity of metals investment for every American today. Yes, we were right, the skeptics were wrong, and they continue to be wrong. Even now, with gold surpassing the $1600 an ounce mark, and silver edging back towards its $50 per ounce highs, there is still time for those who missed the boat to shield their nest eggs from expanding economic insanity. The fact is, precious metals values are nowhere near their peak. Here are some reasons why…

Debt ceiling debate a final warning sign

If average Americans weren’t feeling the heat at the beginning of this year in terms of the economy, they certainly are now. Not long ago, the very idea of a U.S. debt default or credit downgrade was considered by many to be absurd. Today, every financial radio and television show in the country is obsessed with the possibility. Not surprisingly, unprepared subsections of the public (even conservatives) are crying out for a debt ceiling increase, while simultaneously turning up their noses at tax increases, hoping that we can kick the can just a little further down the road of fiscal Armageddon. The delusion that we can coast through this crisis unscathed is still pervasive.

Some common phrases I’ve heard lately: “I just don’t get it! They’re crazy for not compromising! Their political games are going to ruin the country! Why not just raise the ceiling?!”

What these people are lacking is a basic understanding of the bigger picture. Ultimately, this debate is not about raising or freezing the debt ceiling. This debate is not about saving our economy or our global credit standing. This debate is about choosing our method of poison, and nothing more. That is to say, the outcome of the current “political clash” is irrelevant. Our economy was set on the final leg of total destabilization back in 2008, and no amount of spending reform, higher taxes, or austerity measures, are going to change that eventuality.

We have two paths left as far as the mainstream economy is concerned; default leading to dollar devaluation, or, dollar devaluation leading to default. That’s it folks! Smoke em’ if you got em’! This train went careening off a cliff a long time ago.

If the U.S. defaults after August 2, a couple of things will happen. First, our Treasury Bonds will immediately come into question. We may, like Greece, drag out the situation and fool some international investors into thinking the risk will lead to a considerable payout when “everything goes back to normal”. However, those who continued to hold Greek bonds up until that country’s official announcement of default know that holding the debt of a country with disintegrating credit standing is for suckers. Private creditors in Greek debt stand to lose at minimum 21% of their original holdings because of default. What some of us call a “21% haircut”.

With the pervasiveness of U.S. bonds around the globe, a similar default deal could lead to trillions of dollars in losses for holders. This threat will result in the immediate push towards an international treasury dump.

Next, austerity measures WILL be instituted, while taxes WILL be raised considerably, and quickly. The federal government is not going to shut down. They will instead bleed the American people dry of all remaining savings in order to continue functioning, whether through higher charges on licensing and other government controlled paperwork, or through confiscation of pension funds, or by cutting entitlement programs like social security completely.

Finally, the dollar’s world reserve status is most assuredly going to be placed in jeopardy. If a country is unable to sustain its own liabilities, then its currency is going to lose favor. Period. The loss of reserve status carries with it a plethora of very disturbing consequences, foremost being devaluation leading to extreme inflation.

If the debt ceiling is raised yet again, we may prolong the above mentioned problems for a short time, but, there are no guarantees. Ratings agency S&P in a recent statement warned of a U.S. credit downgrade REGARDLESS of whether the ceiling was raised or not, if America’s overall economic situation did not soon improve. The Obama Administration has resorted to harassing (or pretending to harass) S&P over its accurate assessment of the situation, rather than working to solve the dilemma. Ratings company Egan-Jones has already cut America’s credit rating from AAA to AA+.

Many countries are moving to distance themselves from the U.S. dollar. China’s bilateral trade agreement with Russia last year completely cuts out the use of the greenback, and China is also exploring a “barter deal” with Iran, completely removing the need for dollars in the purchase of Iranian oil (which also helps in bypassing U.S. sanctions).

So, even with increased spending room, we will still see effects similar to default, not to mention, even more fiat printing by the Fed, higher probability of another QE announcement, and higher inflation all around.

This period of debate over the debt ceiling is liable to be the last clear warning we will receive from government before the collapse moves towards endgame. All of the sordid conundrums listed above are triggers for skyrocketing gold and silver prices, and anyone not holding precious metals now should make changes over the course of the next month.

What has been the reaction of markets to the threat of default? Increased purchasing of precious metals! What has been the reaction of markets to greater spending and Fed inflation? Increased purchasing of precious metals! The advantages of gold and silver are clear…

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44 million Americans on food stamps and ten other reasons why the economy is simply not getting better

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by theeconomiccollapseblog
Originally posted March 4th, 2011

Over 44 million Americans are now on food stamps. That is a new all-time record and that number is 13.1% higher than it was just one year ago. So how many Americans have to go on food stamps before we can all finally agree that the U.S. economy is dying?  50 million?  60 million? All of us?  The food stamp program is the modern equivalent of the old bread lines. More than one out of every seven Americans now depends on the federal government for food.  Oh, but haven’t you heard?  The economy is showing dramatic improvement. Corporate profits are up. The stock market is soaring. Happy days are here again.

It just seems inconceivable that anyone can claim that the economy is improving when the number of Americans on food stamps continues to set a brand new record every single month. But the food stamp program is not the only indicator that the economy is still having massive problems. The following are ten more reasons why the U.S. economy is simply not getting any better:

#1 Some recent statistics actually indicate that the number of unemployed Americans is still going up. According to Gallup, unemployment in the United States rose to 10.3% at the end of February.  That is the highest number Gallup has reported since early last year.

#2 The housing industry is still a complete and total disaster. In fact, new home sales in the U.S. in January were 11.2% lower than they were in December.  Not only that, the number of new home sales in January was 18.6% lower than the number of new home sales in January 2010.  That is not a sign of improvement.

#3 There wouldn’t even be much of a housing industry at all at this point if it was not for the U.S. government. Right now the U.S. government is either writing or guaranteeing well over 90 percent of all mortgages in the United States.  So what would the housing market look like in 2011 if the government was not in the picture?

#4 In 2010, more than a million U.S. families lost their homes to foreclosure for the first time ever, and that number is expected to go even higher in 2011.

#5 Due to rampant economic decay and record numbers of foreclosures there are areas in most of our major cities that now look like “war zones”.  For example, the Huffington Post is reporting that there are now approximately 15,000 vacant buildings in the city of Chicago and there are approximately 60,000 vacant houses and apartments in the city of Las Vegas.

#6 8.5% of median monthly income is now spent on gasoline. According to the Oil Price Information Service, U.S. drivers spent an average of $347 on gasoline during the month of February, which was 30 percent more than a year earlier. So what is going to happen when gas prices go even higher? Sadly, the average price of gasoline in the U.S. has risen another 4 cents since yesterday and it is likely to go much higher from here.

#7 The U.S. trade deficit continues to grow. The trade deficit was about 33 percent larger in 2010 than it was in 2009, and the 2011 trade deficit is expected to be even bigger.

#8 The CredAbility Consumer Distress Index, which measures the average financial condition of U.S. households, declined in every single quarter in 2010.

#9 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.

#10 The U.S. national debt is growing faster than ever. The Obama administration is projecting that the federal budget deficit for this fiscal year will be a new all-time record 1.65 trillion dollars. It is hard to even imagine how much money that is. If you went out today and started spending one dollar every single second, it would take you over 31,000 years to spend one trillion dollars. Long ago the U.S. government should have been getting these deficits under control, but instead they are just getting even larger.

So in light of the statistics above, can anyone really claim that we are in the middle of an economic recovery?

The truth is that there is no sign that any of the long-term trends that are destroying the U.S. economy are even slowing down. Millions of jobs continue to be shipped overseas. The U.S. dollar continues to be devalued. The federal government continues to go into more debt. State and local governments continue to go into more debt. Our trade deficit continues to grow.

Our cities continue to be transformed into wastelands as they are being systematically deindustrialized. The number of Americans that are dependent on the government continues to soar. The U.S. middle class continues to shrink.

I know that I harp on these themes over and over, but it is vitally important that everyone understands that the mainstream media is lying to us. The U.S. economy is dying a very painful death and there is no hope on the horizon.

Things are not going to be getting better. Well, they may get a bit better for the boys down on Wall Street, but for the rest of us our standards of living are going to continue to decline.

The best days for the U.S. economy are already behind us. What lies ahead is a whole lot of pain. We are going to pay the price for decades of corruption and incompetence. An economic collapse is coming and you had better get ready.

 

How higher interest rates could trigger another 2008-type event

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by Graham Summers
Phoenix Capital Research
Originally posted February 15, 2011

HIGHER INTEREST RATES ARE COMING and coming fast. The Fed has spent trillions trying to lower interest rates (more on this in a moment), and it’s now officially lost control of the long-end of the Treasury market. This will have ENORMOUS implications for the US housing market and financial system. Housing prices will be collapsing in the coming months as interest rates soar. We could also very well see another 2008-type event (a collapse of the US Financial System) as well. Why?

Derivatives. In 2008, the entire financial system nearly went under due to the Credit Default Swap market which was $50-60 Trillion in size. In contrast, the interest-rate based derivatives market is $196 TRILLION in size: more than THREE times larger than the credit default swap market at hits peak.

At this size you only need a very small percentage of these derivatives to be “at risk” (meaning real money is bet on them), say 5% to get $10 trillion in potential losses. To put that number into perspective, the entire WORLD STOCK MARKET is only $36 trillion in size.

See the potential risk here?

To say that the US financial system is in danger would be a HUGE understatement. It is the derivatives market, NOT the housing market that has the Fed concerned.

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Does Bernanke REALLY think QE will boost home prices… Or is he simply trying to hide an even bigger problem?

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by Graham Summers
Phoenix Capital Research
Posted originally November 9, 2010

SOMETIMES IT’S WORTH PUTTING THINGS IN CONTEXT. The world, particularly the US, has been in a bond bull market for roughly 30 years. During that time bond prices (black line) rose almost continuously, while interest rates (blue line) dropped.

So here we are, interest rates are the lowest they’ve been in 30 years, and Ben Bernanke wants to make them fall even lower. His public reasoning is he wants to maintain the housing market and spur investment in business.

But does it?

Interest rates have been at 0% for nearly two years. Despite this as well as a massive home-buyers tax credit, housing prices have, at best, stabilized a bit… but any claim that low interest rates have stimulated a housing recovery is flat out bogus.

As for low interest rates spurring investment in business, this claim is also nonsense. I don’t remember seeing any headlines about companies increasing their capital expenditures or hiring employees? Instead big business is putting its excess cash to work with buyback programs.

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