February 9, 2013
The bread and circuses news this week, of course, is the big snowstorm with blizzard conditions that Mother Nature delivered to the upper east coast in her ongoing attempt to let us know she is still the “boss of things” around here. The storm is not expected to be anywhere near as economically costly as Superstorm Sandy, but an estimated 600,000 are without electricity so far and more is to come today.
Meanwhile, there are some disturbing perturbations in our slow growing economy here in the US, where eleven million homeowners are still under water and foreclosure will begin to go up in those states where they were held up by the “robo-signing” lawsuits. One is a rise in home equity loans and lines of credit as homeowners feel more secure with rising home prices and a (slowly) growing economy. http://www.nbcnews.com/business/economywatch/americans-are-tapping-home-equity-again-1B8304322
Yet the steady, but uneven rise in housing prices around the country may not be all that it seems. Much of this rise has been due to hedge funds and other investors buying up bank-owned repossessed houses for cash, driving up prices in a bidding war in areas hardest hit by foreclosures. Although prices have risen in some of these areas as much as 20% or higher, they are nowhere near prices before the collapse. However, it does raise red flags for some over fears of a new housing bubble – as this article explains. http://www.nbcnews.com/business/housing-market-already-shows-signs-new-bubble-1B8246437
Subprime mortgages are making a comeback ahead of new mortgage lending rules from the FCPA going into effect next year, which do not prevent subprimes, but are purported to do away with many of the excesses that made them so very risky. And lenders who make subprime loans are not protected from lawsuits by the “safe haven” rule which protects from lawsuits those banks whose mortgages meet the lending criteria in the new rules.
Nevertheless, “The subprime market for risky mortgage backed securities is hot again and its revival is exceeding many people’s expectations, the chief market strategist at Rosenblatt Securities said. However, he expects it will end badly …
“… And it has noticed another huge development this week. The Wall Street Journal reported that a joint venture between AIC and Fortress will be issuing a securitization of personal loans.” http://www.cnbc.com/id/100445632
Any one of these things is enough to make this old gal’s heart go into palpitations. To have all three of them highlighted in the same week, makes me right giddy with anxiety.
So, is all this just fearmongering by the press? Well, I’m certainly no economist, but when the Federal Reserve, in it various permutations of QE 1-4, has bought up nearly four trillion dollars (so far) of toxic assets from the banks by creating money out of thin air (as explained by Chris Martenson in his article, “Quantitative Easing for Dummies” http://www.businessinsider.com/quantitative-easing-for-dummies-2013-2?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TheMoneyGame+%28The+Money+Game%29,) it seems to me the only way the Fed will ever get rid of this toxic waste is if the housing bubble re-inflates so they can sell them off at some value above zero. Perhaps I’m just not seeing the genius at work in all of this?
Yesterday, Bloomberg News announced that, “Record petroleum exports helped shrink the U.S. trade deficit in December to the smallest in almost three years as America moved closer to energy self- sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo.” http://www.bloomberg.com/news/2013-02-08/trade-deficit-in-u-s-plunges-on-record-petroleum-exports.html
Yet, with all our vaunted 100 years of energy resources, a still fragile economy – built to run on cheap energy – still circles the upper limits of the price at which energy costs make growth impossible. Mother Nature continues to ratchet up the costs of burning fossil fuels with more – and more costly – natural disasters each year.
And this morning, another Bloomberg article announced that, “China surpassed the U.S. to become the world’s biggest trading nation last year as measured by the sum of exports and imports, ending the U.S. supremacy in global commerce that emerged after the end of World War II in 1945.
U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said yesterday. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion.” http://www.bloomberg.com/news/2013-02-09/china-passes-u-s-to-become-the-world-s-biggest-trading-nation.html
What does all this mean for the average American? I’m pretty sure it means the foundations of the Empire still tremble and we are still on course for the next hard leg down in its decline. For fellow doomers, my advice would be to keep on prepping. And for the rest, just don’t quit your day job.