America's Race to the Bottom

Discussion in 'Business & Economics' started by kmguru, Jan 25, 2010.

  1. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Here is graphical summary of my monthly posts telling how home prices and sales were dropping since recession started in 2008:

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    Answer to graph's question: The're out looking for a job. Or moved out of US.*

    Second answer: About 20% are locked in to their current underwater home - can't sell it to move, even to take a job in another city.

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    "... Pending Home Sales Index for April fell by 1.6% to a reading of 81.9 ..." {BT thinks 100 is the long term average.}

    Photo and quote from: http://www.topstockportfolios.com/r.../1/0/aa41fb26c13906e6156654ea41e869b73daa3fc4

    Billy T Notes: The "Pending Home Sales Index" is a predictive or "leading" indicator of the National Association of Realtors. I think it is based on the new listing that realtors get plus signed, but not yet closed, contracts. I.e. the "hoped for sales" but not actual sales of both new and existing homes with builders starting fewer new "speculation houses". If true and falling that indicates the "shadow inventory" is probably growing - less people who want to sell are even listing with a realtor.

    Even worse: the pending sales of existing homes is down 12% in April. Read details at: http://noir.bloomberg.com/apps/news?pid=20601087&sid=aHI.qseGbemU&pos=2
    I assume large part of this is underwater owners are increasing in number and other owners don't want to even list their home for sale at current market prices. Many realtors, often ladies, must be thinking of going to nursing school, etc. as their industry is dying and driving more nails into the US economy’s coffin.

    -------------
    * Net flux of Brazilians is now out of the US as they can get good jobs back home in Brazil. (I suspect that true of Chinese too, for same reason, but I lack data.)
     
    Last edited by a moderator: May 27, 2011
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  3. Pinwheel Banned Banned

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    Answer: Force everyone to swap homes every two years by law, where they HAVE to offer a higher price each time lol.
     
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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Sounds like a good idea, provided the people are allowed to print money too (like the government).
     
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  7. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... private sector jobs rose by 38K during the month, which was well below the consensus expectations for a gain of about 179K. In addition, April’s report was revised to 177K from 179K. For comparison: March: +201K, February: +217K, January: +189K, December: +247K...." From: http://www.topstockportfolios.com/r.../1/0/6322cb7354b17cecf07f5f5a6d4f359789e9d7f5

    "...Initial Claims for Unemployment Insurance for the week ending 5/28 fell by 6K to 422K. This was above the consensus estimate for 417K but below last week’s total of 428K. Continuing Claims for the week ending 5/21 came in at 3.711M vs. 3.679M and last week’s 3.712M. ..." From: http://www.topstockportfolios.com/r.../1/0/015f5140d305ec89b22d4f9b8d63474c0c6b511a

    "... The Labor Department reported that Nonfarm Payrolls, which is one of the most closely followed gauges regarding the state of the economy at the present time, rose in the month of May by just 54,000. This was far below the consensus estimates for an increase of 244,000. ... The nation’s Unemployment Rate was rose to 9.1% ..." From: http://www.topstockportfolios.com/r.../1/0/e47969fba4f422010f9a12aeee1ec1050c69e429


    BT comment: That 38K is an amazingly few new jobs and unemployment claims are still running above recession level expectations of 400,000. The ever worsening housing market is causing the so called "recovery" to collapse. It never was anything more than corporations making more profits with fewer US workers each and selling more of their production outside of US. That can still continue for a while, but Joe American is finding it ever harder to put food on the table with his static purchasing power salary (if he has a job) and rising food and fuel prices. Social instability may result when his kids are going hungry. (1 in 8 American already needs assistance to put food on the table and government can't afford this growing much larger.)

    Week later data by edit: "Initial Claims for Unemployment Insurance for the week ending 6/4 rose by 1,000 to 427K."
    BT comment: Not much change but 427K of claims now greater than last week's 422K.
     
    Last edited by a moderator: Jun 9, 2011
  8. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression. Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data. ..." From: http://www.cnbc.com/id/43395857
     
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... Sales of existing U.S. homes decreased in May to the lowest level in six months, a sign that the housing market is lagging behind other parts of the economy.

    Purchases of existing homes fell 3.8 percent to a 4.81 million annual pace last month, ... data from the National Association of Realtors showed today in Washington. The median sales price declined from a year earlier and 31 percent of transactions were of distressed dwellings.

    An unemployment rate hovering around 9 percent and tight credit standards mean it may take years to absorb the 1.8 million distressed properties* on the market that are weighing down home values. Persistent weakness in the housing market is one reason why Federal Reserve policy makers are likely to maintain record stimulus when they meet this week. ..."

    From (just minutes ago release): http://noir.bloomberg.com/apps/news?pid=20601087&sid=atkErzwy1a38&pos=2 (Footnote is a Billy T comment)

    *Many banks are not now foreclosing. - I.e. letting owners stay in house "for free" (pay zero on the mortgage) as they have too many already foreclosed homes that they can not sell and have learned that when unoccuppied by the former, now evicted, owners that was even worse for the bank. - I.e. many have been broken into, vandalized, appliances stolen, etc.

    All these "deferred foreclosures" are not even counted in the above inventory of 1.8 million "distressed properties." - Not only is the official problem growing worse but the true problem is growing worse even faster! Some data on this "shadow market unsold excess" aspect is available in the bank's listing of number of owners behind on their mortgage payments, how many months behind, etc. but as too many "non-performing" loans makes the bank look "shaky" / unsound, it highly like they are very under reported.

    Also worth noting is that 30% of all purchases were paid 100% in full by cash at settlement. - The rich are taking advantage of the depressed market, underwater owners forced or choosing to sell, etc and then renting the properties. Rents are rising while home prices are falling as the evicted need to live somewhere and the populations is growing with far too few new homes being built to house them.
     
    Last edited by a moderator: Jun 21, 2011
  10. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... The average American household saw its real income decline between 2005 and 2009. Millions of middle-class Americans have been forced to “downshift”, as credit dries up and the costs of college and health care soar. Some 44 million* Americans live below the official poverty line. Consumer spending per household fell by 2.8% in 2009, the first time it had fallen since the Bureau of Labour Statistics started gathering data in 1984.

    Adjusting to this new world can be hard. Companies have long assumed that America would always be a land of mass affluence and upward mobility. But the American economy was undergoing a structural shift even before the 2007 financial crisis, with galloping rewards at the top and stagnation for many** of the rest. Some economists expect the malaise to last for years.

    Emerging giants such as India’s Tata and China’s Haier regard America as a natural market for their frugal products. The bottom of the pyramid is wider than most people realise. Firms that offer ultra-low prices will find themselves as much in demand in Detroit as in Delhi. ..."

    From: http://www.economist.com/node/18863898?story_id=18863898

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    *Billy T notes that 44.1 million Americans need food stamps to put food on the table, and the number is rapidly growing. Was 42.9 in September 2010.- Growing so fast that if rate continues more than 1/3 of ALL Amerians will need financial aid to eat by September 2012. See WSJ data source, with breakdown by states also, here:
    http://blogs.wsj.com/economics/2010/12/08/food-stamp-rolls-continue-to-rise/ and my post with more comments here:http://www.economist.com/node/18863898?story_id=18863898

    ** But don't dare suggest these ultra-rich, rapidly growing richer and getting an ever bigger percentage of the economic pie, should no longer get the tax reductions GWB gave them. If you do, here is what happens:

    "... Republican negotiators have walked out of talks with US Vice-President Joe Biden on how to reduce the country's debt.
    The US treasury department has warned the US risks default if Congress does not authorise more borrowing by August.
    Mr Biden said it was now up to President Obama and leaders of the Republicans and Democrats in Congress to decide on the way forward.
    The Republicans are resisting Democrat proposals for tax rises in any deal. ..." From:http://www.bbc.co.uk/news/world-us-canada-13900040
     
    Last edited by a moderator: Jun 25, 2011
  11. elte Valued Senior Member

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  12. Mr MacGillivray Banned Banned

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    Soon people will start building their own houses again, with their own hands, made from wood from their own forest, and if that is not possible, they will live in a cardboard box.
     
  13. kmguru Staff Member

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    Has anyone saw the 60 minutes last night as to how so many school children are hungry and no place to stay...We need a foreign aid program from another country in here....
     
  14. Fraggle Rocker Staff Member

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    I just read a commentary on that very subject in this morning's Washington Post, by award-winning columnist Steven Pearlstein:
    In order to make this country barely able to crawl out of this crisis, we absolutely must do three things:
    • Raise the debt ceiling
    • Decrease government spending
    • Raise taxes.
    No two of those actions alone will solve the problem. It takes waaay too long to accomplish anything in Washington, so no two of the three will be enough. We can't not raise the debt ceiling because they can't lower spending fast enough to avoid hitting the current ceiling. We can't not reduce government spending because they'll just keep hitting the new debt ceiling every couple of years, until it's so high that it becomes actuarially impossible to ever pay off the debt. And they can't not raise taxes for both of those reasons.

    The most they could accomplish with a two-out-of-three strategy is to postpone the dire consequences for 15-25 years, when someone else will be in charge and they can blame that guy! And at that point the consequences will be so dire that the entire world economy will crash, including China, Germany, Brazil and everybody else. It will be 1929 all over again, except that in 1929 gigantic regions of the world were not yet integrated into the Euro-American economy.

    It would be ironic if this happens in 2029, on the 100th anniversary of the beginning of the Great Depression. I sure hope I don't live to be 86 and find out what that's like. Those of you who expect to be alive then, perhaps with children whose future you care about, need to light a fire under your legislators and tell them to cut the crap.
     
  15. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Up dating my many earlier posts on the housing market's steady decline:

    "... The National Association of Realtors reports that Existing Home Sales fell in June by 0.8%. ... Sales were reported at an annualized rate of 4.77 million units, which was below the estimate for a rate of 4.91 million units. ..."

    From: http://www.topstockportfolios.com/r.../1/0/27848673fc461f4beb53a9ea23bec4ddbdff19ee

    Billy T comment: Not only are there no "green shoots" to be seen in the front yards, but now the grub worms have eaten all the grass roots. I know of one divorced couple sleeping in separate beds in the same house, which is "under water" financially and and now not even on the market as it could not be sold when it was listed for sale, even at a below their debt price, which they could accept. How much worse can it get?
     
    Last edited by a moderator: Jul 20, 2011
  16. wellwisher Banned Banned

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    The main reason we might need to raise the debt ceiling is due incompetence. Let me give an analogy. If you had a wife who was a good cook, good with arts and crafts, knows how to shop, etc., she can put together a nice party for a song.

    On the other hand, say you had a high maintenence wife, who has no practical skills other than her charms. She can still throw a nice party, but it will cost you double. If we were to lower her budget, her lack of practical skills would show. She would fight against this to avoid embarassment.

    We elect our leaders based on their entertainment value, which is why so much money is needed for deception and mud slinging. These are the high maintenence wives, with charm, who would look bad unless we provide enough resources to disguise their lack of practical ability.

    I like the idea of not raising the debt ceiling. Let the incompetence show begin. The rating may go down. Then we will see who are the practical wives. Once these rise to the occation things turn around and the ratings is restored.
     
  17. Me-Ki-Gal Banned Banned

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    This is what I been talking about Joe . Plain and simple. No recovery . Course Me family is a development family so I knew this shit about the market already. Banks hiding there losses . Not good ! Yeah buy a new house every 2 years . Now that sounds like something worth mandating . It is at least as good as mandating Health Care . Why not ? Everybody needs a place to live . It is one of the elements of social justice is it not
     
  18. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I agree with graph's conclusion. Furthermore, its getting worse.

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    See my post 192 comment, for one sad example of housing problem at a personnel level, but its not an unusual, case.
    Also note that part of the unemployment problem is due to "can't afford to sell my underwater house and move to take job offered me in another city".
     
    Last edited by a moderator: Jul 28, 2011
  19. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Once America was the land of the family farmer and the 4H.
    Now America is the land of Bankers, Wall Street and the 4D. *

    * (Debt, Deficit, Default, and Downgrade)

    BTW whether or not S&P etc. formally "down grade" US Treasury paper is not very important as a down grade, where it counts, has alredy started to happen:

    " ... Chicago Mercantile Exchange (CME) announced it was increasing the "haircut" that it applies to U.S. government debt posted as collateral by traders transacting on the exchange. ..." Read more here to understand why Treasuries worth less than face as collateral alone can collapse the global economy here: http://moneymorning.com/2011/07/29/...ault-or-downgrade-could-crush-global-economy/

    This actual "down grade in the markets" will be more obvious at the next auction of treasury paper (mid August as I recall).
     
    Last edited by a moderator: Jul 29, 2011
  20. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Up dating my many earlier posts (most recent is 192) on the housing market's steady decline:

    "... Housing Starts fell back 1.5% in July to an annualized rate of 604K.
    The June numbers were revised lower to an annualized rate of 613K from 629K (May: 549K). Building Permits for July fell 3.2% to a rate of 597K. ..."

    From: http://www.stateofthemarkets.com/re.../1/0/50a09c4b26bff77af1835118941b178313084936

    These housing reports are like a scratched record: Just keeps playing the same old refrain, over and over again. Perhaps it will stop when the US power grid goes down.

    two days later 18Aug11, by edit: "The National Association of Realtors reports that Existing Home Sales fell in July by 3.5%."
    From: http://www.stateofthemarkets.com/re.../1/0/58b01f0ac0d19657b7c19b3cc8c8792f2e4705a8
     
    Last edited by a moderator: Aug 18, 2011
  21. wellwisher Banned Banned

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    The housing problem, leading to the current unemployment problems, was the result of liberal interference with the free market. There was a well intentioned push for affordable housing. To make housing available to all, it required that banks and other lending institutions provide loans even for high risk debt. This fear was appeased via the government saying it would secure the loans. This loan security led to a new business opportunity to sell homes via these secure loans. Uncle was to cover the tab for both business and individuals.

    The entire process worked very well at first. It did provide affordable housing even to people who would not qualify under the old free market checks and balances. As more and more government secured housing loans got more and more people into the housing market, supply and demand drove up the price of housing creating instant home value appreciation. This quick buck help further drive demand since it was easy money (150K to 250K in a few years, wow)

    The increasing demand also created a lot of jobs in the construction industry since so much housing was being secured with loans. The house of cards was getting bigger and bigger, until the easy loan conditions of the first several years of the loans (very low payments with no money down) changed into normal payments. These new payments were very high, by contrast, more in line with the actual housing value, causing many people to go delinquent.

    This placed extra housing on the market, competing with new construction. The drop in new construction then meant loss construction jobs and therefore more people who could not afford to pay their mortgage. This meant even more housing being placed on the market, driving down the price of homes while also interfering with new construction.

    The construction industry, to lower costs began to hire more and more illegal aliens, who could do a good job at a fraction of the cost. This meant even more lost jobs with respect to the working people who had invested in the local home industry. The illegal aliens were made welcome by the liberals. Again the heart was in the right place but the brain was not engaged in terms of possible cause and effect; loss jobs for those who were in housing debt. The net result has been the collapse of the housing industry and all the spin off jobs, resulting in high unemployment. This is hard to fix because of huge government debts and obligations.

    The government bailout was part of the deal to secure bad debt, with the birds all coming to roost at the same time.
     
  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    I agree with your post except for the unsupported, and false, attacks on "liberals" as at fault (In your text now bold).

    That is part of your political agenda, not supported by the fact that the movement to put all into their own home, whether they could afford that or not, took place entirely during GWB's 8 years. In fact the collapse of his ill considered, non-economical, "homes for all" ideas even started while he was still the POTUS.

    Thus your speaking of "brain not fully engaged" is quite ironic.

    Can you give any support (other than your political beliefs) for the idea that
    "Liberals are to blame" ?
     
    Last edited by a moderator: Aug 16, 2011
  23. Workaholic Registered Senior Member

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    135
    That's part of it, but you forgot to mention how banks repackaged these subprime mortgages and sold them as "safe investments". In order to increase the sale of these "safe investments", many bank gave mortgages to people who were blantantly unable to repay. Meanwhile they also reaped a secondary benefit of being able to give themselves huge signing bonuses for signing up so many people to mortgages.

    Once the truth was apparent and these "safe investments" were downgraded to junk status, a large part of the financial system based on them also fell.

    The point is, if it had just been a simple housing collapse, that would have been bad enough. But the problem is much much worse due to the unprecedented greed displayed by the financial system. A problem that would have been a simple "kick in the nuts" is now a Gordian Knot. Now, where can we find an Alexander to solve our problems?
     

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