Nouriel Roubini's Global EconoMonitor

Forecasting Home Prices in the U.S.

The worst contraction in the housing sector since the Great Depression, now in its fourth year, shows signs of reaching a bottom. Indicators of both demand and supply have posted modest recoveries from the record lows reached in H1 2009, though they remain sharply depressed below historical levels. 

In a recent research note RGE’s Prajakta Bhide and Christian Menegatti provide an assessment of the current condition of the U.S. housing sector and forecast home price dynamics for each of the 10 cities of the S&P/Case-Shiller C-10 index.  They also provide nationwide price forecasts.  They conclude that some of the improvements registered on the demand side in the recent months might be of a temporary nature and that home prices might fall further in the months ahead.

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Check out: Is the U.S. Housing Sector Bottoming Out? by Prajakta Bhide and Christian Menegatti

188 Responses to “Forecasting Home Prices in the U.S.”

BobSeptember 29th, 2009 at 6:01 pm

Christian Menegatti – “and that home prices ‘MIGHT’ fall further in the months ahead.”Wow … what a revelation! You have got over 50% of the home mortgages under water considering 2nd morts and HELOCS. Another 7 million homes to go through foreclosure, a real unemployment rate of over 20% nationally, 12% or 35 million people on food stamps and over 13% of the people in this nation in poverty. And you want to step way out there and proclaim that the M I G H T be some further fall in the months ahead!Please.

WBSeptember 30th, 2009 at 4:05 pm

The analysis in the paper is actually very detailed in term of where prices will go nationally and in the specific MSAs. There are very precise results and detailed explanation of model and assumptions. Worth reading.

BobSeptember 30th, 2009 at 10:47 pm

Bull … he MIGHTILY states;>>They conclude that some of the improvements registered on the demand side in the recent months MIGHT be of a temporary nature and that home prices MIGHT fall further in the months ahead.<Try this ponzi scheme as possible asnwers to current housing and what that might hold going forward ->>The Federal Reserve alone bought $722 billion of mortgages and agency debtwhen only $686 billion in new mortgages were issued. So, through August, the Fed bought more than 100% of the entire supply of new(purchase) mortgages in 2009.That’s not a free housing market; that’s a market bought, owned, and sustained by the Federal Reserve’s willingness to print up three quarters of a trillion dollars out of thin air.While the individual mortgages issued in 2009 may or may not be the exact same ones purchased by the Federal Reserve, that’s immaterial.All the mortgage issuers care about is that when they issue a mortgage, a purchaser with money exists somewhere down the line. The chain needs a terminal buyer, and that buyer has become the Federal Reserve.<

GuestSeptember 29th, 2009 at 7:18 pm

The analysis on this site has gone from great to worthless this year. The posters have more insight than the analysts.

ChrisLSeptember 30th, 2009 at 4:00 am

I’m yet to read an article that makes a compeling case of when market participants will stop dancing. Next month ? Within the next 12 months ? Two years ? Nobody seems to have a clue…The only thing I’m certain , is that the music will eventually stop, and many, many dancers will end up without a chair. That’s why I’d rather not dance at all and stay on my chair for as long as it takes.

FEDupSeptember 30th, 2009 at 6:47 am

If the “tech crash” of 2000 is any guide, the plug was pulled when the public had both feet in the market and was still euphoric on stocks with no earnings and PEs of 500 or more.

ChrisLOctober 1st, 2009 at 10:13 pm

Well, the public has been wise this time and didn’t put even one feet in this rally as it has been too afraid of the risks (retail investors have poured in less than $10 billion). So I doubt they’ll start moving in now after a 60% increase, and the tech crash won’t serve as any guide…

CitizenSeptember 29th, 2009 at 8:42 pm

Sept. 30 (Bloomberg) — Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio. “Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.”Officials at Newport Beach, California-based Pimco say the “new normal” for the global economy will be characterized by heightened government regulation, lower consumption and slower growth. The Standard & Poor’s 500 Index increased 13 percent on average in the five years ended in 2007, before falling 37 percent last year as economies slid into recession. During the last two bull markets, the S&P 500 posted an average total return of 18.5 percent a year.The U.S. savings rate rose to 6 percent of disposable income in May, the highest level since 1998. Only 8 percent of U.S. adults plan to increase household spending, almost one- third will spend less, and 58 percent expect to “stay the course,” a Bloomberg News poll showed Sept. 17. More than three in four adults said they cut outlays in the past year.GDP ForecastThe world’s largest economy likely shrank at a 1.2 percent annual rate from April to June, more than the originally reported 1 percent contraction, according to a Bloomberg News survey before the Commerce Department’s report today. The jobless rate climbed to 9.8 percent this month, from 9.7 percent in August, according to a separate Bloomberg survey before the Labor Department reports figures on Oct. 2.Gross said he’s been buying longer maturity Treasuries in recent weeks as protection against deflation.“There has been significant flattening on the long end of the curve,” Gross said “This reflects the re-emergence of deflationary fears. The U.S. is at the center of de-levering as opposed to accelerating growth.”Consumer prices fell 1.5 percent in August from a year ago, according to the Labor Department in Washington. Prices have declined on an annual basis every month since March.Yields on U.S. inflation-protected debt show there’s little concern about consumer prices eroding the value of bonds’ fixed payments. The difference in rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, is 1.73 percentage points. While up from 0.04 points in November, the level is below the average of 2.18 points over the past five years.Breakeven RatesThe U.S. has the lowest so-called breakeven rates of any major sovereign debt market except Japan. The difference between three-year maturities is 0.6 point, below the average of about 2.21 points this decade.Gross had said during the midst of the seizure in credit markets that Treasuries offered little value as investors seeking a refuge from turmoil in global financial markets drove yields to record lows in December.He has since boosted the $177.5 billion Total Return Fund’s investment in government-related bonds to 44 percent of assets, the most since August 2004, from 25 percent in July, according data released earlier this month on Pimco’s Web site. The fund cut mortgage debt to 38 percent from 47 percent.“We’ve exchanged our mortgages for the government’s check” as the Federal Reserve winds down purchases of agency debt, Gross said. “Mortgages are expensive compared to Treasuries and other vehicles.”Program ExtendedFed policy makers last week committed to complete their $1.45 trillion in purchases of mortgage securities and extended the end of the program to March from December.Pimco’s Total Return Fund handed investors a 17.85 percent gain in the past year, beating more than 90 percent of its peers, according to data compiled by Bloomberg. The one-month return is 1.94 percent, outpacing more than 55 percent of its competitors. Pimco is a unit of Munich-based insurer Allianz SE.In July Pimco reversed a policy to steer clear of U.S. debt when it said it would buy five- to 10-year Treasury securities.“With Treasury yields near the top of our expected range, Pimco plans to overweight duration and take exposure to the five- to 10-year portion of the yield curve,” the firm said July 20 in a report on its Web site.On that day, the yield on the 10-year note touched an intra-day high of 3.72 percent and a low of 3.57 percent. The note yielded 3.29 percent yesterday in New York, according to BGCantor Market Data.Gross said intermediate- to long-term bonds will perform well as long as policy rates and inflation remain low, after minutes of the Federal Open Market Committee’s Aug. 11-12 meeting was released on Sept. 2.To contact the reporter on this story: Susanne Walker in New York at

CitizenSeptember 29th, 2009 at 8:49 pm

On the “Course” to a New NormalDownload PDFPDF en EspañolE-Mail AlertsSurvey: Send Us FeedbackDownload AudioSubscribe to PodcastPodcast InstructionsPodcast ProblemsAnalyzing why people play golf is like exploring the intricacies of string theory – there are so many permutations lacking scientific observation that physicists or golfers can pretty darn well say anything they like and the explanation might stick. When it comes to whacking that little white ball, the possibilities are nearly endless: People play to relax, to be with friends, to get close to Mother Nature, to enhance business connections, to compete and excel. Gosh, I don’t know, the Zen explanation for why we play golf could even resemble the old saw about climbing a mountain: People golf because it’s there. Whatever the reason, it is the most frustrating, damnable game ever conceived – alternately elevating and depressing you within the span of mere minutes. I love golf. No, I hate it.Personally, the reason that golf draws me to its intricate web of psychological entrapment is epitomized by a simple six-inch trophy: a chartreuse ball resting on top of its ebony base, preening on a bookshelf in the family room at our desert home. Its inscription reads, “Hole in one, March 15th, 1990, 14th hole Desert Course, 155 yards.” Well and good, I suppose – the ace of my life – except it wasn’t. It was the ace of my wife. Above the inscription rests the name Sue – not Bill – Gross. It was a great shot but it wasn’t my shot, and I guess therein lies the explanation for why I continue to tee it up.Actually, two years ago I did tee it up in the sweltering 105° June heat of the Palm Springs desert. No one, of course, was crazy enough to be with me including my “ace” role model wife who was sipping a cool lemonade in the comfort of our air-conditioned home. Now, there is an “unwritten” rule in golf that in order to be official, a hole-in-one has to be witnessed, and that you have to play a full 18 holes. Otherwise, I suppose, you could stand on the tee with a bucket of balls and hit hundreds or thousands until one of the little guys went in – whatever. The fact is, on this particular day, I was playing only one ball, but I was alone, and – good God! – it went in! The trophy with ebony base and spanking white Titleist ball would read: “Hole in one, June 7th, 2007, 17th hole, Mountain Course, 139 yards.” Or was it? Does a falling tree make a sound in the middle of a forest if no one’s there? Is a hole-in-one a hole-in-one if no one else saw it? I say emphatically – yes! That damn ball went in and later that day Sue agreed with me (although she had a funny look in her eye – especially since she didn’t know a thing about the rules of golf). No one else though. No one else agrees with me. Not a soul. I suspect they’re jealous and, in fact, I’ve seen a few of them hitting buckets of balls at dusk from that very same tee when they think nobody’s looking. I’m watching, though, which brings up a funny question. If they sunk one, would theirs be a hole-in-one because I was a witness? Like I said – a damnable game.“Is a hole-in-one a hole-in-one” may not strike you as the most critical question of the hour, and I would readily agree. “Will we have a New Normal global economy (and investment market)?” would probably usurp it on even Tiger Woods’s top ten list. This “new” vs. “old” normal dichotomy was perhaps best contrasted by Barton Biggs, as I heard him on Bloomberg Radio in early 2009, when he said he was a “child of the bull market.” I thought that was a brilliant phrase, and Barton is a brilliant phrase-maker. He went on to say though, that his point was that for as long as he’s been in the business – and that’s a long time – it has paid to buy the dips, because markets, economies, profits, and assets always rebounded and went to higher levels. That is not only the way that he learned it, but that is the way, basically, that capitalism is supposed to work. Economies grow, profits grow, just like children do. I think that’s why he said he was a child of the bull market, not just because he had experienced it for so long, but also because economic growth and higher asset prices are almost invariably a natural evolution, much like the maturation of a person. That’s how people grow, and so I think Barton was saying that capitalism just grows that way too.Well, the surprise is that there’s been a significant break in that growth pattern, because of delevering, deglobalization, and reregulation. All of those three in combination, to us at PIMCO, means that if you are a child of the bull market, it’s time to grow up and become a chastened adult; it’s time to recognize that things have changed and that they will continue to change for the next – yes, the next 10 years and maybe even the next 20 years. We are heading into what we call the New Normal, which is a period of time in which economies grow very slowly as opposed to growing like weeds, the way children do; in which profits are relatively static; in which the government plays a significant role in terms of deficits and reregulation and control of the economy; in which the consumer stops shopping until he drops and begins, as they do in Japan (to be a little ghoulish), starts saving to the grave.This focus on the DDRs – delevering, deglobalization, and reregulation – may be conceptually understandable, but nevertheless still a little hard to get one’s arms around. Why would they necessarily lead to a new, slower growth normal? A little easier to grasp might be the following approach, which feeds off the same concept, but which extends it a little further by suggesting that DD and R lead to a number of broken business or economic models that may forever change the world we once knew and make even Barton Biggs a chastened adult. They are as follows:American-style capitalism and the making of paper instead of things. Inherent in the “great moderation” of the past 25 years was the acceptance of a sort of reverse mercantilism. America would consume, then print paper assets and debt in order to pay for it. Developing (and many developed) countries would make things, and accept America’s securities in return. This game is over, and unless developing countries (China, Brazil) step up and generate a consumer ethic of their own, the world will grow at a slower pace.Private vs. public-driven growth. The invisible hand of free enterprise is being replaced by the visible fist of government, a temporarily necessary, but (if permanent) damnable condition itself in terms of future growth and profits. The once successful “shadow banking system” is being regulated and delevered. Perhaps a fabled “110-pound weakling” may be an exaggeration of where our financial system is headed, but rest assured it will not be looking like Charles Atlas anytime soon. Prepare to have sand kicked in your face, if you believe you are a “child of the bull market!”Global economic leadership. It’s premature to award the 21st century to the Chinese as opposed to the United States, but if the last six months have been any example, China is sort of lookin’ like Muhammad Ali standing over Sonny Liston in 1964 yelling, “Get up, you big ugly bear!” Not only has China spent three times the amount of money (relative to GDP) to revive its economy, but it has managed to grow at a “near normal” 8% pace vs. our “big R” recessionary numbers. Its equity market, while volatile and lightly regulated, has almost doubled in twelve months, making ours look like that ugly bear instead of a raging bull.United States housing and employment. Old normal housing models in the U.S. encouraged home ownership, eventually peaking at 69% of households as shown in Chart 1. Subsidized and tax-deductible mortgage interest rates as well as a “see no evil – speak no evil” regulatory response to government Agencies FNMA and FHLMC promoted a long-term housing boom and now a significant housing bust. Housing cannot lead us out of this big R recession no matter what the recent Case-Shiller home price numbers may suggest. The model has been broken if only because homeownership is declining, not rising, sinking to perhaps a New Normal level of 65% as opposed to 69% of American households.Similarly, the financialization of assets via the shadow banking system led to an American era of consumerism because debt was available, interest rates were low, and the livin’ became easy. Savings rates plunged from 10% to -1%, as many (if not most) assumed there was no reason to save – the second mortgage would pay for everything. Now things have perhaps irreversibly changed. Savings rates are headed up, consumer spending growth rates moving down. Get ready for the New Normal.I could go on, reintroducing the negatives of an aging boomer society not just in the U.S., but worldwide. Increased health care may be GDP positive, but it’s only a plus from a “broken window” point of view. Far better to have a younger, healthier society than to spend trillions fixing up an aging, increasingly overweight and diabetic one. Same thing goes for energy. Far easier and more profitable to pump oil out of the Yates Field in Texas or even Prudhoe Bay than to spend trillions on a new “green” society. Our world, and the world’s world, is changing significantly, leading to slower growth accompanied by a redefined public/private partnership.The investment implications of this New Normal evolution cannot easily be modeled econometrically, quantitatively, or statistically. The applicable word in New Normal is, of course, “new.” The successful investor during this transition will be one with common sense and importantly the powers of intuition, observation, and the willingness to accept uncertain outcomes. As of now, PIMCO observes that the highest probabilities favor the following strategic conclusions:Global policy rates will remain low for extended periods of time.The extent and duration of quantitative easing, term financing and fiscal stimulation efforts are keys to future investment returns across a multitude of asset categories, both domestically and globally.Investors should continue to anticipate and, if necessary, shake hands with government policies, utilizing leverage and/or guarantees to their benefit.Asia and Asian-connected economies (Australia, Brazil) will dominate future global growth.The dollar is vulnerable on a long-term basis.Like playing in an Open Championship, future golfers/investors need to play conservatively and avoid critical mistakes. An “even par” scorecard (plus some hard earned alpha) may be enough to hoist the trophy in a New Normal world. Holes-in-one? Maybe if you’re lucky. But make sure someone’s watching, and that their eyes are focused on the New Normal. As for golf, even Sue, my only supporter, has asked me to move my ball, on its own ebony base, away from her more authentic and perhaps the still solitary ace made by Gross family golfers. What a damnable condition.William H. GrossManaging Director

CitizenSeptember 29th, 2009 at 8:52 pm

We are at the point of maximum confusion in the multi-year transition of the global economy, markets and policymaking. We have left the global growth regime that was driven primarily by debt-financed consumption in the U.S., but we have not as yet reached a position of more balanced, albeit anemic, growth. Those who lack a robust anchoring framework, be they investors or policymakers, risk being misled and backtracking to outdated ways of thinking.The signs of inappropriate reversion are multiplying. Confusing temporary factors for sustainable ones, a growing number of analysts have extended the ongoing stimulus/inventory bounce to a V-like recovery next year and beyond. The momentum for meaningful financial reform is stalling in spite of clear evidence that financial activities have far outpaced the regulatory infrastructure. And some banks are returning to the bad habits that almost destroyed them.This reversion is intimately linked to the inadequacy of the anchoring analytical frameworks. Appropriate frameworks provide important protection against the short-termism that can contaminate markets and policymaking. By contrast, ill-designed frameworks can encourage short-term thinking, leading to market and policy overshoot on the way up and down.Today’s lack of appropriate anchoring frameworks appears to be exacerbating short-termism. The issue goes well beyond the still-limited appreciation of the multi-year realignment of the global economy, which is gaining momentum. It also relates to tendencies well-documented by behavioral economists – such as framing the problem wrongly and refusing to question past approaches.Given all this, we would be all well advised to follow the admonition of Mervyn King. Last month, the governor of the Bank of England stated bluntly: “It’s the level, stupid – it’s not the growth rates, it’s the levels that matter here.” Investors have not yet accepted his insight that the absolute levels of income, debt, wealth and unemployment, not just the rates of change, are what matter today. They need to, and soon.Analysis of key levels in the global economy points to important deviations between desired and actual levels. The outlook for major countries will continue to be driven by the levels of key variables, not their rate of recovery. Consider four examples.First, consumer indebtedness is still too high relative to income expectations and credit availability, particularly in the U.S. and the U.K. This inconsistency will hold back any sustainable bounce in the most important component of aggregate demand.Second, some banks’ balance sheets are still too geared for the comfort of regulators or their own managers. This will inhibit them from lending to the real economy at a time when certain sectors (such as commercial real estate, but also residential housing) still require significant refinancing, and when consumers need time to work down their excessive debt loads.Third, unemployment has risen well beyond expectations, and is likely to prove unusually protracted. It will take years for U.S. unemployment to return to its natural rate, even after the natural rate shifted upwards. This will dampen the recovery of consumption and investment, stress social contracts that assume flexible labor markets, and endanger political support for essential structural reforms.Finally, public debt has grown so rapidly as to spark concerns about future debt dynamics. This would inhibit the effectiveness of future stimulus measures, as well as complicating the formulation of exit strategies. It could also erode the medium-term ability of the U.S. to fund cheaply its large deficits by undermining both the global standing of the dollar as world reserve currency and the attractiveness of U.S. financial markets.These factors work against the much-needed handover from temporary growth impulses (which will bolster growth for the remainder of this year) to the permanent ones needed to sustain above-trend growth in 2010 and beyond. As such, the global economy may find it tough to attain Larry Summers’s “escape velocity” – sufficiently high and sustained growth to propel the U.S. (and the rest of the world) away from the contractionary drag of further debt reduction, risk aversion and reregulation.These considerations serve to accentuate the inconsistency between market valuations and the reality facing companies and economies. Today’s markets – be they industrial country equities or corporate bonds – have priced in vigorous growth for 2010. Valuations assume companies will be able robustly to grow earnings through higher revenues, not renewed reliance on the cost reductions that have propelled earnings in the past six months. For that, they are depending on what is likely to prove to be an elusive high-growth scenario for 2010.The longer it takes for investors and the policy consensus to shift to the appropriate analytical framework – one that factors in levels rather than just rates of change – the greater the risk of disappointment in 2010. Mr. King’s insight will need to be more widely appreciated if the global economy is to avoid a growth and wealth relapse next year.

PeteCASeptember 29th, 2009 at 9:47 pm

A quick comment about the topic of the posting above. Why do housing prices really matter … or perhaps I should say – what made them matter so much?The answer is twofold:(1) Home owners essentially used the run-up in house prices as a bank – they got money by using lines of credit based on home equity. That, of course, is exactly what HELOC’s (home equity lines of credit) were all about. And once people got these huge handouts, they went and spent the cash in the real economy. So it wasn’t just an abstract issue about housing costs – the $$ were spent just like they were real income.(2) And second, as we all know, the Fed and the Wall St banks blew a huge bubble in the housing prices. Wall St enabled the process through the securitization scheme they developed, and the Fed blew the bubble with cheap credit.So my point is this … the real issue – if you want to boil things down to the basics – is not that housing prices went crazy per se. The issue is that people tapped the increases in home prices as form of income. So in reality, the last bubble was truly a Bubble In Home Owner Prosperity. It was a prosperity bubble. Nothing more of less.That bubble has popped. There is NO way for Americans to get their hands on this kind of money again. Recent data show that our salaries are going down on average (unemployment is up, and more people are working part-time jobs). American competitiveness is under serious attack, and some might say it is wilting on the vine. The painful process that we are starting to experience now is driven by the fact that American workers can no longer rightfully claim high wages compared to the rest of the world. That is one of the big fundamental drivers, and nothing that the Fed is doing will change that.It’s possible that we – as a people – could turn this around. Innovation is not dead in the USA. But we are hamstrung by high levels of debt, and the Gov’t policy of trying to re-inflate debt levels is harmful (not helpful).PeteCA

JLarkinOctober 1st, 2009 at 10:21 am

Thanks for mentioning the innovation factor. That is a big unknown. As is the ability of the Fed to “fool the people” for some time to come. As is the possibility of wars, acts of God, or other low probability, but major events.

PeteCASeptember 29th, 2009 at 9:57 pm

Every time I read a new article by Jim Quinn these days – I keep thinking that it won’t be long before we see him marching down the street carrying a loaded musket, a fife and a drum!Here is his latest contribution, which contains a quote from Benjamin Franklin that we should all consider quite seriously.Founding Fathers by Jim QuinnI probably don’t give enough credit to Mr Quinn on this blog. But the work he has put into all these articles over the last few months is truly astronomical – and a great credit to him. Anyone who wants a deeper understanding of the issues behind what is going on mow … should check his articles over at the theburningplatform.comPeteCA

autistic blindman yup yup yup yup.September 29th, 2009 at 10:22 pm

pjb,you state and i quote in limited context…”Every species of life, that is to say, every variety of emergent phenomena, has its own level and type of consciousness cum intelligence in support of its own function and therefore each functional entity contains its own unique time cycle for this necessary functional support. The question then begs: Does the forest of trees have its own cycle of time differentiated from that of any and therefore all, individual trees?The answer is obviously affirmative and the cycle of time of the forest is not identical to that of any tree.This then suggests that the emphasis on faith-based ideologies and the adoption of same as the foundation of the socio-economic evolution of humanity, eg economics as opposed to socio-economics, is self-destructive and thoughtless, irresponsible and a waste of the gifts of life themselves.”.to me, this is music. but .. as a student of samei would/must dissect, like a frog, its anatomy. lets begin.first, open the windows and let us enjoy the circulation of fresh air to dilute the formaldehyde vapors. (frog reference and attempt at humor in theface of the corpus corpse as it relates to man andbetter living and dying through modern chemistry )..i notice a tendril, that being, in this air and light, a difference in that “self-destructive and thoughtless” should/might read “self destructive and heartless”, accepting that some, you included, might see this distinction as semantic: as socio is heart related and economic is thought related. again, they can be/are from the same source, it is from the heart related impacts and implications thatwe suffer, not the thought related but the feeling manifest, empathetic, as mathematically and less, people, is more for ME.thoughts are funny, reassuring, intoxicating, or horrifying ( abstract ) : feelings are more prone to “suffering”, physical, experiential and also transitory.experience of the union of the two, direct, and bothsocio and economic and they go together as they areenforced by self/intellect to do so. termed god ?.again..” The question then begs: Does the forest of trees have its own cycle of time differentiated from that of any and therefore all, individual trees?”.i do not know as i am not sure that the forestexists other than as an abstraction which is infinitely plastic. this plasticity givingopportunity to all manner of speculativeauthority? rule over liberty. mindfully i acceptdegrees of limitations on liberty as consequencesfrom abuse do have detrimental and fatal consequencesfor the innocent and the otherwise pedestrian.yet, liberty is the source of survival and joy!let us leave/leaf the windows open for the timewe can.peas?

PeteCASeptember 29th, 2009 at 11:58 pm

A glance at the chart for the broad Dollar Index (see link below) shows there is plenty of downside potential for a dollar slide. Sometimes the gyrations of $USD are a bit misleading, and the trade-weighted dollar index gives a much better feel about how our currency is performing *vs. the currencies of our major trading partners).Broad Dollar IndexThe sharp rise in the trade weighted dollar during the “flight to safety” is clearly visible – and can happen again if investors flee to T-bills. But will it?PeteCA

The AlarmistSeptember 30th, 2009 at 3:31 am

You flee to quality. The flight to T-bills last year was premised on the old wisdom that the backing of the full faith and credit of the US was actually worth something.The actions of the current US regime pose a huge question-mark, since they have demonstrated in less than a year that they are willing to commit the better part of a full-year’s GDP to dubious programmes, leaving very little to service the interest payments on the debt that the rest of the world is being asked to float, much less to actually redeem that debt when it falls due.If the rest of the developed world doesn’t follow the example of the US and the UK, it could well be that the past nine months deliver a new paradigm for flight to quality, which is why both of them have been pushing their partners in the G-whatever to join them in their various stimulus and bailout plans.A sharp move down is a distinct possibility.

GuestSeptember 30th, 2009 at 7:06 am

when will people understand dollar and T-Bill is not safehaven? under current FED and Obama adminstration, dollar and T-Bill is toxic as Zenbabwe and subprime mortgage with worthless value.

GuestSeptember 30th, 2009 at 7:08 am

not only dollar and T-Bill doesnt hold value, it pays 0.01% interest. O.o oh my god, when will people get it? >.

ChrisLOctober 2nd, 2009 at 7:54 am

“The actions of the current US regime pose a huge question-mark”you mean to say this is something new ?1. Under Reagan, BushI, Bush II (Republicans), the Federal Debt doubled every 8 years (9% growth per year). Only Clinton reduced the Federal debt slightly.2. Under all US regimes since Reagan, including Clinton, the total debt (private + govt) grew at a steady 10% per year, led by the irresponsible actions of the Bubble creating specialists, Fed & Govt.So Obama/Bernanke are just following the poisonous recipies of their predecessors. It means growing the Federal debt by another $ 11 trillion in the next 7 years, and trying desperately to encourage American households and businesses to spend as much they can (negative savings) so as to increase the private debt by another $50 trillion in that same period.Why are people waking up only today when it’s been going on for 30 years ?

JLCSeptember 30th, 2009 at 7:26 pm

I think a large part of that dollar rally was deleveraging due to market crahses and the sudden tightening of margin requirements. Suddenly, over-leveraged entities had to sell whatever they could in order to raise cash. Since the dollar is the reserve currency and most things are priced in dollars, demand for dollars to meet margin requirements or liquidate positions caused the relative value of the dollar to soar. As the dollar soared through key technical levels and everything else crashed, more and more were forced to reverse their positions.It was a tidal wave that has now receded. I believe we will see it again if the Treasury faces a funding crisis and needs to create some dollar demand. The dollar has been flirting with a key technical crossroads for the past few weeks. We could see a big move either way, IMO.

The AlarmistSeptember 30th, 2009 at 3:22 am

Second derivative does not predict the first derivative. Just because the rate of decline in prices appears to have slowed does not mean that the decline will not continue or even accelerate again.

Little SaverSeptember 30th, 2009 at 3:59 am

>They conclude that some of the improvements registered on the demand side in the recent months might be of a temporary nature and that home prices might fall further in the months ahead.<Wow, and that while the Fed is throwing a trillion at this market. Wonder where this market will go without this support or when the support on the Fed’s balance will be withdrawn?>As of 9/23 the Fed had purchased $700 b of MBS, they have another $550 billion to go.“The FOMC expects we will complete the execution of our $1.25 trillion intervention in the mortgage-backed securities market by the end of the first quarter of next year.” (Finally the word intervention, thanks Mr. Fisher)Of interest to me was that Mr. Fisher (Dallas Fed president) had strong words to say regarding the Feds future tightening efforts:“I expect that when it comes time to tightening monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity to that with which we pursued monetary accommodation.” to see this alacricity, speed and intensity.

GuestSeptember 30th, 2009 at 7:02 am

Fisher just talked to himself so he can mesmerized by his own words “this alacricity, speed and intensity”. bottom-line, 0% rate and QE bubble forever, no exit strategy. talk is cheap and so is cheap money being pump into economy. no exit strategy until proven otherwise. cheers.

London BankerSeptember 30th, 2009 at 4:52 am

GBP is on a tear today against USD and EUR. I suspect it is wealthy Iranians getting their cash into the UK in case they have to flee a warzone. One the the UK is definitely good for is absorbing the disenfranchised elites of less stable countries. They can all happily live side by side in Kensington and Chelsea.It’s cynical, but I suspect the assessment by “British intelligence” that Iran is developing secret nuclear warhead capabilities may be aimed at propping up the weak UK banking and property sectors by panicking Iranians and others into buying boltholes and moving cash to the UK.

FEDupSeptember 30th, 2009 at 6:20 am

Not too far fetched as wars of all kinds (or threats of) have proven to be one of the most effective measures of causing tremendous amounts of money to be spent and/or transferred.

GuestOctober 1st, 2009 at 3:00 am

I believe that this may very well be right on target (sorry for the sick pun).Iran, as had Iraq, has been moving away from trading oil in USD.Everything else (“secret” nuclear facilities included) is a smoke screen. The last thing that you want to do is to call attention to your vulnerabilities. Pay no attention to that USD behind the curtain!

GuestSeptember 30th, 2009 at 7:01 am

Fisher just talked to himself so he can mesmerized by his own words. bottom-line, 0% rate and QE bubble forever, no exit strategy. talk is cheap and so is cheap money being pump into economy. no exit strategy until proven otherwise. cheers.

PeterJBSeptember 30th, 2009 at 7:02 am

“… i notice a tendril, that being, in this air and light, a difference in that “self-destructive and thoughtless” should/might read “self destructive and heartless”, accepting that some, you included, might see this distinction as semantic: as socio is heart related and economic is thought related. again, they can be/are from the same source… “@ autistic blindmanYou may have nailed it but let me say that the Royal Science of ancient Egypt was founded in the knowledge of the Heart which,”evokes” synthetically the full qualitative essence of the symbol – archaic and innate.Joseph Campbell reports well on the “innate response mechanism” (IRM) of lesser animals and concludes that the man animal does not have this gift; but he does – whereas the objective is elusive and esoteric and or intellectual by nature and unique to Man (this hid the IRM of Man from Campbell)This commonality of Man /man is the “invisible hand” and represents the ‘socio’ in ‘socio-economics’ and is the reason that the consumer will never again in the coming decades, represent and drive the GDP of any economy. The “consumer” has been burnt, lied to, betrayed, stolen from, and generally misrepresented and now generally knows that this ain’t going to happen again. The consumer knows that better value exist in family, simplicity, savings, frugality, honesty, humility, blah, blah and et cetera, etc.As art develops independently prior to science and “economics” it is indeed the forerunner of socio-economics and indicates the future that all else must, a priori, follow.Our status quo of everything “institutional” including science and economics, is abysmal and is being challenged in revolution by the proletariat in all aspects of society, which will in due course, will bring in the new order albeit sans the old guard; hence the panic and desperation of current “leadership” which includes experts and bureaucracy not mentioning the political hasbeens that are seen trying to scrape, skim, scam the last meal or sup from an Epoch gone.You see… there is the plane and the volume to consider in neurological means where the plane is of the surface,; numerical, quantitative and superficial and the volume is of qualitative in terms of space and time as well as numeric and quantitative; the mathematics are entirely different, as are the constraints and limitations, er, policy.So it can be more than inferred that the coming revolution is one of mentality and this argument cannot be denied by evidence of such things as ‘Blogs’ or, if you like, the public are wising up to the applied ignorance of its “leadership” and all that hangs off it: revolution.Or, the preferred consumer model will never return to support the desired GDP numerical of ~70% because, the consumer in main, not only doesn’t trust (“leadership”)any more but is no longer attracted by the coloured beads and trinkets – I speak generally and we must remember that there is a new sucker born er, every minute (second?).The future is in the way we think – not what we buy – and the coming Epoch is about thinking in terms of qualitative reality or volume.There is no future for the status quo. The coming generation of “leadership” will not be expressed in the same terms of todays’ measures, as we decant towards a neurological state of human reason in accord with Universal Principles founded in physics.Ho hum

Pecos BankerSeptember 30th, 2009 at 8:00 am

Oh my god, I just saw on Yahoo that CIT is in danger of collapse! What can we do to save CIT?! Perhaps we could all just send $10 to CIT ourselves! We must rescue this poor hapless financial institution! Oh, wait, thank god! The treasury has already thought of this and will arrange to BAIL OUT CIT on our behalf! Oh happy day! How wonderful that we have a treasury department that anticipates our own charitable actions! Praise be to Tim Geithner, Ben Bernanke, and our fellow Roubini-ite, Larry Summers! Praise be to Obama as well!Obama? Where is Obama?

PeteCASeptember 30th, 2009 at 9:29 am

John Hussman had an excellent weekly article at the following link:We’re Speaking Japanese Without Knowing ItProf Hussman deserves credit for: (1) His calls that the Wall St crisis should have been handled by allowing bond holders to take the losses for the big banks, (2) His prescient prediction that we would have a double-dip recession because of the pattern in the mortgage resets for the USA.This discussion about handling bank failures is esp. relevant right now – as rumors swirl that two more of the major banks on Wall Street could be in trouble over the next few months. But does anyone believe that Bernanke & Geithner will swerve from their existing bailout policies and adopt a new strategy??? The policy of the Fed seems to have been to maintain the existence of the big banks (and most of their CEO’s), rather than to take steps to promote a healthy US economy.PeteCA

FEDupSeptember 30th, 2009 at 9:59 am

Continuous money printing and bailouts by the FED is equivalent to producing WEDs or Weapons of Economic Destruction. They have already crossed the threshold of being able to restore normal economic growth for the next 5-10 years and if they continue along this reckless path of saving the TBTF parasites, it may be a generation before American’s purchasing power returns. Where are NR’s analyses and warnings?!!!

SeanSeptember 30th, 2009 at 9:59 am

This is in reply to London Banker post about conspiracy of government buying bonds through some brokers/agents while foreign banks are reducing it, that he wonder where would the money come from. The money come from USA New Savers . Bear in mind, the saving rates are only starting to increase. In the 80s, the saving rate is about 15% of take home pay. We are only 1/3 at it now.Not that I don’t believe in conspiracy, but the facts here dispute the conspiracy bonds buying from FED through puppet agents. “Bond funds attracted net deposits of $209.1 billion in the first eight months of the year while stock funds drew $15.2 billion, according to Morningstar Inc., the Chicago-based research firm that tracks the $10.6 trillion industry”

PeteCASeptember 30th, 2009 at 10:24 am

The economy will adapt and change in such a way as to cause maximum pumitive losses on investors in the Western hemisphere. This, of course, is because the western banking system is essentially insolvent. Since the Fed has made the decision to save the big banks (rather than transfer losses to the bond holders), the losses have to be made up from somewhere. Some of that come from piblic money. But pension funds are also investing heavilyb in bonds out of fear – so naturally a situation will arise in the future where the prices of bonds will collapse. In essence, the lifetime savings and retirements money of Baby Boomers is being raided.PeteCA

economicminorSeptember 30th, 2009 at 11:28 am

Who are the bond holders who would have taken the hit? … That is most likely why the government couldn’t let that happen…Not only the wealthiest individuals but also major pension funds and insurance companies and the big banks. It most likely would have wiped out Wall Street as we knew it plus a lot more. Money market funds would have collapsed and business across the world would have come to a standstill.I’m not saying they did the right thing in protecting the gamblers as gamblers very seldom learn to not gamble. They may have prevented that crisis but IMHO I see nothing but volatility and more crisis on the horizon. I just wish that Congress had more moral sense and if not punish the offenders, at least have implemented rules to stop them. But I guess we are so far down this road of insane behavior that there is no turning back. Any deviation from the current course is a major wreck even though going down this road is also going to be a wreck. Just not today.

PeteCASeptember 30th, 2009 at 1:35 pm

I don’t know who all the bond holders are. But the list does include prominent indiduals in Saudi Arabia and other parts of the Gulf States. You think there might be a little politics playing out here ? These are some of the same people who have been strong buyers for US treasuries for many years :-)PeteCA

economicminorSeptember 30th, 2009 at 1:38 pm

Naw! Not Politics!!!As in where the money comes from and who gets it!Not a chance… All of our *representatives* are beyond POLITICS!

economicminorSeptember 30th, 2009 at 11:09 am

Forecasting that house prices have or are stabilizing is pretty ridiculous when you don’t have all the facts. In a recent post Calculated Risk shows Survey of Home Purchase Market w/ graphs.When you look at the graphs, and you see WHO is driving the house prices to stable and slightly up! It isn’t the normal home buyer who in normal times, the green sections, are most of the buyers……And WHO is financing the speculators? Fannie and Freddie are financing most of the loans and yesterday I read a piece that said the FED was buying ALL the underlying residential mortgages being produced… So in reality, the taxpayers are on the line for all these purchases. And the First Timers are getting $8k more of your future income as and incentive.Does this add up to any kind of healthy market place or healthy economy? And even so, with 30 year mortgage rates near all time lows, the volume is dropping.Then look at the PMI or the Dry Ships index or just about any other indicator.. Even with the highly manipulated GDP, it was still negative.Remember that report I sent a few weeks back about taxes received by the Treasury are down 18%….The only place things are getting better are in the minds of the criminally insane who seem to be in charge.Insanity continues to be main stream for the government and high risk taking speculators are still driving the bus… With obvious support from the FED. As in their minds, it is all a confidence game….Boy is the wreck going to be spectacular!

ChrisLSeptember 30th, 2009 at 11:28 am

Central Banks: The Pimps of the World Economyby J.S Kim…A recovery under these conditions, commonly and erroneously referred to by the media as a “boom”, is not a “boom” at all, but a mass distortion of prices not set by free market forces of supply and demand, but deliberately engineered by foolish Central Bank monetary policies that successfully “bait” foolish individuals and institutions. History tells us that malinvestments always end up in busts. Not in small corrections and further sustainable growth for the next five years as Keynesian economists would want you to believe, but in spectacular busts. This is why I can be 100% sure that a spectacular bust is in the future of the US stock markets and that the only question that remains is the timing of this bust. And when the bust that is inevitable occurs, you can be 100% sure that the financial shills that are our mass media will once again erroneously describe the “bust” as an “unforeseeable event”. Through the lens of an Austrian economist, this bust is necessary as it is part of the market’s self-healing process whereby it sheds itself of the distorted value caused by prolonged malinvestment and returns assets to their proper fair market valuations. Of course, in the process of the bust, panic often ensues which depresses assets below fair market valuations….For the reasons described above, I am 100% certain that the reinflation of the US stock market, the Chinese stock markets and the European stock markets will all end up in disastrous busts. People don’t understand that the predictions made by the small handful of us that advocate Austrian economic principles are not driven by a genetic propensity towards pessimism. To the contrary, our predictions are driven by the logic of real world application. For the last century, Central Banks have interfered with free market forces and imposed loose monetary policies that have led to the formation of asset bubbles that were unsustainable in nature. In every single instance, these bubbles did not undergo mild corrections and further periods of sustained growth, but all eventually experienced spectacular crashes. Thus, the continued application of the same strategies by Central Banks today are already predestined to fail in the same manner. To call Austrian economics a “doom and gloom” economic theory is a great miscarriage of justice. If its sound principles were applied by world governments, then sustainable steady growth could be achieved without the cycles of boom and bust we experience every four or five years.If the media insists on playing the role of financial shills and calling advocates of Austrian economics “gloom and doomers”, the least they could do is reciprocate and label Central Banks and all proponents of their monetary policies as “psychopaths”. Though one may believe such a label to be unduly harsh, the clinical definition of a psychopath is one that regularly engages in antisocial behavior and exhibits a chronic disregard for ethical principles. When Central Banks continually engage in the same loose monetary schemes when they already know that the end result will be massive failure, this behavior embraces the clinical definition of a psychopath. What the people have failed to realize for the better part of this past century is that the private families that own and operate Central Banks have reaped great rewards from creating these massive failures, with the cost being the great destruction of a nation’s wealth.Henry Ford once allegedly stated, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, there would be revolution before tomorrow morning.” One thing we have learned today is that Central Banks have insured that the people of our nation still do not understand how our banking and monetary system works. For if they understood, they would not be following the road to destruction that is deliberately being paved for us by the US Federal Reserve, not dissimilar to the behavior of suicidal lemmings that follow one another off the edge of a cliff….btw, I just finished the road to serfdom by F.Hayek, and it was most eye opening, to say the least.I had been brainwashed in business school by a range of neo-classical and other keynesian professors that Austian principles were not worth spending any time, and that they were a bunch of laissez faire ideologues. Hayek is certainly not one of them, contrary to what libertarians think: he clearly sees a role for government, but that one doesn’t include being in bed and allowing a phony private institution, the central bank, to fabricate asset bubbles and boom/bust cycles that only serve the purpose of enriching the private families that own it…

The AlarmistOctober 1st, 2009 at 4:28 am

Wow, back in my days they didn’t have any classes in ethics. We were expected to come with those already in place.

Pecos BankerSeptember 30th, 2009 at 9:29 pm

“What the people have failed to realize for the better part of this past century is that the private families that own and operate Central Banks have reaped great rewards from creating these massive failures, with the cost being the great destruction of a nation’s wealth.”Who are these families and how much have they benefitted in actual dollars? What JS Kim says is not much different from Chapman over at the “International Forecaster” talking about the “Illuminati”. At any rate, the idea of a band of rich families purposely running the world’s economy into the ground, resulting in millions, if not billions, of ruined lives seems like something that requires hard evidence and not just allegations.Yes, the system favors the ultra-rich. With their wealth, they have no need to chase prices, like us desperate 401k’ers. (Thinking about buying gold at $1000 or stocks at current S&P earnings? Better hurry before the prices go up!) They can buy low and sell high. The entire economy is based on the time value of money which always works to the advantage of those with money. They are also better informed and probably have a lot of insider information with a generous portion of plausible deniability of the same. The “system” is what needs to be studied rather than looking for culprits per se.Capitalism from its inception and by definition favors those with capital. It brings out the worst in our human nature in terms of greed and insensitivity to the suffering of others. It favors predators. It breeds parasites as it matures–witness the financial industry and the armies of lawyers that support it. It corrupts governments. All of this results from a natural organic process, wherein the fittest for this toxic environment survive. Most rich people individually are quite kind–no worse than normal people–and have the same concerns for society. Why, then, is capitalism so rapacious? “It’s the system, stupid” you might say. It has its own built-in dynamic and biases. Everything we are seeing, from Madoff to a bought and paid for Congress that will never outlaw lobbying, to the architects of the collapse being relied upon to suddenly start acting ethically, all of this is a natural, organic development inherent in capitalism as a system. People are just the mitochondria of a complex cell as it struggles to survive in a hostile environment. The system calls the shots, not us. Rather than focusing on rich culprits, from a systemic point of view, we could just as easily focus on our own economic behavior. Nobody forced us to regard our house as an ATM machine. Nobody forced us to vote for the stupidest person in the room–GWBush–for president for eight years. Did “they” dumb us down? Blame and pity have no place in systemic analysis.

ChrisLOctober 1st, 2009 at 12:44 pm

During the boom period from 1980 till 2007, the share of all corporate profits reaped by financial firms grew from less than 10% to 46%, whilst the ratio of world financial assets to world GDP grew from 100% to 330%. Now in the bust they are to make more than $ 3 trillion of losses (according to IMF and Roubini), and those are going to be payed by the tax payers.I don’t see what’s wrong with what J.S.Kim says…

Pecos BankerOctober 1st, 2009 at 1:11 pm

Nothing wrong with what he says. I was balancing an eel on the end of my nose when I experienced a bout of dyspepsia due to undigested suet. No harm done, I hope.

wdm223September 30th, 2009 at 11:36 am

This housing analysis seems well-reasoned and thoroughly researched.It may be based upon a statistical model, but it comports with common sense.I find it quite useful.

morphogenic blindmanSeptember 30th, 2009 at 4:41 pm Gary Null Show – September 30th, 2009CONVERSATIONS WITH REMARKABLE MINDS.”Dr. Rupert Sheldrake is a British biochemist and plant physiologist who has experimented with innovative field theory in plants and animals, including humans, to account for the causative formation of the deeper structures of biological development. Included in this is a greater understanding of memory, perception, and cognition as well as the forces that unfolds an organism…. His more recent work has been to apply his theory of morphic resonance and morphogenic fields in parapsychology experiments. While in India, he became close associate of the late Father Bede Griffiths.”.perhaps getting closer to the “invisible hand”.morphogenic resonance?.

morphogenic autistic blindmanSeptember 30th, 2009 at 6:52 pm

@ prior thread”If the gentle hands wake up and find the right tools, there may be an escape from this moral, financial and social impasse?”Reply to this comment By Little Saver on 2009-09-30 01:01:28.yes! but ….here a story, dark, that implies a possible andpartial explanation of the lack of responsivenessof some of our representatives….or how the “invisible hand” when left to itsown druthers in the shadows (read shadow banking /shadow government / all that shadow crap ) fallsunder the influence of the “black hand”.ie. organized crime is no substitute forgovernance informed by morphogenic fieldsand the resonance therein, intellect etc…… 30 minutes local new jersey story.the rest ..franklin credit union scandal….larry king, boy’s town, washington d.c..covert checks and balances. shadow hands.

Average JaneSeptember 30th, 2009 at 6:55 pm

Ken Lewis of Bank of America retiring.Bill Winters of JP Morgan retiring.Richard Kovacevich of Wells Fargo retiring.David O’Reilly of Chevron retiring.Guess all must be well if these Head Honchos feel comfortable enough to retire.

GuestOctober 1st, 2009 at 3:24 am

In the future when they’re facing pitchforks they may rue the day that they did not offer themselves at the alter of the justice of today.

The AlarmistOctober 1st, 2009 at 4:30 am

The 401k is merely a small gratuity … these guys all have lush pensions and/or deferred comp plans that dwarf our lifetime earnings potential.

MM CASeptember 30th, 2009 at 10:31 pm

Are we getting ready for subprime 2.0?Jeff Nielson / DNATuesday, September 29, 2009 0:05Old habits are hard to break. When the Nasdaq tech-bubble burst, the US government and the Federal Reserve chairman “Bubbles” Greenspan created an even bigger asset-bubble to replace it (the US housing bubble).By refusing to allow its economy to purge itself of bad debt and excessive credit, the US government created a much more damaging bubble — aggravated by Wall Street’s multi-trillion dollar, global Ponzi-scheme.With the US housing market now experiencing its worst collapse in history as the aftermath of that bubble, and with no “bottom” in sight, the US government is once again trying to take the easy way out — this time by trying to re-inflate the same bubble which has just burst.This time, the Fed’s benchmark interest rate is at 0%. This time, it’s the US government itself which has lowered the bar with its lending standards. This time, there is even more mortgage-fraud (up 23% from last year) — and there is still no oversight.Now it is the Federal Housing Administration (FHA), a government agency, which is handing out subprime loans like a financial “Pez-dispenser”. An illuminating article by business consultant David DePhillips provides a long list of ugly numbers.The FHA’s market share of the US mortgage market has risen from 2% to 23% in just four yearsIt already has a 7% delinquency rate on its loan portfolio, despite the fact that most of these are new loansIt has become the new employer for thousands of private sector “mortgage brokers”, who were the instigators of most of the mortgage-fraud during the first housing bubble, with the number of “FHA approved” lenders rising by more than 40% since the end of 2007 — from 9,600 to nearly 14,000.If this was an otherwise-healthy market, then perhaps the FHA’s reckless expansion into this sector could be seen as “support” for struggling US homeowners. In fact, nothing could be further from the truth.US banks are holding millions of already-foreclosed/ repossessed homes off of the market. The most recent statistics show that total foreclosures and repossessions are on pace to go well over 4 million units this year.Meanwhile, sales statistics over the last two months show US “REO” (bank-owned real estate) sales will be less than 2 million units. This adds to the existing glut of 20 million empty homes.What is worse is that the US housing sector hasn’t even gotten to the peak of its mortgage-resets of bad loans from the last bubble. This upcoming spike in resets begins next year and will continue through 2011, before beginning to tail-off in 2012.To make this upcoming “train-wreck” even worse still, the US’s spendthrift baby-boomers are starting to retire, and their retirements are grossly under-funded — even if the US’s pension system can remain solvent.With real estate comprising 75% of the assets for these financial lemmings, and with these boomers needing to come up with trillions of dollars just to come close to maintaining their standard of living, there is no mystery as to what they will be selling — year after year after year.Adding “insult to injury”, the Obama regime is essentially doing nothing to help out the homeowners themselves — despite loud and frequent claims to the contrary. With 4 million homeowners potentially eligible for aid in his “housing rescue”, less than 5% of that number have received any formal offers of mortgage relief.Now the FHA is almost broke — joining other government entities like Fannie Mae, Freddie Mac, and the FDIC. None of the hundreds of billions of dollars which these agencies need to remain solvent has been factored into Obama’s fantasy-budget.Thus, the only real difference between the US housing bubble, “chapter I” and the new “chapter II” is that much of the future trillions in hand-outs, “loans” and other, assorted bail-outs which will be squandered in the next wave of insolvencies will be used to prop-up government entities.

economicminorOctober 1st, 2009 at 11:52 am

So in conclusion, housing foreclosures are going to continue, driving house prices even lower. Spending in general is going to continue to decline which will make the unemployment situation worse, driving house prices even lower. The stock market which has priced in a recovery will break through its previous lows because things are only getting better in the minds of the Marie Antoinettes.This doesn’t sound like a W recession. More like a lightening strike to the ground.

PhilTOctober 1st, 2009 at 3:16 pm

Dear EM -When is this going to affect production (or has it already?)A sales clerk at the local Best Buy – who is very proud of how competitive they are with WalMart – tells me that they cannot keep Flat Screen televisions in the store.They stock 100 different Flat screen TV SKU’s and have a regional warehouse close by that has approximately $400 million in (total) merchandise ready to deliver to the few stores in this region. From his point of view there is no retreat in consumer demand – but an acceleration. Go figure – the median income in these part has been stagnant at around $19,500 for many years !What will be the longer term price direction for home appliances? Will they follow home prices as you describe above?

GuestOctober 2nd, 2009 at 7:40 am

Perhaps this indicates that more and more people are now becoming convinced that their choice is between finally buying that flatscreen they have eschewed as long as their old boxy set is working – or never having one at all. Perhaps people are buying for fear they will have no tv at all when everything crashes because their old sets are close to expiring.

MM CASeptember 30th, 2009 at 10:33 pm

LOL- as good a reason as any as to why Gold has not moved in over year for the most part…Federal Reserve Admits Hiding Gold Swap Arrangements, GATA SaysSource: Gold Anti-Trust Action Committee Inc.On Wednesday September 23, 2009, 9:30 am EDTMANCHESTER, Conn.–(BUSINESS WIRE)–The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. that it has gold swap arrangements with foreign banks that it does not want the public to know about.The disclosure, GATA says, contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.The Fed’s disclosure came this week in a letter to GATA’s Washington-area lawyer, William J. Olson of Vienna, Virginia (, denying GATA’s administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund’s treatise on gold swaps here: letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (see, formerly a member of the President’s Working Group on Financial Markets, detailed the Fed’s position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act.Warsh wrote in part: “In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.”When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve’s Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (See Fed’s September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here: the letter, GATA says, is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see and, it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.GATA will seek to bring a lawsuit in federal court to appeal the Fed’s denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed’s admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for financial support from the public and from all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here: also can help GATA by bringing this information to the attention of financial news organizations and urging them to investigate the Fed’s involvement in gold swaps particularly and the gold (and silver) price suppression generally.

MM CASeptember 30th, 2009 at 10:34 pm

More good news coming our way…Unprecedented U.S. corp. defaults seen for ’09Tue Sep 29, 2009 11:43am EDTNEW YORK (Reuters) – U.S. corporate debt default rates are expected to hit “unprecedented” levels in 2009, even though the economy may be past the halfway mark of the U.S. recession, according to a forecast unveiled on Monday at the Reuters Restructuring Summit.”There is a lot of pain left — we are only just half way through the 600 or so defaults in this cycle,” said Phil Kleweno, a partner at Bain’s corporate renewal group.The forecast for the 2009 corporate default rate has risen to 12 percent to 14 percent, from a May forecast of 11 percent to 13 percent, according to Bain’s corporate default outlook. That suggests a total of about 180 to 210 companies could default on their debt this year.”Our ongoing gross domestic product models are calling for a softer and longer climb out” of the economic decline than previously thought, said Kleweno.Defaults will rise to 500 to 600 in the period between 2008 and 2011, up fivefold from the previous four-year period.About 50 percent of defaults to-date have occurred in media, entertainment, automotive, chemicals and packaging industries. Going forward, there will be little relief for these sectors, he said.”Consumer facing companies will continue to be at a higher risk of default,” said Kleweno.DEBT EXCHANGESMore defaults will come from debt exchanges — meaning a company agreed with its bondholders to exchange old debt for new debt and equity — rather than from corporate bankruptcies, according to the study.Distressed debt exchanges have occurred 40 percent more often than bankruptcies so far this year.”People are being proactive,” said Kleweno. But he added that these amendments are only buying time. Rather than fixing the balance sheet, the amendments and lender negotiations tend to kick the can down the road and defer the problem, he said.Though Bain expects the U.S. economy to bottom by the end of this year, corporate default pressures will remain as many companies continue to struggle to meet interest payments on heavy debt loads.Bain expects the default rate in 2010 to be around 9 to 11 percent of debt issuing companies, or about 140 to 160 defaults.WAVE OF MATURITIESA spike of maturities beginning next year will cause the next wave of financial distress, according to the Bain study

MM CASeptember 30th, 2009 at 10:36 pm

Bend over Average Joe American, they are only just starting… We have seen nothing yet…U.S. Income Inequality Is Frightening–And Much Worse Than We ThoughtBruce Judson|Sep. 30, 2009, 2:08 PM | 1,995 |24The newest economic inequality numbers, which ran counter to the expectations of almost all experts, are frightening.The Associated Press released an article titled, US income gap widens as poor take hit in recession. The opening paragraph of the article, based on recent census data, reads:The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans as rippling job layoffs ravaged household budgets.The article, which then discussed the Census statistics that led to this conclusion, failed to mention that the Census Bureau considered the differences between 2007 and 2008, with regard to economic inequality, statistically insignificant.But, whether the Census Data shows a meaningful increase, or not. is irrelevant. The Census Data reports that, contrary to the almost universal expectations of economists, economic inequality most likely did not decrease in 2008. Experts had anticipated that the declines in income of the rich would lead to a reversal in this groups ever–widening share of our national income. Instead, the Census reported that the 2008 income losses by the top 10% of Americans were offset by larger losses among middle class and poorer Americans.MIT economist Simon Johnston appears to have been one notable exception to this expectation of a shrinking income gap.Let’s review what we know about the measurement of income inequality before discussing the disturbing implications of this newest government report.About two weeks ago, I critiqued a Sept 10, 2009 front page story in the Wall Street Journal titled, Income Gap Shrinks in Slump at the Expense of the Wealthy. My critique had three central points:First, economists have, with few exceptions, agreed that Census Data is inappropriate for measuring income inequality because it consistently understates the income of the wealthiest families. To protect the privacy of reporting individuals, the Census “top-codes” income, which means that no one is ever recorded as making more than about $1.1 million in a single year. So, oil traders, hedge fund executives and anyone else at the super-high end of the income strata who might earn $100, $50 or $5 million in a single year, always earn $1.1 million or less in this Census Data. In addition, the Census Data does not include capital gains income, which is typically a large source of income for the wealthiest Americans.Two economists, Professors Emmanuel Saez and Thomas Piketty, developed a method for measuring income inequality using IRS data, which avoided the problems inherent in using Census Data. This data was recently updated in response to the IRS release of 2007 information, and found that: Economic inequality in 2006 was, by some measures at the highest levels, ever found in the data available for the past 95 years. In 2007, these same measure showed a further jump further bringing America to it it’s highest levels of economic inequality in recorded history.As a consequence of Census top-coding and the lack of capital gains data, the Saez-Piketty methodology has consistently shown that the Census substantially understates the extent of economic inequality in the nation. This means that, there is a real possibility that the the new Census Data understated the extent to which income inequality grew in 2008, and that the relative losses of the wealthiest families, versus less fortunate Americans, will be more than statistically insignificant.It is possible that losses in reported capital income by the wealthiest Americans, if captured by the Saez-Piketty methodology, will be larger than the the incomes above $1.1 million that were not reported and offset the Census findings, leading as economists anticipated to a decline in the share of income going to the rich. However, I view this as unlikely. In considering this possibility, its important to remember that the IRS works on reported income gains, not gains which were never captured as taxable income. For income reporting purposes, the question is not whether the market value of capital assets declined but whether they were sold at an actual loss from their purchase price.We will not know the answer to this question until July or August 2010, but in weighing the available evidence my working hypothesis is that as demonstrated by this new Census Report, income inequality did not decrease from 2008 to 2007.Second, the original Journal article expressed a strong expectation that, as a result of the Great Recession, the ongoing growth of income inequality would decline substantially through 201o. My critique indicated that this was “far from clear.” The conventional economic wisdom, based on historical data, is that income inequality decreases, at least temporarily, as the richest Americans lose income faster than less-well-off Americans during a downturn. In contrast, this new data suggests that the dangerous cycle toward increasing income at the top of America has become even more self-reinforcing than previously recognized. We are now at the point where the pure market forces, which many economists told us would eliminate this issue, are no longer effective.Third, the Journal article implied that the decrease in economic inequality it incorrectly predicted might be the start of a long-term trend. Instead, I demonstrated that, even if income inequality did decline in 2008 and 2009, it would almost certainly be “temporary.” The historical evidence shows that economic inequality frequently declines in a downturn, in the absence of strong government action, but that it will almost inevitably rebound and continue its march forward.Now, let’s return to our main point:Early next week, my new book It Could Happen Here will be released by HarperCollins. The book is an in-depth look , based on a historical analysis, of the implications of our historically high levels of economic inequality for the nation’s ultimate, long-term political stability. As economic inequality grows, nations invariably become increasingly politically unstable: Should we complacently believe that America will be different?A central conclusion of the book is that once economic inequality reaches a self-reinforcing cycle it is halted only by inevitably controversial, hard-fought, bitterly opposed government action. Senator Jim Webb encapsulated this idea, when he wrote in his book, A Time to Fight: Reclaiming A Fair and Just America:“No aristocracy in history has decided to give up any portion of its power willingly.”In 1928, economic inequality was near today’s levels. Franklin Roosevelt succeeded in reversing the trend toward the continuing concentration of wealth, but it was a turbulent battle. In 1936, while campaigning for his second term and speaking at Madison Square Garden, FDR told the crowd:“Never before in all our history have these forces [Organized Money] been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hatred.I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said, wait a minute, I should like to have it said of my second Administration that in it these forces met their master.”In FDR’s era and in our own, money brings power: both explicitly and implicitly, in hundreds of different ways, both large and small. Today, the wealthiest Americans, together with a number of financial and corporate interests that act on their behalf, protect their ever-increasing influence through activities that include, among others, lobbying, supplying expertise to the councils of government, casual conversation at dinner parties, the potential for jobs after government service, the power to run media advertisements that influence public opinion. Indeed, MIT economist Simon Johnston, writing in The Atlantic asserted that the U.S. is now run by an oligarchy:The great wealth that the financial sector created and concentrated [ from 1983 to 2007] gave bankers enormous political weight–a weight not seen in the U.S. since the era of J.P. Morgan (the man) … Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.The new inequality data suggests that the potential problems for the nation associated with the concentration of wealth and power are even more severe than previously recognized. Two weeks ago, I wrote that “Once income concentration becomes a reinforcing cycle of the kind we are witnessing, it is never stopped by pure market forces.” This mechanism is now in full swing. The market forces associated with the Great Recession, which many economist had expected to stem the growing, corrosive gap between the rich and the poor, appear to have become ineffective.The great strength of American democracy has always been its capacity for self-correction. However, Robert Dahl, the eminent political scientist, recognized that political power fueled by wealth may ultimately neutralize this central aspect of our democracy. In his 2006 book, On Political Equality, Dahl wrote:As numerous studies have shown, inequalities in income and wealth are likely to produce other inequalities..The unequal accumulation of political resources points to an ominous possibility: political inequalities may be ratcheted up, so to speak, to a level from which they cannot be ratcheted down. The cumulative advantages in power, influence, and authority of the more privileged strata may become so great that even if less privileged Americans compose a majority of citizens they are simply unable, and perhaps even unwilling, to make the effort it would require to overcome the forces of inequality arrayed against them.In the chapter following this quote, Dahl notes “that we should not assume this future is inevitable.” He’s right. But, was clearly concerned. Three years late, we should be even more concerned.Many current Executive Branch initiatives deserve our support and praise: However, nothing proposed to date will effectively halt growing economic inequality, and its corrosive impact on our economy and the long-term future of the nation. (In a future post, I will explicitly discuss the proposed regulatory reform of the financial sector.)My analysis in It Could Happen Here concludes that without a vibrant middle class, the the American democracy as we know it, is not sustainable. Before the Great Recession, the middle class was in far worse shape than was generally acknowledged. In an economy with a record number of job seekers for every available job, the potential for nearly one-half of all home mortgages to be underwater, and increasing foreclosures, the collapse of the middle class will accelerate. With each job loss and each foreclosure, another family becomes a member of the former middle class.America has never been a society sharply divided between have’s and have not’s. Unfortunately, this new data says to me we continue to head in that direction. Economists assumed that the Great Recession would be a circuit breaker that would halt this advance, at least temporarily. It did not.With no new legislation, it appears we are potentially on course for 13 million foreclosures, almost one in every four mortgages in the nation, from the end of 2008 through 2014. Do we really believe that we can turn such huge numbers of Americans out of their homes with no consequences for the health of our system of governance? Could our democracy survive a transformation into a nation composed principally of a privileged upper class and an underclass which struggles from paycheck to paycheck and lacks basic economic security?We will only stop the growth of economic inequality if the President and the Congress are ready to fight in the style of Franklin Roosevelt. FDR was a divider not a conciliator. Before World War II, he fought an all-out war at home. Today, “There’s class warfare, all right,” as Warren Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”I fervently hoped that we have not passed the point of no return, described by Professor Dahl. The recent news shows we are one step further on this road. If we continue down it, our nation may be on the path to becoming a House divided against itself, which ultimately cannot stand.

The AlarmistOctober 1st, 2009 at 4:41 am

The income-gap is merely interesting … what is more likely to become an issue is the security-gap between public sector drones and the regular worker-bees in the private sector.The public-sector drones in the US are already earning twice as much on average as the public-sector workers when you count wages and benefits and have vastly more secure roles overseeing an expanding sinecure. At some point the public apparatus becomes un-sustainable as the public-sector demands well north of 50% of the fruits of everyone else’s labors.This is what has repeatedly brought down a number of great civilisations. We might think to hate the rich when we actually see them, but it is the bureaucrats that people have to deal with when they become government dependents, and it is the system they always learn to despise.

GuestOctober 1st, 2009 at 11:19 am

When confronted with the sorry fact of the most extreme inequality ever to exist in America, what alarms you is not the gap between illionaires and everybody else but a gap between the lowest paid and the next lowest?Wow.

jessOctober 1st, 2009 at 1:34 pm

…you may enjoy reading, “Tranforming Power” by Judy Rebick (canadian)…why keep arguing over cause …the effects are clearly visible in the misery that you SEE.bottom up / participatory democracy is alive and well in other countries.”glocalization”So glad your commmittees gave Dr. Bennett a listen the other day regarding healthcare…It is exactly the sharing of experience, knowledge, and WISDOM emphasizing co-operation, that spreads the right ideas and the required action.

The AlarmistOctober 2nd, 2009 at 2:14 am

It was a lame parry. The average Federal worker earns $120k per annum with benefits. Maybe that is ‘lowest paid’ in today’s debased dollars, so I guess I should recant and nurse my wounds.

GuestOctober 1st, 2009 at 12:48 pm

We don’t “hate” the rich, we hate the exploiters. They just happen to be rich… We want OUR state, not the exploiter’s state. We want REAL equality. WE ARE THE PEOPLE!

jessOctober 2nd, 2009 at 8:19 am

top-coded” income?”which means that no one is ever recorded as making more than about $1.1 million in a single year.”Who wrote this defintion into the tax code ?

GuestOctober 2nd, 2009 at 8:29 am

Thx for the article.When you add that the US has half of the world’s nukes, military arsenal and more than half of the world’s guns lying around in people’s homes, I can say that I’m much more worried about the potential instability of the American democracy than Iran getting some nukes.

MM CASeptember 30th, 2009 at 10:39 pm

No one is talking about this, but just using these average declines tells me the US economy is in mid flight down after falling off the cliff….Folks, things are much worse than anyone realizes… all people are seeing is BS Green shoots, a govt lying about just how and things are and a mainstream press who has no clue and buys all the BS green shoots…SEPTEMBER 30, 2009 Falling Tax Revenues Slam StatesBy CONOR DOUGHERTYState tax revenues in the second quarter plunged 17% from a year earlier as rising unemployment and reduced spending hurt sales- and income-tax collections, according to Census Bureau figures released Tuesday.The decline was the sharpest since at least the 1960s. The biggest drop among major revenue sources was in state income taxes, which were down 28% from a year ago. Sales-tax revenues fell 9%. About two-thirds of state revenues are derived from sales and income taxes. The numbers aren’t adjusted for inflation or changes in tax rates.RelatedSortable Chart: Change in Receipts, by StateState tax revenue plunges to its sharpest decline since the 1960s. WSJ’s Conor Dougherty tells The News Hub what governments are doing to cut spending as well as raise revenue.The steep declines show how the recession continues to cripple state finances, despite support from the federal stimulus package and signs of a nascent recovery in economic activity.”This brings really bad news for almost every single state and leaves them with unprecedented budget crises,” said Lucy Dadayan, a senior policy analyst with the Nelson A. Rockefeller Institute of Government at the State University of New York.Falling revenues, combined with growing demand for social programs like Medicaid, have forced states to slash spending and scramble to raise revenue through changes including new taxes, legalized slot machines and pricier fishing licenses.But with tax collections continuing to decline, many have been forced to reopen budgets after they have been passed to push through even bigger cuts to staffing and services. States, unlike the federal government, are generally required to balance their budgets.In Michigan, stalled budget negotiations between the governor and the legislature could force state government to shut down if a deal isn’t reached by Wednesday night. The governor would likely have to take emergency steps to keep essential services, such as hospitals and prisons, operating. “We remain optimistic that we will have a budget in place,” says Liz Boyd, a spokeswoman for Gov. Jennifer Granholm.Some cash-strapped states are rethinking the level of services the government provides. In Louisiana, a commission next month will ponder ideas including cutting 15,000 state jobs, about 13% of the total, in the next three years and eliminating money-losing toll collections on a New Orleans bridge.”Anything is fair game,” said Amber King, a public information officer for state Treasurer John N. Kennedy, who serves on the “streamlining commission.” The group is supposed to make final recommendations by mid-December, she said.Some of the sharpest tax declines were in states that have been among those hit hardest by the recession, particularly those with high concentrations of jobs in the battered housing sector. In Arizona, overall tax revenues fell 27% in the second quarter. Tax revenues fell 12% in Florida and 14% in California.States across the country saw big declines in personal income taxes, the largest single source of state funding, representing about a third of states’ overall revenues. Eleven states — including California, New York and Wisconsin — saw personal income taxes fall more than 30%.Corporate income taxes, which tend be volatile and generally account for only a small portion of state revenues, rose 3%.Despite signs that the recession is abating, many analysts don’t foresee state revenues rebounding anytime soon. Economists widely expect the national unemployment rate, 9.7% in August, to remain around 9% through 2010, keeping pressure on wages and incomes. At the same time, after losing trillions in wealth, many consumers are paying down debt and paring back spending — reducing sales taxes.”The decline in tax revenue collections indicates that states will likely continue facing weak tax revenues for the quarters ahead,” the Rockefeller Institute’s Ms. Dadayan said. For many states, even grim revenue projections are turning out to be too high. Lower-than expected revenues caused Massachusetts’s governor to cut the budget four times during the fiscal year that ended in June, including drawing down reserves from a rainy day fund and eliminating unfilled jobs.History may repeat itself: With revenues still weaker than expected, the state could be forced reopen the budget as early as next month, said a spokesman for the state’s Executive Office for Administration and Finance.—Leslie Eaton contributed to this article.

PeteCAOctober 1st, 2009 at 9:37 am

Get ready for big increases in sales taxes for the US states. It’s the only move they’ve got that can bring in extra income – and be politically acceptable.PeteCA

Guest in the streetOctober 1st, 2009 at 11:33 am

Congress and the corporate press would like you to believe that is the only politically acceptable move, but the large and growing mood in the street is to stop regressive taxes like sales tax, and return to taxing the rich fairly – like America used to do when the economy was robust and the country was strong.

GuestOctober 1st, 2009 at 11:42 pm

I think Alarmist is correct. Here in RI the public mood is running strongly against state and local government employees and their comparatively sweet deal. There is also huge resentment because these groups are represented by unions. No one has any sympathy for people who want to strike because their physician co-pay is going from $4 to $5.

GuestOctober 2nd, 2009 at 7:31 am

Here in RI? Do you mean Roubini’s blog? Here at RGE are mostly people who choose to ignore, ignore, and ignore some more the comparatively super-duper-sweet deal the illionaires are getting. Here at RGE are the kings and queens of stupendous, crippling myopia, who will see this very friendly warning as an unfriendly insult.

MM CASeptember 30th, 2009 at 10:42 pm

Why cant we just get the truth… same day 1/2 the idiots say housing is doing better, the other half worse… I use my eyes and they tell me empty and vacant houses everywhere and millions of foreclosures happening…Foreclosures, Delinquencies Continue to RiseBy JESSICA HOLZER WSJWASHINGTON — Lenders stepped up efforts to help strapped borrowers during the second quarter of 2009, but their actions weren’t enough to stem rising mortgage delinquencies and foreclosures, a federal banking regulator reported Wednesday.Since the first quarter of 2009, actions to rescue borrowers from foreclosure increased nearly 75%, as lenders ramped up their participation in the government’s loan modification program, the Office of the Comptroller of the Currency said. Such actions, which totaled 440,000 during the quarter, once again climbed more quickly than new foreclosures.Primary SourceRead the full OCC report. However, the poor economy continued to take its toll across all loan categories — from prime and Alt-A to subprime.The report, issued each quarter by the OCC, covers 34 million loans, totaling $6 trillion and representing about 64% of all first mortgages outstanding in the U.S.The share of seriously delinquent mortgages rose to 5.3% of all loans, the OCC said. Meanwhile, the number of foreclosures in process swelled to 993,000 mortgages, or about 2.9% of the loans covered by the report.The report revealed deep problems with so-called payment option adjustable-rate mortgages, which allow borrowers to choose from a range of minimum payments. More than 15% of such loans were seriously delinquent and 10% were in the process of foreclosure in the second quarter.The share of loan modifications that reduced monthly principal and interest climbed to nearly 80% of all new modifications, up from a little over half in the first quarter, the OCC said. This continues a trend away from loan modifications that do not reduce monthly payments for borrowers.Write to Jessica Holzer at

GuestOctober 1st, 2009 at 11:37 am

Wrong, Alarmist. MM CA, You can’t get the truth because you have allowed a very few people to have so much money they have the power to keep the truth from you.What could be more obvious?Does this fact suggest a solution to you, MM CA?

The AlarmistOctober 2nd, 2009 at 2:18 am

You will always have the party elite and their hangers-on apparatchiks, but what the heck. Go ahead and tax the rest of the society into poverty in the name of social justice. Remember that the poor in the ‘unjust America’ of today have it better than the middle-classes in most of the rest of the world.

GuestOctober 2nd, 2009 at 7:21 am

Your thinking is devoid of rigour and one wonders if you consulted any facts at all before you came to your erroneous conclusions.

ChrisLOctober 2nd, 2009 at 8:35 am

“Remember that the poor in the ‘unjust America’ of today have it better than the middle-classes in most of the rest of the world.”Evidence please ?

GuestOctober 2nd, 2009 at 9:09 am

tax in the name of social justice? what a good idea !!!!!!!!!!!!!!!!!!!!perhaps society would not need to arm itself with guns then the humans that eat out and live on the garbage dumps would finally have something better to eat.

CitizenSeptember 30th, 2009 at 10:53 pm

Asian Stocks Fall on Growth Concern; Honda, Advantest DeclineBy Masaki KondoOct. 1 (Bloomberg) — Asian stocks fell, led by companies reliant on exports, after an unexpected drop in Chicago business activity raised concern the U.S. economic recovery will falter.Honda Motor Co., which gets 45 percent of its sales in North America, sank 2.4 percent in Tokyo, while Samsung Electronics Co., Asia’s biggest maker of chips and flat screens, lost 1.8 percent in Seoul. Advantest Corp., the world’s largest maker of memory-chip testers, slumped 4.8 percent after Credit Suisse Group AG cut its rating on the stock.The MSCI Asia Pacific Index declined 0.7 percent to 117.19 as of 10:46 a.m. in Tokyo. The gauge has surged 66 percent from a five-year low on March 9 as stimulus measures around the world dragged economies out of recession.“The recovery is slowing and the global economy is coming to a turning point,” said Mitsushige Akino, who manages the equivalent of $666 million at Tokyo-based Ichiyoshi Investment Management Co. in Japan.

CitizenSeptember 30th, 2009 at 10:57 pm

Sept. 30 (Bloomberg) — Former Federal Reserve Chairman Alan Greenspan said he sees the U.S. economy slowing next year as the surge in stocks comes to an end.“The odds are that we flatten out, even though earnings are doing very well,” Greenspan said in an interview with Bloomberg Television, referring to the equity market. That flattening out will probably “put some sort of dull face” on the economy in 2010, he added.Greenspan said he expects the economy to grow at a 3 percent to 4 percent annual pace in the next sixth months before slowing down. As a result, unemployment isn’t likely to decline much from last month’s 9.7 percent rate, he said. Even so, he doesn’t expect the economy to relapse into recession next year.The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, the Commerce Department said today. An unexpected decline in a gauge of business activity released today, along with a private report showing employers cut more jobs than forecast, indicate a recovery may be slow to take hold.The former Fed chief said he sees little threat of higher inflation now, even as the economy recovers. In the longer run, inflation will pick up unless the Fed withdraws the stimulus it has pumped into the economy, he said, voicing concern it may come under political pressure to refrain from doing so.“We are still by any measure in a disinflationary environment,” said Greenspan, 83. “Unless we sterilize or unwind the big monetary base we’ve built up, two, three years out inflation really begins to take hold.”Consumer PricesConsumer prices have fallen for six straight months from year-earlier levels, the longest stretch of declines since a 12- month drop from September 1954 to August 1955, according figures from the Labor Department.The central bank switched to asset purchases as its main monetary-policy tool after cutting its benchmark interest rate almost to zero. Its balance sheet has doubled to $2.16 trillion in the week ended Sept. 23.The economy is likely to expand at a 2.6 percent annual pace in the second half of 2009, followed by average growth of 2.4 percent next year, according to a Bloomberg News survey of economists. Forecasts for next year range from an expansion of 4 percent seen by MKM Partners to a contraction of 0.1 percent predicted by Mizuho Securities Co.Stocks ‘Very Positive’Growth in the near term will be boosted by the inventory cycle as companies bring stockpiles into line with sales and by the rise in stock prices, Greenspan said. The Standard & Poor’s 500 Index has jumped 56 percent since its low for the year on March 9, an ascent that’s had a “very positive” impact on the economy, Greenspan added.The index fell 0.3 percent to 1,057.08 today.“Over the next six months, three or four percent is the right number” for growth of gross domestic product, he said. “The intermediate outlook for both homebuilding and for motor vehicle production is not all that good.”Greenspan, who was appointed Fed chairman in 1987 by President Ronald Reagan and served until January 2006, praised the steps has taken by his successor, Ben S. Bernanke, to help pull the economy out of its worst recession since the Great depression.“The Fed has done a splendid job,” he said.Still, the size of the Fed’s balance is “not sustainable” and will eventually have to be reduced to “something just north of $1 trillion,” he said.“My concern is that legislation or other actions on the part of Congress may prevent” the Fed from withdrawing the stimulus, he said.Representative Ron Paul of Texas, a Republican, is leading an effort in Congress to repeal the central bank’s immunity to audits of monetary policy.Regulatory OverhaulGreenspan said that an overhaul of financial regulations is needed. Treasury Secretary Timothy Geithner has proposed the most sweeping changes to the rules governing Wall Street in seven decades, including giving the Fed authority to monitor risk across the financial system while stripping it of its consumer-protection role.“It’s very obvious that a lot of things which were in place in the regulatory area in the markets failed,” Greenspan said. “It broke down and it’s got to be fixed.”Bernanke has opposed ceding central bank’s power to regulate the safety of financial products to new agency. Greenspan, for his part, called such power “peripheral” to the Fed’s main role.Excessive RegulationHe also cautioned against responding to the financial crisis with excessive regulation. While agreeing that the government should have a say on executive compensation in the institutions that are receiving official aid, Greenspan voiced wariness about extending that control to other banks.“You have to be careful here because this should be a relationship between shareholders, directors and executives,” he said.To contact the reporter on this story: Rich Miller in Washington

11b40October 1st, 2009 at 5:57 pm

Why would anyone find credibility in anything from this man?His comments on excessive regulation really are special, aren’t they?Independent contrctor

The AlarmistOctober 2nd, 2009 at 2:24 am

Becaue someone who has his experience in totally destroying or debasing a system might have a unique insight into what went wrong ???

11b40October 2nd, 2009 at 8:18 am

But then there is the question of trust, isn’t there? He protects his caste, and it is a very small one in number.Independent Contractor

GuestOctober 1st, 2009 at 3:49 am

For some time now I’ve been watching the Dow Futures, seeing Citigroup constantly among the most active: usually commandingly more active.The following article by William Hester (from Hussman Funds) shows how heavily Citigroup, Freddie Mac, AIG and Bank of America are weighting on the DOW. All five have defied logic and risen like Phoenixes. I can’t help but believe that Citi is being used by the govt/Fed to manipulate the markets. Wouldn’t surprise me to find that Citi is actually a big CIA front operation… Regardless, they are all powerless to stop the inevitable.Without Phoenix Stocks, Volume Continues to Contract

REDOctober 1st, 2009 at 7:20 am

And what exactly is the inevitable??If you are still predicting depression, its not going to happen. An economic recovery is underway at the expense of every American’s savings and wealth in relation to the rest of the world (ie dollar depreciation).Economic recoveries are reasonably easy to create by printing money. The fact that everyone in America is worse off against foreigners due to the loss of USD purchasing power is how the depression has been shared around.So the US Government has bailed out the financial oligarchs, not only does each citizen have more government debt to pay off but they can also buy less from overseas from their wages and savings.No Depression, just devaluation, plain and simple – Look at the gold price

PeteCAOctober 1st, 2009 at 9:35 am

Suppose the US dollar drops to half its current value. That puts oil at $130-$140/BL. Think that will impact the US economy … you better beleive it! See the dilemma that Bernanke’s got? There is no free way out of this mess.PeteCA

GuestOctober 1st, 2009 at 12:29 pm

Have you read Ellen Brown’s book “Web of Debt”, Pete? She is a monetary reformer who presents, in my opinion, a lucid, convincing argument that the way out is actually quite easy. We could retire debt without inflation if State-owned banks (as opposed to the current private consortium) issued it, reclaiming the interest payments for the public and spending the interest paid back into the economy on durable and necessary infrastructure. (I sure hope I am presenting her view accurately.) Anybody here read this book yet?

The AlarmistOctober 2nd, 2009 at 2:29 am

It’s not a recovery when your purchasing power fails to hold parity, which is precisely the case in the US these days. It will catch up to us eventually. For now, the current management of the USD is the pyrite version of the gold-standard.

PeterJBOctober 1st, 2009 at 5:12 am

For @blindman: a contribution and gift.brightness and shadow make light. without shadow, no object would be visible, so that if brightness were without shadow, we should no more know light than does a blind man. This proposition can also be revered:the blind man is he who lives in a “brightness without shadow”;-]>now, as you have said, sense needs context and,so indeed does ‘intelligence’, where intellect seeks, a priori, through its very nature, harmony, and therefore, elegance.therefore, when chaos rules the day and insanity appears everywhere, you can be certain that “leadership” has reached the nadir of its state of existence and, er, usefulness, and needs to be immediately recycled. note that death never occurs but impermanent states break down to their constitutional components and so life, as we know it, continues to thrive in its own dependency of milieux; as a consequence i have used the term ‘recycled’.I also share a gift that i also received this day:Deep into the darkness peering,long I stood there, wondering, fearing,Doubting, dreaming dreams no mortal ever dared to dream before.-Edgar Allen Poe, The RavenHo hum

Be your own leaderOctober 1st, 2009 at 11:47 am

There is no shadow on a cloudy day, but I can still see objects very well, so they must be visible.

morphogenic autistic blindmanOctober 1st, 2009 at 7:16 am

here a heart beat from the cannot be but heard and felt..and conversation concerning rhythm and rhythmsover rhythms. more fields. relates tochaos, cramps and cicads? music, anatomy etc…armand demille and guest… to Be Born ByMickey Hart”The intent of this music is to facilitate and coordinate rhythmic breathing cycles, assisting the mother’s concentration and focus before, during and after delivery.”–MH.Hear Samples. music was composed specifically for the birth of Mickey’s son Taro, and is intended to be used during the birthing process. Taro’s fetal heartbeat was recorded on a Nagra portable field recorder, with a fetal pulse monitor attached to his mother’s stomach. Back in the studio, the stereo tape was then transferred to a 16 – track recorder and overdubbed. Rhythms were improvised on a Brazollian Surdo> Next, Bobby Vega added bass harmonics, and finally Steve Douglas contributed subtle shadings on a wooden flute.thank you.peas.

GuestOctober 1st, 2009 at 12:01 pm

The intense pain of giving birth took my sister involuntarily to a place that was “simultaneously so far out into the cosmos and so deep into the inner core of herself” that she says music would have been unnoticed at best and an intrusion at worst. Can’t say what the baby was feeling, of course, and haven’t heard if other mothers have the same “inner-outer cosmic heavy lightening electric experience”.

morphogenic autistic blindmanOctober 1st, 2009 at 10:47 pm

g,your sister should write a book. i would liketo talk to her about that makes me think pain focuses the mind,forcing insight into an otherwise vacantchildlike playground, festering all manner ofillusion and candy snot.your comment also makes me wonder what would itbe like to be in labor for 100 years? or ingestation for 2000 years?i would want music to play and to hear, toinfluence and to synchronize, morhogenically,with my surroundings. i think it is thecivil, sympathetic and diplomatic option.volume, timbre, tone, composition and rhythm…music. natures song, delicate yet hardy.ask her again. your sister was hearingwithout having to listen, perhaps?it happens many times everyday all around andeverywhere.your comment also causes me to recollect anidea that i have had but will remain unstatedas it is too ridiculous, yet correct, to bestated here, perhaps best kept for the grave astoday man cannot think like that. some day”he” will see. “he” will see the world as it it is in your face, as it were, in front ofyou in your field of view. children know thendo not.the pain of your sister, inspiring, rhythmic andvery musical, music, passion and compassionin conversation, relative balance. ??

GuestOctober 2nd, 2009 at 7:55 am

Funny you should say what her pediatrician said to her; that she should write a book about that experience.You sometimes speak in riddles I don’t always understand, blindman, but I must say that you provide this place its soul.

MM CAOctober 1st, 2009 at 8:38 am

NO JOBS continues…. Ther is no way there is any recovery in place…And the Banks are INSOLVENT!Jobs Are Still Missing From The Recovery PuzzleVincent Fernando|Oct. 1, 2009, 9:28 AMAnother 551,000 Americans filed initial jobless claims last week, missing consensus expectations of 535,000.While number of people claiming unemployment insurance hit 6.09 million, the lowest level since April, the U.S. recovery will eventually be stunted should jobs data not improve further and faster. The economy remains a tough slog for many.UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORTSEASONALLY ADJUSTED DATAIn the week ending Sept. 26, the advance figure for seasonally adjusted initial claims was 551,000, an increase of 17,000 from the previous week’s revised figure of 534,000. The 4-week moving average was 548,000, a decrease of 6,250 from the previous week’s revised average of 554,250.The advance seasonally adjusted insured unemployment rate was 4.6 percent for the week ending Sept. 19, unchanged from the prior week’s unrevised rate of 4.6 percent.The advance number for seasonally adjusted insured unemployment during the week ending Sept. 19 was 6,090,000, a decrease of 70,000 from the preceding week’s revised level of 6,160,000. The 4-week moving average was 6,154,500, a decrease of 39,250 from the preceding week’s revised average of 6,193,750.The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 5.665 million.UNADJUSTED DATAThe advance number of actual initial claims under state programs, unadjusted, totaled 443,694 in the week ending Sept. 26, an increase of 5,878 from the previous week. There were 392,515 initial claims in the comparable week in 2008.The advance unadjusted insured unemployment rate was 3.8 percent during the week ending Sept. 19, a decrease of 0.1 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 5,054,617, a decrease of 169,287 from the preceding week. A year earlier, the rate was 2.3 percent and the volume was 3,018,976.Extended benefits were available in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia, and Wisconsin during the week ending Sept. 12.Initial claims for UI benefits by former Federal civilian employees totaled 1,455 in the week ending Sept. 19, an increase of 323 from the prior week. There were 2,296 initial claims by newly discharged veterans, an increase of 367 from the preceding week.There were 20,408 former Federal civilian employees claiming UI benefits for the week ending Sept. 12, an increase of 1,202 from the previous week. Newly discharged veterans claiming benefits totaled 30,689, an increase of 457 from the prior week.States reported 3,275,213 persons claiming EUC (Emergency Unemployment Compensation) benefits for the week ending Sept. 12, an increase of 99,832 from the prior week. There were 1,559,198 claimants in the comparable week in 2008. EUC weekly claims include both first and second tier activity.The highest insured unemployment rates in the week ending Sept. 12 were in Puerto Rico (6.1 percent), Oregon (5.4), Nevada (5.3), Pennsylvania (5.3), California (4.9), Michigan (4.9), Wisconsin (4.8), New Jersey (4.7), North Carolina (4.7), Arkansas (4.6), and South Carolina (4.6).The largest increases in initial claims for the week ending Sept. 19 were in California (+5,112), Texas (+3,946), Florida (+2,348), Iowa (+2,013), and Illinois (+1,945), while the largest decreases were in Kansas (-1,545), Wisconsin (-1,258), Oregon (-833), Ohio (-804), and New York (-623).

MM CAOctober 1st, 2009 at 8:40 am

We Have No Clue How Bad Bank Balance Sheets Really AreJoe Weisenthal|Oct. 1, 2009, 6:48 AM | 939 |2That the FDIC had to raise its estimate for coming losses to $100 billion makes it plenty clear that the state of American banking is far from healthy. But what’s scary is not the eye-popping number, it’s the lack of insight anyone has into bank balance sheets.Jonathan Weil at Bloomberg hits the nail on the head:There was a stunning omission from the government’s latest list of “problem” banks, which ran to 416 lenders, a 15-year high, as of June 30. One outfit not on the list was Georgian Bank, the second-largest Atlanta-based bank, which supposedly had plenty of capital.It failed last week.Georgian’s clean-up will be unusually costly. The book value of Georgian’s assets was $2 billion as of July 24, about the same as the bank’s deposit liabilities, according to a Federal Deposit Insurance Corp. press release. The FDIC estimates the collapse will cost its insurance fund $892 million, or 45 percent of the bank’s assets. That percentage was almost double the average for this year’s 95 U.S. bank failures, and it was the highest among the 10 largest ones.The obvious worry is that there are a lot more Georgian Banks out there than anyone realizes. Granted, if the FDIC can raise 3-years worth of fees by borrowing forward from its member banks, we can handle a lot of Georgian Banks. And in the end, handling smallish, regional banks isn’t going to prove to be a major systemic problem, even if there are several of them.What’s scary is that this level of opacity likely extends upwards to the ranks of the too-big-to-fail institutions that can’t be rescued merely by making depositors whole. As the story about JPMorgan’s (JPM) Jamie Dimon — sitting in his office, examining the bank’s CRE exposure by zipcode suggests — even most of the banks have no idea what they’re holding. How oculd regulators?

morphogenic autistic blindmanOctober 1st, 2009 at 8:37 pm

m,may i add chaze, j.p, etc. currently have noidea, none, not the slightest clue, have never,do not understand, cannot and may never, refuseto accept the ways and means of commercialbanking. to them the depositor or customer isa virus in their system. they are that unfamiliarwith their own assets. i have discussed thiswith their representatives as have my relationsand it is remarkable.i personally have never been directly, personally, affiliated but have only intervened and heard onbehalf of loved one, they think that when they open your accounts to random strangers it is your problem toremediate! and…..two, they are of the opinion that the customerhas unlimited time, patience and money to toleratetheir ineptitude and arrogant usery. not to mention their inability to differentiate socials…. good luck to them and their business model.most of all to their customers…….idiots,yes.

MM CAOctober 1st, 2009 at 8:42 am

From Gordon Browne:A Somber G-20As a part-time member of the press corps, I had the good fortune to attend many of the public sessions at last week’s G-20 meeting in Pittsburgh. As impressive as it was to closely witness the gathering of countries representing some 85 percent of the world’s GDP (along with the governors of the World Bank, the IMF and the European Central Bank), it was equally remarkable to witness the immense security forces deployed to restrain those who feel the gathering harbored the forces most responsible for the world’s economic and financial problems.The meeting got off to an unexpectedly gloomy start as President Obama, accompanied by UK Prime Minister Gordon Brown and French President Nicholas Sarkozy, jointly announced the discovery of secret Iranian nuclear facilities. These revelations were eye opening, and the mood in the room was nothing short of electric. This contrasted sharply with comments offered the day before by Russian President Dmitri Medvedev, who reiterated his country’s reluctance to impose tougher sanctions on Iran. As a result, the risks of continued conflict in the Middle East remain a global preoccupation, with major implications for the prices of gold and oil.But despite the geo-political setbacks, the failure to achieve any major agreements, the somber atmosphere, and the sanguine final communiqué, the U.S. stock and junk-bond markets continued to roar in nervous volatility.U.S. markets appear to have taken on a casino-like life of their own, while the fundamentals and even some technical measures urge caution – such as the U.S. dollar plummeting to new lows. Something just does not add up. This feeling may have been the root cause of the somber mood enveloping the G-20.Increasingly, there appears to be a distinctly volatile disconnect between market sentiment and practical reality. It is eerily similar to the market of 1931, which presaged the second of six major downturns of the Great Depression, leaving U.S. stock markets at only 10 percent of their pre-crash values.There are a number of concerns that have caused some of the world’s shrewdest observers to be less than completely credulous about the current ‘recovery.’ I have repeatedly echoed these factors in my columns: continued weakness in the labor market, lack of funds for discretionary spending, the rising trajectory of debt and mortgage defaults, moribund corporate earnings, and the diversion of bank credit away from corporate borrowers to interest-bearing Fed accounts. But no amount of outcry from the skeptics seems to sway the official narrative: ‘recovery is on its way.’In the meantime, the U.S. government continues to increase its deficits, heralding a new monetary age where ‘trillion’ has become the new ‘billion.’ The dollar continues to sink to levels which now threaten its privileged position as the world’s reserve. If such status is lost, the Fed will no longer be able to print limitless dollars while holding interest rates at historic lows – without facing monetary collapse. Soon, the era of low interest rates could be over.Furthermore, the world’s three largest holders of U.S. Treasuries, China (with some $800 billion), Japan ($740 billion) and Great Britain ($220 billion), may soon need access to their funds. The UK deficit is now 10 percent of GDP, making him prone to selling his U.S. Treasuries. Japan is slipping into recession and may need its dollars for internal stimulation, as might China.On that note, I noticed that my former parliamentary colleague, Prime Minister Brown, looked a bit shell-shocked at the G-20. Perhaps this resulted from Britain’s unfortunate decision to have sold the bulk of its gold reserves for U.S. dollars while gold was still trading in the $700’s!From a technical point of view, U.S. stock and junk bond markets have risen dangerously without correction, but still just short of the rebound level of a Dow 10,000 that I predicted for August. Nonetheless, these markets look vulnerable.The unease is felt on Main Street U.S.A and in the backrooms of the G-20. It’s a shame that Washington and Wall Street haven’t gotten the memo.

GuestOctober 1st, 2009 at 9:43 pm

Another War in the Works / September 28, 2009By Paul Craig RobertsDoes anyone remember all the lies that they were told by President Bush and the “Main Stream Media” about the grave threat to America from weapons of mass destruction in Iraq? These lies were repeated endlessly in the print and TV media despite the reports from the weapons inspectors, who had been sent to Iraq, that no such weapons existed.The weapons inspectors did an honest job in Iraq and told the truth, but the mainstream media did not emphasize their findings. Instead, the media served as a Ministry of Propaganda, beating the war drums for the US government.Now the whole process is repeating itself. This time the target is Iran.As there is no real case against Iran, Obama took a script from Bush’s playbook and fabricated one.First the facts: As a signatory to the non-proliferation treaty, Iran’s nuclear facilities are open to inspection by the International Atomic Energy Agency, which carefully monitors Iran’s nuclear energy program to make certain that no material is diverted to nuclear weapons.The IAEA has monitored Iran’s nuclear energy program and has announced repeatedly that it has found no diversion of nuclear material to a weapons program. All 16 US intelligence agencies have affirmed and reaffirmed that Iran abandoned interest in nuclear weapons years ago.In keeping with the safeguard agreement that the IAEA be informed before an enrichment facility comes online, Iran informed the IAEA on September 21 that it had a new nuclear facility under construction. By informing the IAEA, Iran fulfilled its obligations under the safeguards agreement. The IAEA will inspect the facility and monitor the nuclear material produced to make sure it is not diverted to a weapons program.Despite these unequivocal facts, Obama announced on September 25 that Iran has been caught with a “secret nuclear facility” with which to produce a bomb that would threaten the world.The Obama regime’s claim that Iran is not in compliance with the safeguards agreement is disinformation. Between the end of 2004 and early 2007, Iran voluntarily complied with an additional protocol (Code 3.1) that was never ratified and never became a legal part of the safeguards agreement. The additional protocol would have required Iran to notify the IAEA prior to beginning construction of a new facility, whereas the safeguards agreement in force requires notification prior to completion of a new facility. Iran ceased its voluntary compliance with the unratified additional protocol in March 2007, most likely because of the American and Israeli misrepresentations of Iran’s existing facilities and military threats against them.By accusing Iran of having a secret “nuclear weapons program” and demanding that Iran “come clean” about the nonexistent program, adding that he does not rule out a military attack on Iran, Obama mimics the discredited Bush regime’s use of nonexistent Iraqi “weapons of mass destruction” to set up Iraq for invasion.The US media, even the “liberal” National Public Radio, quickly fell in with the Obama lie machine. Steven Thomma of the McClatchy Newspapers declared the non-operational facility under construction, which Iran reported to the IAEA, to be “a secret nuclear facility.”Thomma, reported incorrectly that the world didn’t learn of Iran’s “secret” facility, the one that Iran reported to the IAEA the previous Monday, until Obama announced it in a joint appearance in Pittsburgh the following Friday with British Prime Minister Gordon Brown and French President Nicolas Sarkozy.Obviously, Thomma has no command over the facts, a routine inadequacy of “mainstream media” reporters. The new facility was revealed when Iran voluntarily reported the facility to the IAEA on September 21.Ali Akbar Dareini, an Associated Press writer, reported, incorrectly, over AP: “The presence of a second uranium-enrichment site that could potentially produce material for a nuclear weapon has provided one of the strongest indications yet that Iran has something to hide.”Dareini goes on to write that “the existence of the secret site was first revealed by Western intelligence officials and diplomats on Friday.”Dareini is mistaken. We learned of the facility when the IAEA announced that Iran had reported the facility the previous Monday in keeping with the safeguards agreement.Dareini’s untruthful report of “a secret underground uranium enrichment facility whose existence has been hidden from international inspectors for years” helped to heighten the orchestrated alarm.There you have it. The president of the United States and his European puppets are doing what they do best–lying through their teeth. The US “mainstream media” repeats the lies as if they were facts. The US “media” is again making itself an accomplice to wars based on fabrications. Apparently, the media’s main interest is to please the US government and hopefully obtain a taxpayer bailout of its failing print operations.Dr. Mohamed ElBaradei, Director General of the International Atomic Energy Agency, a rare man of principle who has not sold his integrity to the US and Israeli governments, refuted in his report (September 7, 2009) the baseless”accusations that information has been withheld from the Board of Governors about Iran’s nuclear programme. I am dismayed by the allegations of some Member states, which have been fed to the media, that information has been withheld from the Board. These allegations are politically motivated and totally baseless. Such attempts to influence the work of the Secretariat and undermine its independence and objectivity are in violation of Article VII.F. of the IAEA Statute and should cease forthwith.”As there is no legal basis for action against Iran, the Obama regime is creating another hoax, like the non-existent “Iraqi weapons of mass destruction.” The hoax is that a facility, reported to the IAEA by Iran, is a secret facility for making nuclear weapons.Just as the factual reports from the weapons inspectors in Iraq were ignored by the Bush Regime, the factual reports from the IAEA are ignored by the Obama Regime.Like the Bush Regime, the Middle East policy of the Obama Regime is based in lies and deception.Who is the worst enemy of the American people, Iran or the government in Washington and the media whores who serve it?Paul Craig Roberts [email him] was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand.

GuestOctober 1st, 2009 at 10:39 pm

As the Obama administration lays the groundwork to isolate Iran economically from the rest of the world over that nation’s nuclear program, perhaps, Mr. Brown, as you tingle with excitement over revelations from the G-20 meeting and the Sarkozy/Brown/Obama mortified trio, it is important to point out that the world and especially the United States is awash with propaganda supporting the heavily armed nuclear nation of Israel in its attempt to be dominate in the Middle East. With all of this propaganda directing the U.S to enter another Middle Eastern war in addition to Iraq and Afghanistan, it’s important to hear a few testimonies on the other side of the equation. These are instances regarding Israeli occupation of Palestine:Israeli Soldiers Speak Out on Atrocities Against Palestinians/Gazans”Breaking the Silence:” Testimonies of Israeli Soldiers by Stephen Lendman (September 28, 2009)”Breaking the Silence is an organization of veteran Israeli soldiers that collects anonymous testimonies of soldiers who served in the Occupied Territories during the Second Intifada.” They recount experiences that deeply affected them, including abusing Palestinians, looting, destroying property, and other practices “excused as military necessities, or explained as extreme and unique cases.”They believe otherwise in describing “the depth of corruption which is spreading in the Israeli military” to which Israeli society and most Western observers turn a blind eye. “Breaking the Silence” was established to force an uncomfortable reality into the open to “demand accountability regarding Israel’s military actions in the Occupied Territories perpetrated by us in our name.”Its new booklet features 54 damning testimonies from 30 Israeli soldiers on their experiences in Operation Cast Lead. They recount what official media and government sources suppressed with comments like:”You feel like an infantile little kid with a magnifying glass looking at ants, burning them.”Another referred to “not much said about the issue of innocent civilians.” Anyone and anything were fair game, and laws of war went out the window.They explained wanton destruction, crops uprooted, human slaughter, women and children killed in cold blood, illegal weapons used, free-fire orders to shoot to kill anywhere at anything that moved, and using civilians as human shields.Israeli commanders refuted their accounts as groundless, but B’Tselem reported that the military “refused to open serious, impartial investigations,” even when provided with detailed information, including victims’ names, exact dates, and precise locations of incidents.On its own, B’Tselem collected testimonies from Gaza residents in which 70 Palestinian civilians were killed, over half of them children. Israeli military sources were unresponsive, except to acknowledge receipt of some information, nothing more or that a serious investigation would be conducted. It never was.Anonymous Testimonies to Protect Soldiers from Recriminations – First From Earlier OperationsA Nachal unit first sergeant recounted Israeli tanks entering a West Bank village and crushing a car beneath the treads. “Yes, I saw it from the APC we were in. I peeped out. Suddenly we heard a car being crushed….I can’t understand why a tank should run over a car when the road’s open.” It wasn’t an isolated incident. It happens often, wanton destruction for its own sake.He also said that “When we got back from that operation, we had loot so to speak. There were IDs confiscated, uniforms, Kalachnikovs. For army intelligence.”A Nachal elite unit first sergeant said missions were explicitly intended to harass people. Homes were entered, arrests made. “At various points while closing in on a house there are varying open-fire instructions. When the whole house is surrounded, crews placed all around it, the guy who runs out of the house is considered an ‘escaper’ and must be stopped. If he exits running in a suspect manner (he) must be shot (and) kill(ed). Shot to be stopped: in other words, shoot to kill.”When entering villages, armed Palestinian policemen “at certain points in time….were considered enemy troops (so) we had to shoot to kill if we saw any.” Orders were to shoot when in doubt. In describing the atmosphere and command orders, they were “Kill, kill, kill, kill. We want to see bodies.”He explained his anti-terrorism training saying: “Terrorist in sight, that’s what it’s called, when you run into them. It’s some sort of code. It used to be ‘hostages.’ So you reach the terrorist, you confirm the kill. You don’t confirm the kill, you confirm the guy has been ‘neutralized,’ no chance of his getting back to you because he’s been shot in the head. That’s confirming he’s neutralized.”A 401 Armor unit staff sergeant described the freedom he had to fire a lot – “automatic fire, directed at the whole city, at houses and at doors, was something that everybody did, not just me. I do not know why I did it. I (had) a gun. I did not think. In the army I never thought. I did what I was told to do. And besides, everybody did it. That was the custom – officers and such, everybody knew.”A Battalion 55 Artillery corp first sergeant said when his unit “return(ed) from operations we would throw stun and smoke grenades into the bakeries that opened between 4:00 and 5:00 am because people in the village threw stones….Once I fired over 1500 rounds from a machine gun at the houses in the city.” Nobody cared, it was just at Palestinians.An Armoured Corps first sergeant recounted earlier Gaza and West Bank operations for the “main purpose (of) either demolish(ing) terrorists’ houses or places where they manufacture mortars, and other such stuff, or…You would come in and ruin everything you see.” At times, “open-fire orders (were to kill) every person you see on the street….kill him….shoot to kill. Don’t mind whether he has or has no gun on him.”Operation Cast Lead TestimoniesOne soldier said:”….In training you learn that white phosphorus is not used, and you’re taught that it’s not humane. You watch films and see what it does to people who are hit, and you say, ‘There, we’re doing it too.’ That’s not what I expected to see. Until that moment I had thought that I belonged to the most humane army in the world.”Other testimonies describe white phosphorous used in densely populated neighborhoods, wanton killing and destruction “unrelated to any direct threat to Israeli forces, and permissive rules of engagement that led to the killing of innocents.”More comments reflected the “moral deterioration” of the army and Israeli society, even affecting the rabbinate that blessed mass slaughter and destruction prior to engagements.Soldier testimonies bear witness to disturbing Israeli values “on a systemic level.” Operation Cast Lead’s rein of terror was “a direct result of IDF policy, and especially (its) rules of engagement (that sanction) shoot (first) and (don’t) ask questions.”Breaking the Silence participants offered their testimonies as “an urgent call to Israeli society and its leaders to sober up and investigate anew the results of our actions….(a disturbing) slide together down the moral slippery slope” that affects them and all Jews globally.Testimony 1 – Human ShieldPeople are called “Johnnie. They’re Palestinian civilians” in Gaza neighborhoods. In checking out houses, “we send the neighbor in, the ‘Johnnie,’ and if there are armed men inside, we (use) ‘pressure cooker’ procedures….to get them out alive….to catch the armed men.” When necessary, combat helicopters are called in to fire anti-tank missiles at civilian homes. Then send a “Johnnie” in to check for dead and wounded.In one home, two were dead and another alive, so supersized Caterpillar D-9 bulldozers start “demolishing the house over him until the neighbor went in” and got him out.Human shields were also used to check for booby-traps and perform other services. “Sometimes the force would enter while placing rifle barrels on a civilian’s shoulder, advancing into the house and using him as a human shield. Commanders said these were the instructions and we had to do it.”Testimony 2 – House DemolitionsResidential buildings at strategic points were taken over by force. Neighborhoods were described with “lots of destroyed houses….ruins….more and more ruins, and even the houses still standing, most of them kept getting shelled….” Other houses were blasted….blown “up in the air” with explosives.”Operational necessity” sometimes meant a whole neighborhood was destroyed so as “not to jeopardize Israeli soldiers (and with) the day after” in mind, meaning to disrupt Gaza life to the maximum and leave it that way after forces pulled out.Testimony 3 – Rules of EngagementDescriptions included “enter(ing) a yard and out of sheer fear the family was waiting in an exposed spot – a father, grandfather, young mother and babies. As we were coming in, the commander was firing a volley, and mistakenly killed an innocent. We got to the house….he goes in with live fire….the family was hiding from the bombings….he happened to kill an elderly guy….it really seems insane….if I look at it from the (other) side, there are people who deserve to go to jail.”Testimony 4 – Rules of Engagement & Home OccupationTactics taught are “dry” and “wet” entries. In Gaza, there was “no such thing as a dry entry. All entries were wet,” meaning free-firing with missiles, tank shells, machine guns, grenades, everything. On the ground, wet entry orders were to “shoot as we enter a (house or) room (so) no one there could fire at us.”Testimony 5 – AtmosphereWhat “bothered me? Many things….all that destruction. All that fire at innocents. This shock of realizing with whom I’m in this together….the hatred, and the joy of killing….I killed a terrorist….blew his head off….There’s nothing to hold you back.” They’re just Arabs.The rest of the story, if you can take it…

MM CAOctober 1st, 2009 at 8:48 am

It’s been nice knowing you!!!!Audit Integrity, a Los Angeles research services company, released the results of an independent corporate bankruptcy study which identified 20 major U.S. corporations that are at risk for filing bankruptcy in the next 12 months. If the Audit Integrity numbers are correct, the retail operations of Macy’s, Oshkosh, Rite Aid, Sprint Nextel, and Goodyear are in danger of following in the footsteps of Circuit City, KB Toys and Linens ‘n ThingsHere is Audit Intergity’s list as published by Reuters:* Advanced Micro Devices, Inc.* Amkor Technology, Inc.* AMR Corporation* Apartment Investment and Management Co.* CBS Corporation* Continental Airlines, Inc.* Federal-Mogul Corporation* Hertz Global Holdings, Inc.* Interpublic Group of Companies, Inc.* Las Vegas Sands Corp.* Liberty Media Corporation (Capital)* Macy’s, Inc.* Mylan Inc.* Oshkosh Corporation* Redwood Trust, Inc.* Rite Aid Corporation* Sirius XM Radio Inc.* Sprint Nextel Corporation* Textron Inc.* The Goodyear Tire & Rubber CompanyI have highlighted the companies whose bankruptcies would have obvious impacts on the world of retail commercial real estate.I don’t see this news upping investor demand for all of those Rite Aid’s on the market. There are tons of them listed at LoopNet right now – I get a few in my email every day as well. Come to think of it, there are quite a few Goodyear Tire stores on the market as well.

GuestOctober 1st, 2009 at 8:51 am

Wal-Mart Stores will offer 100 toys for $10 during holiday seasonThey are now competing for business with the Dollar stores… They are trying to figure out how to take out and destroy the dollar stores… its funny to see Walmart scrambling these days with what to do with all the dollar stores…

MM CAOctober 1st, 2009 at 8:59 am

Please shut him up…. Is anyone else tired of him?September 30th, 2009Krugman and the pied pipers of debtInvestors are celebrating an incipient “recovery,” but the interventions that were responsible for it are sowing the seeds of a more violent contraction down the road. The problem, quite simply, is debt. We’ve accumulated record amounts, yet many economists tell us we need more.Leading the charge is Paul Krugman. He exhorts us to borrow our way back to prosperity, but he doesn’t acknowledge that his brand of Keynesian economics ignores the consequences of debt. If you look at a chart of America’s total debt burden, he’s leading us over a cliff.The problem begins with the flawed way Krugman and other economists measure well-being. Primarily, they look at measures of activity, like GDP. These tell us how much people spend, but say nothing about where we get the money.Every so often, we overextend ourselves, buying too much useless stuff with too much borrowed money. So we cut back, dumping the third family car and swapping the McMansion for a townhome.But this is problematic for Krugman and other economists. Less spending means falling GDP. It means “recession.”They ride to the rescue with two blunt instruments — monetary and fiscal policy — that encourage more borrowing and thus more spending. More spending equals “growth” so economists congratulate themselves for engineering “recovery.”But if recessions never happen, bad businesses and unpayable debts are never washed away. They grow like cancer inside the system.Since the mid-1980s, we’ve intervened whenever the economy hiccuped, so sectors that should have shrunk sharply — like housing and finance — never did. Feasting on easy credit, these sectors have exploded as a percentage of the economy.Now, since individuals and corporations refuse to borrow more, the only way to grow spending is for the government to borrow.According to George Cooper, author of The Origin of Financial Crises, “what is missing from today’s debate is recognition that previous growth rates were artificially supported by an unsustainable credit binge, itself the result of the misapplication of Keynesian policy.”Cooper counts himself a Keynesian but says Keynesian policy has become “dangerously distorted.”“We should be using Keynesian stimulus only to arrest the rate of credit contraction not to reverse it. The harsh truth is that our economies desperately need a recession.”That’s because they desperately need to de-lever. As you can see in the first chart, debt relative to GDP is at record highs.If we want sustainable growth, spending that drives it must come from savings, not more borrowing. To get there, we must first pay old debts. And that means recession.Krugman is clearly aware of the consequences of excessive borrowing.“I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits,” he wrote in 2003, citing a $1.8 trillion 10-year deficit projection from the Congressional Budget Office.Fast forward six years, total debt has jumped 70 percent relative to GDP and optimistic projections put the 10-year deficit at $9 trillion.This time, however, Krugman dismisses deficit “hysteria,” arguing that we can grow our way out of debt. “We did it during the Clinton administration,” he told me when he visited Reuters last week.But we didn’t. While Clinton balanced the federal budget, Americans plowed through their savings. We kept growing because, in the aggregate, we were still accumulating debt.

FEDupOctober 1st, 2009 at 2:43 pm

The fact that Krugman can’t seem to understand that the same budget deficits he was screaming about in 2003 are 500% greater today means that “when policy makers lose their common sense, then their policies become senseless!”

MM CAOctober 1st, 2009 at 9:01 am

Some Recovery!Foreclosure Rate Rises 17 PercentWashington Post Staff WriterWednesday, September 30, 2009; 10:46 AMThe number of homes lost to foreclosures rose about 17 percent in the second quarter of this year despite the launch of an extensive government program aimed at helping borrowers save their home, according to government data released Wednesday.

Winston SmithOctober 1st, 2009 at 11:05 am

‘People are changing things’Two films that have much to do with the economy relating to what kind of food we’re putting into our bodies and how we grow it. the nutritional value of food at the supermarket in 1950 to the present day has diminished by 40 percent. I haven’t eaten much food from a large corporation in 35 years. I urge those who are interested in good health and an economy that benefits the farmer, and our local economies and our very own bodies to check these out.

tutterfrutOctober 1st, 2009 at 12:51 pm

“One way we look back at a culture is how they dispose of their dead.” cash for stimulus, cash for crooks, cash for clunkers…maybe it’s time for “cash for corpses”

FAMCOctober 1st, 2009 at 3:38 pm

plot the dow in a commodity country currency (brazilian real for example) and see if the “rally” is “real” or if its a product of a lower dollar.nominal is different from real.

PeterJBOctober 1st, 2009 at 5:41 pm

” But beyond the financial indicators, states also fiddle more and more the unemployment figures which, all countries included, only reflect 50 to 70 percent of real job losses, according to our team. The more the situation will worsen, the wider this gap between statements and reality will be, as indeed politicians and bureaucrats always prefer lying than acknowledging their failures. They convince themselves that this attitude is legitimate because it is their duty to “gain time”. However, in the field of unemployment, they fall victim to their own communication. “LEAP/E2020Ho hum

gAntonOctober 1st, 2009 at 6:54 pm

The Fight Against GravityYeah, home prices just might take off (but I’m a little skeptical). Actually, the big talker (Obama) and the big spender (big Ben) can manipulate just about any market as long as they don’t run out of money. (They both ran out of principle a long time ago.)But the day of reckoning!–the day of reckoning is at hand!Actually, it won’t be a day–it will take a little time. What goes up must come down, and generally, things come down a good deal faster than they went up. For a grand example, take the government manipulation of the auto manufacturing industry. It took months to go up, but just in days the automobile industry is on the dung heap.

The AlarmistOctober 2nd, 2009 at 2:36 am

Sure, home prices will take off in dollar terms. Won’t mean much when the dollar is worth a fraction of its former self, but I’m sure the average home-owner will feel good about his regained ‘wealth’ even when it is further taxed away by his benificent governments.

GuestOctober 2nd, 2009 at 7:49 am

You see a government usurped by the wealthy and powerful, but your solution seems to be to get rid of the government instead of getting rid of the wealthy and powerful. How very irrational of you.

The AlarmistOctober 2nd, 2009 at 10:15 am

Like the poor, you will always have the wealthy … humans and other elements in nature tend to distribute themselves along something like a bell curve … it’s just normal.

GuestOctober 2nd, 2009 at 2:19 pm

You say “it’s just normal”, but science says the opposite: it’s abnormal. Pardon me while I ignore your opinion and rely on science.

GuestOctober 2nd, 2009 at 6:54 pm

The rich are rich because they have the ability to exploit. Just take a look around at the current economic crisis and tell me whether it could have gotten to this point if not backed by the “full faith and credit of the US government.”It’s about levers of power. Remove the levers and the sphere of influence by the ruthless becomes very small…

FEDupOctober 2nd, 2009 at 7:38 am

Nonfarm payrolls decline accelerates: 236,000 jobs lost in September. Surprise, surprise, the experts are wrong again. Perhaps the “old boy’s club” down at the FED should visit all the small business owners around the country and ask them how bad it really is to get a clue on the true economy!

MM CAOctober 2nd, 2009 at 8:45 am

NO JOBS CONTINUES!U.S. Job Losses Failed to Slow Down in SeptemberPrintOverview: Job losses peaked in Q1 2009 but has remained in the 200,000-300,000 range since then, which is comparable to the job losses in the last two recessions. The unemployment rate has risen steadily during this cycle. Initial and continuous claims peaked in April 2009 but have been falling at a sluggish pace since then. For stabilization in the labor market, job losses need to slow to 50,000-75,000 per month, and jobless claims need to fall below 400,000, which might not happen until late 2009. Job losses and reduction in wages and work hours in the absence of home equity withdrawal and easy credit will put pressure on loan defaults and consumer spending despite fiscal and monetary stimuli. This implies that the labor market will be a leading indicator of economic recovery.Labor Market Indicators Still Showing WeaknessPayrolls fell 263,000 in September 2009 after falling by a revised 304,000 in July and 201,000 in August 2009. This brought the economy’s total loss of jobs since the recession began in December 2007 to 7.2 million, taking the total unemployed in the economy to 15 million. The private sector lost 210,000 jobs. The Household survey showed that employment had declined by 785,000. (U.S. Bureau of Labor Statistics [BLS]; October 2, 2009)The unemployment rate rose from 9.7% in August to 9.8% in September (a 26-year high). The long-term unemployment rate (including marginally attached job seekers and workers who are discouraged or part-time for economic reasons) rose from 16.8% in August to 17% in September 2009. (U.S. BLS)Job losses continued across sectors though the pace of job losses slowed in some sectors: Manufacturing (51k), services (147k), construction (64k), finance (10k), business and professional services (8k), retail (39k) and leisure and hospitality (9k). The government also lost 53k jobs, led by job losses at the Federal, state and local government levels. There were job gains in health care and education (3k). (U.S. BLS)The average workweek declined by 0.1 hours, including in the manufacturing sector. Average hourly earnings rose 2.5% y/y, while weekly earnings rose only 0.7% y/y. The aggregate hours index fell. Around 33% of the unemployed workers have been jobless for six months, and around 52% of the unemployed have been jobless for three months. The diffusion index declined in September, indicating that job losses were more widespread. (U.S. BLS)Unemployment Rate Forecasts: Morgan Stanley (MS), 9.9% in Q4 2009; Goldman Sachs (GS), 9.8% in Q4 2009 and 10.0% in Q2 2010; JPMorgan, 10.0% in Q4 2009 and 9.8% in Q2 2010; ML/BoA, 10.2% in Q4 2009 and 10.0% in Q2 2010. (Bloomberg Survey, October 1, 2009). The U.S. Federal Reserve, 9.2%-9.6% for Q4 2009 and 9%-9.5% for Q4 2010.The unemployment rate is over 10% in around 12 U.S. states. Michigan, Nevada, California, Oregon and Rhode Island have some of the highest unemployment rates.Initial jobless claims rose by 17,000 to reach 551,000 in the week ending Sept 26, after falling by 17,000 the previous week. The four-week moving average fell by 6,250 to 548,000. Continuous claims fell 70,000 to 6.09 million, while the jobless rate remained unchanged from the previous week at 4.6%. (U.S. Department of Labor; October 1, 2009).Some of the decline in continuous claims might be due to the expiry of claims by the unemployed. Amid weak hiring trends, there are growing calls for the government to extend unemployment benefits that are set to expire by the end of 2009. Analysts estimate that jobless claims generally peak four to 10 weeks before the economy bottoms.Automated Data Processing (ADP): Private employment fell 254,000 in September 2009, the smallest decline since July 2008, after falling 277,000 in August 2009. (September 30, 2009)Challenger job cuts announcements in August 2009 slowed to 14% y/y as several sectors saw the number of job cuts slowing. The ISM Manufacturing and Non-Manufacturing Employment Indexes have been contracting at a slower pace in recent months. The Manpower Survey shows most employers plan to hold headcount “relatively stable” in Q4 2009 indicating sluggish hiring plans though some sectors did indicate an uptick in hiring plans. The Conference Board Help-Wanted Online Data Series showed a decrease in online advertised vacancies in September 2009. The series has however stabilized since April 2009 after showing declines for two years.Job Openings and Labor Turnover Survey (JOLTS): The job openings rate in Julu 2009 was unchanged at 1.8%. The hires rate at 3.1% is at a low and the separation rate remained at a record low of 3.3%. (U.S. BLS)The Employment Cost Index (ECI) rose 0.4% q/q and 1.8% y/y in Q2 2009 (a record low). Wage growth improved to 0.4% q/q, but benefits growth slowed to 0.3% q/q. Compensation has slowed significantly in the private sector and in state and local governments. The manufacturing sector has seen a greater slowdown in wages while services have seen a more pronounced slowdown in benefits. Cutting workforce and labor costs helped firms sustain corporate earnings in H1 2009. (U.S. BLS)Productivity growth in Q2 2009 rose 6.6% q/q and 1.9% y/y as firms are cutting workers and work hours more than the decline in output to maintain productivity. (U.S. BLS)Weak Labor Market Will Continue to Weigh on the EconomyDr. Nouriel Roubini: All elements of total labor income–jobs, hours and average hourly wages–are under pressure, which will impact consumption in the coming months. The unemployment rate in late 2009 will be higher than what was assumed for 2010 in the adverse scenario of the banks’ stress tests. This will lead to further delinquencies on loans and securities and lower-than-expected recovery rates. As people with mortgages lose their jobs, they will have severe difficulties servicing their mortgages. (July 2, 2009)

MM CAOctober 2nd, 2009 at 8:55 am

The Big Banks are INSOLVENT, that is why the credit crunch will continue. Good luck to all the small business’s who make up 70% of the employed work force. No lending to them equals NO JOBS. We could have U3 unemployment at 15% and U6 at 25-30% within the next 2 years.The Credit Crunch ContinuesTaxpayer dollars have supported institutions that are ‘too big to fail.’ Small business has been left out in the cold.By MEREDITH WHITNEY WSJAnyone counting on a meaningful economic recovery will be greatly disappointed. How do I know? I follow credit, and credit is contracting. Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan.Since the onset of the credit crisis over two years ago, available credit to small businesses and consumers has contracted by trillions of dollars, and that phenomenon is reflected in dismal consumer spending trends. Equally worrisome are the trends in small-business credit, which has contracted at one of the fastest paces of any lending category. Small business loans are hard to find, and credit-card lines (a critical funding source to small businesses) have been cut by 25% since last year.Unfortunately for small businesses, credit-line cuts are only about half way through. Home equity loans, also historically a key funding source for start-up small businesses, are not a source of liquidity anymore because more than 32% of U.S. homes are worth less than their mortgages.Why do small businesses matter so much? In the U.S., small businesses employ 50% of the country’s workforce and contribute 38% of GDP. Without access to credit, small businesses can’t grow, can’t hire, and too often end up going out of business. What’s more, small businesses are often the primary source of this country’s innovation. Apple, Dell, McDonald’s, Starbucks were all started as small businesses.What’s especially disturbing is how taxpayer dollars have supported “too big to fail” businesses yet left small businesses unassisted and at a significant disadvantage. Small businesses do not have the same access to government guarantees on their debt. After all, most of these small businesses don’t issue public debt.As is true in most recessions, banks’ commercial lending portfolios shrink as creditworthy customers pay down their debts and the less-worthy borrowers are simply denied loans. Banks, in other words, want to lend only to those that don’t want to borrow. Challenging as that may be, in the last cycle small businesses at least had access to their credit cards.Small businesses primarily fund themselves through credit cards and loans from local lenders. In the past two years, credit-card lines have been cut by over $1.25 trillion. During the same time, 10% of all credit-card accounts have been cancelled. According to the most recent Federal Reserve data, small business lending is down 3%, or $113 billion, from fourth-quarter 2008 peak levels—the first contraction since 1993. Credit cards are the most common source of liquidity to small businesses, used by 82% as a vital portion of their overall funding. Thus, it is of merit when 79% of small businesses surveyed tell the Small Business Association that credit-card lending standards have tightened drastically and their access to credit lines has decreased materially.Incentives should be provided to smaller banks to step up small-business loans on a greater scale. Smaller banks could not only bridge gaps created by the shut down in the securitization market but also gaps being created by a massive contraction in credit-card lines. Arguably credit would perform better with these types of loans as they would reintroduce and reinforce the most important rule in banking: “Know Your Customer.”I believe that we are only in the early stages of the second half of this credit cycle. I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010. This includes not only the large lenders reducing exposure but also the shuttering of several major subprime credit-card lenders. Beginning in the fourth quarter of 2007, lenders began reducing available credit by zip code. During the past four quarters, lenders have cut “inactive” accounts (whether or not the customer viewed the account as a liquidity vehicle).The next phase will likely be credit-line cuts as lenders race to pre-emptively protect themselves from regulatory changes associated with the Credit Card Accountability, Responsibility and Disclosure Act, passed in May of this year, and the 2008 Unfair and Deceptive Acts and Practices Act.Regulators should be mindful that regulatory change during the midst of a credit crisis often ends with unintended consequences. Those same consumers that regulators are trying to help are actually being hurt by a vast reduction in available credit.Main Street represents the foundation of this country. Reviving it should take priority over any regulatory reform or systemic overhaul.Ms. Whitney is CEO of Meredith Whitney Advisory Group, LLC.

MM CAOctober 2nd, 2009 at 9:18 am

My 70% is small and medium size buisness. excludes the Fortune compnaies. Medium size biz is seeing the same thing and are going out buisness also at an alarming rate. The Fortune companies are no longer buying the stuff small and med size used to manufacture. they only post porfits becuase they too continue to cut jobs and off shore jobs!Stimulus, what stimulus… Get a clue obama you are being fleeced by all those you trusted… you trusted Caterpillar, did photo ops with them and look what they are doing….

GuestOctober 2nd, 2009 at 9:02 am

GS is Corrupt!US secretly tried to make deal with Goldman Sachs in wake of financial crisisBy John ByrneWednesday, September 30th, 2009 — 9:11 amWarren Buffett balked at conflict of interestBREAKING 10:08 AM ET:Vanity Fair will report in the next issue of the magazine that US Treasury Secretary Henry Paulson — a former head of the investment bank Goldman Sachs — tried to orchestrate secretive deals in the midst of the financial crisis but got blowback from prominent investor Warren Buffett. The following press release was obtained by Raw Story; the magazine appears today on newsstands in New York and Los Angeles.——————————————————————————–NEW YORK, N.Y.—The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair.In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman’s current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department.Sorkin reports that Warren Buffett was also contacted about investing in the merged company, but told a banker at Goldman that it would never happen. “By tonight the government will realize they can’t provide capital to a deal that’s being done by the former firm of the Treasury secretary with the company of a former vice-chairman of Goldman Sachs and former deputy Treasury secretary,” Buffett said. “There is no way. They’ll all wake up and realize, even if it was the best deal in the world, they can’t do it.”Story continues below…——————————————————————————–Jim Wilkinson, Paulson’s chief of staff, realized that such a deal would be a public-relations nightmare at the worst possible time—just as they were trying to pass TARP. “Hank, if you do this, you’ll get killed,” Wilkinson frantically told his boss. “It would be fucking crazy.” Paulson, he said, would lose credibility; he would be accused of lining the pockets of his friends at Goldman; the “Government Sachs” conspiracy theories would flourish.Rodgin Cohen, a Sullivan & Cromwell lawyer who was advising both Wachovia, on parallel talks with Morgan Stanley, and Goldman Sachs, on its bank-holding-company application, was the first to suggest that the government attempt a shotgun wedding between Goldman and Wachovia, Sorkin reports. He offered up the idea in a phone call to Kevin Warsh, a governor at the Fed, saying that it wasn’t an officially sanctioned plan by his clients, just a friendly suggestion from an old-timer in the business. He said he knew it was a long shot—the “optics,” he acknowledged, would be problematic, given that Paulson and Wachovia C.E.O. Robert Steel were both former Goldman men—but it would solve everyone’s problems: Goldman would get the deposit base it needed, and Wachovia would have its death sentence stayed.According to Sorkin, Goldman co-president Gary Cohn had agreed to engage in talks with Wachovia only on the presumption that the Fed would help Goldman guarantee some of Wachovia’s most toxic assets. And Warsh, in a bold gesture, made a commitment that the Fed would strongly consider it. Paulson spoke with Blankfein and told him to take the talks seriously. “If you go into this looking for all the problems and how much help you’re going to get, it’s never going to happen,” he said, adding, “You’re in trouble, and I can’t help you.”Much to their dismay, Cohn and Steel spent 24 hours working on a deal that they thought was near closure—and had the support of the Fed—but which ultimately died after Paulson, Bernanke and Geithner decided against pursuing it, in part, because of the “optics” of Goldman’s ties to the government. “I’m sorry. I understand—I’m just as frustrated as you are. We just don’t have the money; we don’t have the authorization,” Warsh explained.At the same time, Sorkin reports, the Federal Reserve also tried to push Goldman Sachs and Citigroup together, but Vikram Pandit, Citi’s C.E.O., rejected the idea. “Well, that was embarrassing,” Blankfein exclaimed after he got off of one phone call with Pandit.Meanwhile, the government demanded Morgan Stanley merge with J. P. Morgan, an idea that both John Mack, Morgan Stanley’s C.E.O., and Jamie Dimon, J. P. Morgan’s C.E.O., did not want to pursue, but both held brief talks at the government’s urging.Paulson, Bernanke, and Geithner told Mack that he should be willing to sell his firm to J. P. Morgan for $1 a share. Mack, in an impassioned phone call with the three government leaders, rejected their demand: “There are 35,000 jobs that have been lost in this city between A.I.G., Lehman, Bear Stearns, and just layoffs. And you’re telling me that the right thing to do is to take 45,000 to 50,000 people, and put them in play, and have 20,000 jobs disappear? I don’t see how that’s good public policy.”The November issue of Vanity Fair hits newsstands in New York and Los Angeles on September 30 and nationally on October 6.

FEDupOctober 2nd, 2009 at 9:37 am

Again lack of transparency and disclosure seem to be the hallmarks of our govt leaders and the elites who operate no differently than “thieves in the night”. When does the public wake up and demand accountability for such corruption?!

MM CAOctober 2nd, 2009 at 9:43 am

Average joe American is too trusting still… either that or we are all just plain stupid or maybe we are just too scared….

GuestOctober 2nd, 2009 at 9:05 am

According to the latest data, the number of vacant U.S. homes touched 18.7-million in the second quarter. That is a daunting figure, of course, but it is more fun to put it in context. Assuming four people per household, the U.S. currently has enough surplus housing to put the entire population of the U.K., with room left over for Israel.

The AlarmistOctober 2nd, 2009 at 10:17 am

And you could build houses for all of humanity with nice little gardens and fit them all into the state of Texas. Don’t you just love these little factoids?

MM CAOctober 2nd, 2009 at 10:37 am

all the more reason why new home building is not coming back anytime soon… the current home builders are dead companies… Yet we have famlies doubling and tripling up now, homeless increasing at an alrming rate… I’m sure they will say bull doze all these to keep the home building companies aflaot… What a country… No one cares about the people who built this country and that would 300 million average joe americans

MM CAOctober 2nd, 2009 at 9:09 am

PENSION BUBBLE going to go Burst next year… Over 1 Trillion dollar problem… Get ready Average Joe american for this one….

The AlarmistOctober 2nd, 2009 at 10:18 am

It’s bigger than that … but hey, that’s what Soc Sec is for, right?If you think Obamacare went down poorly with the populace, just wait until you see how the proposed nationalisation of retirement savings is going to be received.

GuestOctober 2nd, 2009 at 7:15 pm

Yeah, like the private sector has done all that well!Anyone thinking that this could turn out well -be it public or private solutions- just doesn’t get it how things operate, how a grow-or-die system is destined to crash.

PeteCAOctober 2nd, 2009 at 10:15 am

The Death of Keynesian EconomicsWhy does Ben Bernanke keep hiding in his man-cave at the Fed, contemplating his navel, and wondering why he can’t “stimulate aggregate demand” by pumping more liquidity into the economy?Well … why for Pete’s sake?Is it just that Keynesian economists can’t escape the logical trap that they are now in? Is it because they really believe that the Austrian camp is hopelessly inept and mentally bankrupt? Or is it simply that economics is a “bastard science” and no general conclusions can ever be extrapolated from a bunch of theories that are all constructed from simple examples with no more than four independent variables?Good questions … all of them.But today our minds are drawn to Chart #8 titled the “Debt Illusion” in the following article …Chris Puplava ChartsSpecial thanks to Chris Puplava for this chart.This chart shows the decrease in the ability to raise GDP in the USA by pumping more debt into the national economy.But the chart should really be called “The Death of Keynesian Economics”.It’s kind of like reading Alice in Wonderland. Then one day you wake up and you realize … you really are Alice and this really is Wonderland. But the question is – will Ben Bernanke come to that realization? And when?PeteCA

EOctober 2nd, 2009 at 11:03 am

Thank you PeteCA. I’m consistently impressed by your rational approach to these economic times, and I absolutely appreciate the data-based arguments you find and put forth in these forums. I’m forwarding your link to some of my friends.I’ve wondered what might be some reasonable defensive strategies for those who have seen gains in the recent market rise. I’m a novice, so “stop loss” is about the limit of my thinking, although I had considered using equity or index options more recently: are your thoughts on how to respond to a market “that can remain irrational longer than (we) can stay solvent”?

PeteCAOctober 2nd, 2009 at 1:29 pm

I’ll take a stab at this. But the usual comments apply. This is an economics blog, I don’t give investing advice, and all the risks you take are your own.First … some humble pie. I called this current rebound quite badly myself. I was not surprised at the bounce in the Dow from the March lows. But I was caught unawares by the sustained nature of this rebound and by just how much money poured into the recovery. In fact, it is one of the strongest post-recession rebounds ever recorded. Some credit for good predictions probably should go to the guys over at “Money and Markets” because I think one of their commentators (Larry or Sean) actually called this rebound to go to 10,000 quite some time ago. That was a pretty close call, everything considered. I believe the sharpness of the rebound was initially due to short covering in the market, but since then it seems like a lot of investors have jumped in on the rising trend i.e. momentum traders.So what’s the matter with staying bullish and holding a stop-loss on your position. In a word … nuttin’ really. If you got in early on this piece of market action, and you’re holding good profits, then you can afford to cash out whenever it suits you. So long as you are very sure about your stop-loss arrangement and you believe it won’t let you down (in a sharp selloff), then you can continue to follow the trend. Be aware that if and when this trend stops and reverses, it’s likely that a lot of people will do the same as you … cash out very quickly. So you better be pretty nimble if you follow this strategy.Personally I believe we are seeing a bear market bounce in the Dow and S&P right now – i.e. it is a classic bounce in a long-term bear chart. But it is a strong reversal. Let’s suppose, however, that we adopt a Devils Advocate position. Let’s look at it from the point of view of an investing bull. If I was a bull, I would be thinking to myself that just possibly the market has got ahead of itself at the current time. The bounce-back has created a soaring value for P/E values that are simply out-of-step with the real US economy. I just don’t believe that corporate profits can truly bounce back anywhwere near as quickly as the market has priced in. Therefore, if I was a hypothetical bull, I would still be thinking that some kind of market setback is going to occur soon – and be watching for where to take profits. Bulls may believe that after another drop in the market, that the Dow will change and start rising more steadily. I am skeptical, but it’s definitely one possible option. Therefore, be aware that bullish investors trading these positions may try to cash out, and get back in later. The really key behavior will be to see what happens to the market after it does sell off. Does it go back to another major bear market (i.e. double-dip recession) or does it hit a resistance (above the March lows) and start rising again? Good question … and we’re just gonna’ have to see how it plays out.Whatever you do … be careful out there. The trend followers in this market will move money in a heartbeat if they sense things are going against them … it’s still a very nervous time for investing.Just some thoughts.PeteCA

GuestOctober 2nd, 2009 at 10:35 am

DSB Bank website still down (new)Friday 02 October 2009Clients of DSB Bank[Netherlands]continued to have difficulty in accessing their accounts online on Friday report various media.The bank is still officially blaming hackers for the problems but a bank employee told ANP press service on Friday morning that the website had crashed because of too many clients were trying to move their money, reports the NRC.Financial services watchdog AFM which has already fined DSB and is keeping a careful eye on the bank, declined to comment on whether it is investigating the possibility that the bank intentionally limited access to its website on Thursday to prevent a bank run, says the Volkskrant.The bank told the paper it has opened a telephone number through which customers can transfer money and that the situation is calm following the withdrawal of around €60m, or one percent of clients’ total savings, on Thursday.Mistakes admittedOn Thursday evening two of DSB’s executives admitted that the bank has made mistakes in the past when it comes to mortgage loans. Speaking on Nova, Hans van Goor said ‘With the wisdom we have in 2009, we would not make the same mistakes.’ His colleague Robin Winschoten made a similar apology on the Pauw & Witteman show.The problems with DSB’s website started on Thursday morning following a call by Pieter Lakeman, who heads a lobby group of disgruntled DSB clients, to remove their money from the bank. The call was intended to lead to a run on the bank and force it into bankruptcy.In a reaction on Friday, Lakeman told the NRC: ‘DSB is not prepared to talk about compensation. If the bank is bankrupt, then we can deal with the receiver who will look only at the interests of creditors’.Meanwhile, the AD reported on Friday that the bank’s owner, Dick Scheringa, was trying to avoid the press although this was denied by the bank.’Totally idiotic’Earlier this week finance minister Wouter Bos described the mortgage sales practices of the DSB bank as ‘totally idiotic’ reports Friday’s Volkskrant.A parliamentary majority wants him to take action against the bank but Bos has made it clear this is the task of the financial services watchdog AFM which has already fined DSB and is keeping a careful eye on the bank, the paper says.Meanwhile, despite its ‘outsider’ status, the mainstream banks are now rallying around in support of the DSB, reports the paper. The central bank and the banking association have described Lakerman’s call for a bank run as ‘not very sensible’, the paper says.If the DSB collapses, the other banks will be responsible for ‘coughing up’ the money to ensure DSB clients get their savings back under the bank guarantee scheme, the paper points out. On top of this they stand to lose billions of euros from the mortgages they have sold to DSB.©

GuestOctober 2nd, 2009 at 7:24 pm

How can you withdraw from a website? I know that bank websites allow you to transfer between accounts within the bank, but I don’t think that wire transfers are allowed.If it was the regular back-end servers dealing with ATM activity then I could understand, but not the public-facing website.

ChrisLOctober 2nd, 2009 at 10:40 am

Greenspan is saying that once in a century, private credit breaks down (because of inadequate risk models), and that the solution that has been adopted, ie substituting sovereign credit for private credit, is the correct one.But, what Greenspan avoids to say is that the economy could only grow as it did during the last three decades when total credit was doubling every 7 to 8 years. In the US for instance, during the last eight years, private credit including all outstanding liabilities doubled from $ 25 trillion to $ 50 trillion, and sovereign doubled from $ 5 trillion to $ 10 trillion.So for the US economy to continue growing in the next 8 years as it did in the past, we need to pile on another $60 trillion of debt. As private credit has already broken down and can’t add a $ more as businesses and households are already too leveraged and every $ of additional credit gets destroyed with more than a $ of default (private credit is actually falling), the sovereign is going to have to substitute all of it and more, ie pile on at least another $ 60 trillion of debt all by itself. Which is obviously ridiculous, as in the end, whatever sovereign debt is owed will have to be paid by all households.The only thing that can be achieved by substituting the fall in private credit with an equivallent rise in sovereign credit is to postpone the credit and economic collapse. During that time you get a Japanese L shaped recession (or mutlitple small Ws, which looks the same), no growth, no collapse either, which is what our leaders probably want to achieve as their ultimate goal is to kick the can as far as possible so that it doesn’t explode whilst they are in charge.In the end, American households will have to REALLY deleverage (not simply transfer some of their debt to the sovereign which is exactly equivallent with not deleveraging).I am amazed by Greenspan’s short-sightenedness, or maybe is he just as everybody else, trying to buy time.

GuestOctober 2nd, 2009 at 7:32 pm

Yeah, it’s funny how obvious all of this is- fundamentals is something that we just don’t want to admit to else we have one of those Wile E. Coyote moments.

GuestOctober 2nd, 2009 at 11:13 am

Over the last two weeks a new pattern in gold trading has emerged.Around the same time of day a volume sale of gold slams down the price $15-$20/oz, but then there is an immediate re-purchase as if others are waiting for the predicable slam and pushing the price back up $15-$20/oz. The quickness suggests confidence by the buyers that gold will go higher in spite of continued slams by the big sellers.

PeteCAOctober 2nd, 2009 at 1:38 pm

There does seem to be strength at the $1,000/oz value for gold. But cross-check the market moves against the dollar. Gold has been trading inversely against the $USD lately. A lot of the volatility you are seeing in gold is a direct reflection of volatility in the $USD right now. The $USD hit a resistance level at 76 … and it is unclear whether the dollar will bounce upwards from here or sink below this level. Keep in mind that more hedge funds are switching to the dollar as a carry trade. Some of these sharp movements that you are seeing are probably carry trades (out of the dollar currency), or reversals as some trades are sold off. Meanwhile the G20 bankers and the IMF have been trying to jawbone the value of gold down. We’ll see if IMF gold sales have any impact … the gold may just get bought up by hungry investors in Asia (and central banks that need to diversify!).PeteCA

GuestOctober 2nd, 2009 at 1:28 pm

Image flash…Slim Pickens riding the A-bomb in Dr. Strangelove. He’s all giddy, enjoying the view and ride. Yeehawww! Forgive me. This financial mess is much bigger than anyone, or any government. Intellectual honesty of the risk at hand is glaringly lacking. Even NR is pulling his intellectual punches. Don’t want to panic the markets into a correction excuse. Bull puckey! A LACK of transperancy and regulatory checks/balances got us into this mess, it will NOT lead us out in the long run. Our children and children’s children’s lives are at stake. Beat the drums folks…keep beating the drums!!!

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