Deutsche Bank Makes Dire Housing Projections
In June, Deutsche Bank forecast that home prices – covering 100 U.S. metropolitan areas – will decline an additional 14% from the first quarter of this year through the first quarter of 2011, for a total drop of 41.7%.
In March, it had projected that the total decline would be 39.6%.
By this measure, we are at least a year-and-a-half away from the end of this housing recession/crisis.
But that isn't the worst of the bank's predictions.
According to Deutsche Bank, 48% percent (or nearly half) of all US mortgages will be underwater by early 2011. This is a stunning, and dire, prediction that would affect some 25 million homes.
Deutsche Bank also predicts that 41% of all prime conforming mortgages will be underwater by early 2011. For prime "jumbo" mortgages (principal values larger than the conforming maximum), the underwater condition is projected to rise to 46%.
"Underwater" defines the condition of the mortgage balance outstanding being larger than the market value of the house. Prime mortgages are those issued to borrowers with the highest credit ratings. Conforming mortgages are those that come within the size limits prescribed for Fannie Mae and Freddie Mac underwriting. Prime conforming mortgages are considered the least risky of all mortgages.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the bank analysts said.
If the employment picture were to improve, the number of underwater mortgagees staying in their homes would be greater than it will be if unemployment doesn't peak for another 1-2 years, which was the situation after the last recession in 2001.
The Deutsche bank projections imply that it does not see an improved employment picture developing.
Some of the millions of currently unemployed are going to become future defaults, unless the unlikely event of increased employment occurs in the coming months.
At present, the average California foreclosure has a total loan balance of $425,134 on a home that is now worth $236,739 — meaning the average foreclosure is 45% underwater.
And the fallout may get worse; 72% of foreclosures aren't being put on the market because lenders are waiting to see how much additional loan modification assistance will be provided by the federal government.
However, being that our government is massively in debt — to the tune of $13 trillion — it may have reached the limit in bailouts and assistance that it can provide.
Rabu, 12 Agustus 2009
Sabtu, 08 Agustus 2009
The Fed Rules All
Despite the fact that more than half of the House of Representatives signed on as co-sponsors, and despite the efforts of Senators as disparate as Jim DeMint and Bernie Sanders, the Senate still managed to block a bill to audit the Federal Reserve on procedural grounds.
In July, the Senate brazenly chose not to have the Government Accountability Office increase its scrutiny of the Federal Reserve by auditing it and then issuing a report with its conclusions.
It's worth noting that DeMint is a southern, Christian conservative, and the liberal Sanders is a self-described socialist. The two rarely agree on anything, except that the Fed needs to be audited for the good of the nation.
As DeMint put it, " The value of our dollar, our whole economic system, rides on this unelected, secret agency called the Federal Reserve. We're not sure what they're doing right now.... Frankly, a lot of us here in this country, and around the world, are concerned that we're going to destroy the American dollar and the worldwide reserve currency."
DeMint said that he and some of his colleagues are concerned that the Federal Reserve will monetize the debt (by printing more money), buy our own debt, and ultimately devalue the dollar in the process.
Yet, despite the Fed's utter lack of transparency, the Obama administration has proposed giving it the power to regulate all financial institutions — banks, insurance companies, brokerage houses, etc.
And now we have seen a concerted effort to keep the GAO, and the Congress, from taking a look at the Fed's books. Clearly, the Fed fears oversight. It must feel quite relieved that it will continue operating in secrecy.
The fact hat a bill with 250 co-sponsors in the House could still fail in the Senate says a lot about the awesome power of the Fed.
For what it's worth, DeMint says he will keep bringing the bill up as an amendment to other Senate bills, hopefully getting it passed that way.
Why should you and all Americans care?
The Federal Reserve’s balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit. That's what Jim Grant, editor of Grant’s Interest Rate Observer, recently told CNBC.
With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.
In other words, it's all a giant charade.
Perhaps Americans are finally getting hip to the Fed's smoke and mirrors act.
According to a recent Gallup Poll, the Federal Reserve has the lowest approval rating of nine various federal agencies -- including the IRS.
In the July poll, only 30% of respondents gave a thumbs up to the Fed, while 40% said the IRS was doing an excellent or good job. A majority of the public (57%) sees the Fed’s current performance as either poor or fair.
That amounts to a serious public relations problem for the Fed.
But why should they worry? They've got the Senate under their thumb and on their side.
This is beyond politics. "We the people", and our interests, are not being represented. Instead, we are being blinded and then robbed.
"To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability. Thus the loudest arguments against greater transparency are likely to come from those friends, and understandably so." - Rep. Ron Paul
Despite the fact that more than half of the House of Representatives signed on as co-sponsors, and despite the efforts of Senators as disparate as Jim DeMint and Bernie Sanders, the Senate still managed to block a bill to audit the Federal Reserve on procedural grounds.
In July, the Senate brazenly chose not to have the Government Accountability Office increase its scrutiny of the Federal Reserve by auditing it and then issuing a report with its conclusions.
It's worth noting that DeMint is a southern, Christian conservative, and the liberal Sanders is a self-described socialist. The two rarely agree on anything, except that the Fed needs to be audited for the good of the nation.
As DeMint put it, " The value of our dollar, our whole economic system, rides on this unelected, secret agency called the Federal Reserve. We're not sure what they're doing right now.... Frankly, a lot of us here in this country, and around the world, are concerned that we're going to destroy the American dollar and the worldwide reserve currency."
DeMint said that he and some of his colleagues are concerned that the Federal Reserve will monetize the debt (by printing more money), buy our own debt, and ultimately devalue the dollar in the process.
Yet, despite the Fed's utter lack of transparency, the Obama administration has proposed giving it the power to regulate all financial institutions — banks, insurance companies, brokerage houses, etc.
And now we have seen a concerted effort to keep the GAO, and the Congress, from taking a look at the Fed's books. Clearly, the Fed fears oversight. It must feel quite relieved that it will continue operating in secrecy.
The fact hat a bill with 250 co-sponsors in the House could still fail in the Senate says a lot about the awesome power of the Fed.
For what it's worth, DeMint says he will keep bringing the bill up as an amendment to other Senate bills, hopefully getting it passed that way.
Why should you and all Americans care?
The Federal Reserve’s balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit. That's what Jim Grant, editor of Grant’s Interest Rate Observer, recently told CNBC.
With $45 billion in capital and $2.1 trillion in assets, the central bank would not withstand the scrutiny normally afforded other institutions, Grant said in a live interview.
In other words, it's all a giant charade.
Perhaps Americans are finally getting hip to the Fed's smoke and mirrors act.
According to a recent Gallup Poll, the Federal Reserve has the lowest approval rating of nine various federal agencies -- including the IRS.
In the July poll, only 30% of respondents gave a thumbs up to the Fed, while 40% said the IRS was doing an excellent or good job. A majority of the public (57%) sees the Fed’s current performance as either poor or fair.
That amounts to a serious public relations problem for the Fed.
But why should they worry? They've got the Senate under their thumb and on their side.
This is beyond politics. "We the people", and our interests, are not being represented. Instead, we are being blinded and then robbed.
"To understand how unwise it is to have the Federal Reserve, one must first understand the magnitude of the privileges they have. They have been given the power to create money, by the trillions, and to give it to their friends, under any terms they wish, with little or no meaningful oversight or accountability. Thus the loudest arguments against greater transparency are likely to come from those friends, and understandably so." - Rep. Ron Paul
Jumat, 17 Juli 2009
The Cost of War & Our Military Empire
While America debates how soon we can bring our troops home from Iraq, it's worth noting that -- more than 60 years after the end of WWII -- the US still has more than 50,000 troops in Germany and 30,000 in Japan.
In fact, the US has over 500,000 military personnel deployed on over 700 bases, with troops in 150 countries -- including 37 European nations.
It makes you wonder, as Ron Paul asks, in this time of deep economic crisis, why not just bring them all home?
The $3.1 trillion budget for fiscal 2009, signed by President Bush, raised military spending to inflation-adjusted levels not seen since World War II.
Defense spending is the third largest expense in the federal budget. Only Medicare-Medicaid ($739b), and Social Security ($700b) are bigger.
According to the Stockholm International Peace Research Institute, this year, the Pentagon will spend $607 billion for its day-to-day operations. Winslow Wheeler, a sharp-eyed bean counter at the Government Accountability Office and the Senate Budget Committee before joining the Center for Defense Information, a Washington think tank, puts the figure at $609 billion.
But who's counting?
Either way, the figure is more than the total combined military spending of every other country in the world. Put another way, the spending amounts to $1.2 million per minute, or $1.7 billion per day.
But the defense budget didn't include supplemental requests to fund the wars in Iraq and Afghanistan. The White House later asked Congress for $70 billion in supplemental war funding. Requesting the funding in installments allowed the White to avoid revealing the true costs of the wars.
Money for the Energy Department to work on the nation’s nuclear arsenal, the Selective Service, Homeland Security, healthcare for war veterans, and other defense-related spending pushes the total far higher.
Add up all projected defense-related spending for fiscal 2009 and $607 billion balloons to $750 billion — almost a third of all U.S. federal spending today. To put it another way, if the Pentagon were an independent country, it would be the 10th richest in the world.
By year's end, the cost of the Iraq war will rise to $694 billion, making the conflict the most expensive in US history, besides WWII.
To get a feel for the true costs of the Wars in Iraq and Afghanistan, check out the following. It illustrates one of the many reasons that our budget is busted and our debt ballooning:
http://costofwar.com/
While America debates how soon we can bring our troops home from Iraq, it's worth noting that -- more than 60 years after the end of WWII -- the US still has more than 50,000 troops in Germany and 30,000 in Japan.
In fact, the US has over 500,000 military personnel deployed on over 700 bases, with troops in 150 countries -- including 37 European nations.
It makes you wonder, as Ron Paul asks, in this time of deep economic crisis, why not just bring them all home?
The $3.1 trillion budget for fiscal 2009, signed by President Bush, raised military spending to inflation-adjusted levels not seen since World War II.
Defense spending is the third largest expense in the federal budget. Only Medicare-Medicaid ($739b), and Social Security ($700b) are bigger.
According to the Stockholm International Peace Research Institute, this year, the Pentagon will spend $607 billion for its day-to-day operations. Winslow Wheeler, a sharp-eyed bean counter at the Government Accountability Office and the Senate Budget Committee before joining the Center for Defense Information, a Washington think tank, puts the figure at $609 billion.
But who's counting?
Either way, the figure is more than the total combined military spending of every other country in the world. Put another way, the spending amounts to $1.2 million per minute, or $1.7 billion per day.
But the defense budget didn't include supplemental requests to fund the wars in Iraq and Afghanistan. The White House later asked Congress for $70 billion in supplemental war funding. Requesting the funding in installments allowed the White to avoid revealing the true costs of the wars.
Money for the Energy Department to work on the nation’s nuclear arsenal, the Selective Service, Homeland Security, healthcare for war veterans, and other defense-related spending pushes the total far higher.
Add up all projected defense-related spending for fiscal 2009 and $607 billion balloons to $750 billion — almost a third of all U.S. federal spending today. To put it another way, if the Pentagon were an independent country, it would be the 10th richest in the world.
By year's end, the cost of the Iraq war will rise to $694 billion, making the conflict the most expensive in US history, besides WWII.
To get a feel for the true costs of the Wars in Iraq and Afghanistan, check out the following. It illustrates one of the many reasons that our budget is busted and our debt ballooning:
http://costofwar.com/
Selasa, 14 Juli 2009
What Does $1 Trillion Look Like?
According to Goldman Sachs, the U.S. government may sell a record $3.25 Trillion of debt this fiscal year ending September 30, in an attempt to end the steepest U.S. recession in half a century.
This additional debt will be added to the current $11.25 Trillion national debt, meaning the total debt will probably exceed the entire GDP before the year is over. Last year, the GDP was $14 Trillion, but it is undergoing a serious contraction this year.
Meanwhile the budget deficit has already reached $1 Trillion -- the first time it has ever reached that lofty sum -- and it is expected to reach $1.84 Trillion by the end of this fiscal year (Sept. 30).
We shouldn't be surprised if the deficit reaches $2 Trillion, as these numbers have already gotten so completely out of hand. And once you're talking a about a trillion, what's a few billion more, right?
With all this talk of trillion of dollars, and the figure being tossed around rather casually, perhaps we should put $1 Trillion in perspective.
A stack of $1,000 dollar bills four inches high would equal $1 million.
A stack of $1,000 dollar bills 358 feet high would equal $1 billion.
A stack of $1,000 dollar bills 67.9 miles high would equal $1 Trillion.
You could line the side of the road from Springfield, MA to Albany, New York with $1,000 dollar bills -- stacked on their sides -- and that would equal $1 trillion.
The following graphic provides a better understanding of amount of money we're talking about. Bear in mind, this is only $1 Trillion; the federal budget for ONE YEAR is $3.6 Trillion, and our debt will soon exceed $13 Trillion.
http://www.pittsburghgrapevine.com/forums/display_topic/id_84/
According to Goldman Sachs, the U.S. government may sell a record $3.25 Trillion of debt this fiscal year ending September 30, in an attempt to end the steepest U.S. recession in half a century.
This additional debt will be added to the current $11.25 Trillion national debt, meaning the total debt will probably exceed the entire GDP before the year is over. Last year, the GDP was $14 Trillion, but it is undergoing a serious contraction this year.
Meanwhile the budget deficit has already reached $1 Trillion -- the first time it has ever reached that lofty sum -- and it is expected to reach $1.84 Trillion by the end of this fiscal year (Sept. 30).
We shouldn't be surprised if the deficit reaches $2 Trillion, as these numbers have already gotten so completely out of hand. And once you're talking a about a trillion, what's a few billion more, right?
With all this talk of trillion of dollars, and the figure being tossed around rather casually, perhaps we should put $1 Trillion in perspective.
A stack of $1,000 dollar bills four inches high would equal $1 million.
A stack of $1,000 dollar bills 358 feet high would equal $1 billion.
A stack of $1,000 dollar bills 67.9 miles high would equal $1 Trillion.
You could line the side of the road from Springfield, MA to Albany, New York with $1,000 dollar bills -- stacked on their sides -- and that would equal $1 trillion.
The following graphic provides a better understanding of amount of money we're talking about. Bear in mind, this is only $1 Trillion; the federal budget for ONE YEAR is $3.6 Trillion, and our debt will soon exceed $13 Trillion.
http://www.pittsburghgrapevine.com/forums/display_topic/id_84/
The Debt and Interest Rates; a Vicious Cycle
The interest on this year’'s debt will cost taxpayers $565 billion, or 4 percent of GDP. That number will only increase in coming years. And naturally, with a shrinking GDP, it will become an ever increasing percentage of the overall economy.
While budget expenditures are increasing, government revenues so far this year have dropped 18 percent from a year ago. Government income and revenues are going in the wrong directions.
Our massive debt will put upward pressure on interest rates.
According to government projections, each 1% rise in interest rates will add $50 billion annually to the debt, and eventually $170 billion annually over time.
If the economy were to recover, demand for credit by the private sector would rise, meaning the government’s borrowing costs would also increase. That would raise interest rates for everyone. This makes for an odd conundrum; do we hope for a recovery at the expense of higher interest rates?
So we've begun a vicious cycle; the growing debt will eventually increase interest rates, and increasing interest rates will only further add to the national debt. Paying debt interest gets us nothing in return; it doesn't generate economic growth.
The government's falling revenues will spur the government to issue more bond debt, which will eventually have to be paid back with interest.
According to Citi Group, the federal government will sell more than $5 trillion in new debt this year and next.
The cavernous hole we're in just keeps getting continually deeper.
The interest on this year’'s debt will cost taxpayers $565 billion, or 4 percent of GDP. That number will only increase in coming years. And naturally, with a shrinking GDP, it will become an ever increasing percentage of the overall economy.
While budget expenditures are increasing, government revenues so far this year have dropped 18 percent from a year ago. Government income and revenues are going in the wrong directions.
Our massive debt will put upward pressure on interest rates.
According to government projections, each 1% rise in interest rates will add $50 billion annually to the debt, and eventually $170 billion annually over time.
If the economy were to recover, demand for credit by the private sector would rise, meaning the government’s borrowing costs would also increase. That would raise interest rates for everyone. This makes for an odd conundrum; do we hope for a recovery at the expense of higher interest rates?
So we've begun a vicious cycle; the growing debt will eventually increase interest rates, and increasing interest rates will only further add to the national debt. Paying debt interest gets us nothing in return; it doesn't generate economic growth.
The government's falling revenues will spur the government to issue more bond debt, which will eventually have to be paid back with interest.
According to Citi Group, the federal government will sell more than $5 trillion in new debt this year and next.
The cavernous hole we're in just keeps getting continually deeper.
Budget Deficit Highest Since WWII
The Office of Management and Budget estimates that the budget deficit this fiscal year (which ends Sept. 30) will be $1.84 trillion. For the 2010 fiscal year, the estimate is $1.26 trillion.
Measured against the economy, this year’'s shortfall is 13 percent of the gross domestic product. Next year’'s deficit would be 8.5 percent of GDP. These deficit projections are the highest in more than 60 years, since the end of World War II.
Economists generally agree that a country'’s annual deficits should not exceed 3 percent of economic output.
The Office of Management and Budget estimates that the budget deficit this fiscal year (which ends Sept. 30) will be $1.84 trillion. For the 2010 fiscal year, the estimate is $1.26 trillion.
Measured against the economy, this year’'s shortfall is 13 percent of the gross domestic product. Next year’'s deficit would be 8.5 percent of GDP. These deficit projections are the highest in more than 60 years, since the end of World War II.
Economists generally agree that a country'’s annual deficits should not exceed 3 percent of economic output.
Senin, 13 Juli 2009
US Bank Closings
2007 - 3
2008 - 25 (more than in the previous five years combined)
2009 - 53, and counting. It's only July.
The FDIC’s list of “troubled banks” stood at 305 at the end of the first quarter, the latest data available. By the end of 2008, the agency expected bank failures to cost its insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. However, its problems have grown continually worse.
The FDIC has $53 billion to cover $4.4 trillion in deposits. Does that make you feel insured?
2007 - 3
2008 - 25 (more than in the previous five years combined)
2009 - 53, and counting. It's only July.
The FDIC’s list of “troubled banks” stood at 305 at the end of the first quarter, the latest data available. By the end of 2008, the agency expected bank failures to cost its insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. However, its problems have grown continually worse.
The FDIC has $53 billion to cover $4.4 trillion in deposits. Does that make you feel insured?
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