Sep 23 2011

The coming failure of Operation Twist – The Federal Reserve resurrects a program from the 1960s named after the Twist Dance. Appropriate timing for a Dancing with the Stars nation.

The Federal Reserve has literally run out of ideas.  Operation Twist, a throwback to the 1961 action taken by the Fed named after the Twist Dance fad at the time, is now back in 2011.  This time the Fed plans to purchase $400 billion of bonds with 6 to 30 year maturities while selling bonds with shorter term maturities.  The Federal Reserve continues to deal with a debt crisis with more debt.  The market has quickly spoken shaving off 700 points in two days and many global markets are now solidly back in bear market territory.  The problem with this program is that it assumes that the only problem with the economy is that not enough people are borrowing and spending.  The Fed goes after interest rates like a lion after a zebra.  Interest rates are not a problem.  Rates are at historical lows.  The problem of course is that household income has gone south for well over a decade.  The only true winners with these low rates are the banks who can access cheap money to wildly speculate in the stock market casino.

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Sep 19 2011

The banking gears of housing – Bank of America sells mortgage servicing rights on large loan pool to Fannie Mae. 400,000 loans shifted to Fannie Mae with $73 billion in unpaid principal.

Things just seem to get more perplexing with the housing market.  Back in August the Wall Street Journal discussed a deal between Fannie Mae and Bank of America.  The deal is odd even for the current banking system we have in place.  It was reported that Fannie Mae purchased the servicing rights to 400,000 loans for the grand total of $500 million.  Why would this be an issue you may ask?  Well first, Fannie Mae being a GSE does not specifically service mortgages so buying a pool of loans with unpaid principal of $73 billion seems out of place.  It also makes you wonder why a bank that has faced some troubles during the financial crisis would unload so many loans back to the government.  This concern clearly does not go unnoticed and a Representative from the housing battered state of California sent a letter to the Federal Housing Finance Agency (FHFA) asking for more details on the deal.

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Sep 16 2011

A new gilded age shines on America – 50 million Americans roam the countryside uninsured. 45 million Americans receiving food stamps up by 18 million since the Great Recession began in late 2007.

Much of the country is in psychological denial to the damage being created by the current recession.  Some even believe that we are fully in a recovery.  Part of this has to do with the way the safety net is designed but also the lack of coverage presented in the media.  We have over 45,000,000 Americans on food stamps. It is likely someone you know may be on the food assistance program but you wouldn’t know it because they are issued a debit card that looks like any other credit card.  You also have this stubborn notion that any problems that befall a family are completely their fault while big bankers make egregious errors and somehow it is the market that caused their ill fortune.  This twisted logic has become more apparent with the economic disaster data released in the recent Census report.  46,200,000 Americans are now considered to be in poverty, over 15 percent of the population.  It is no coincidence that this figure aligns with the food stamp data.  In essence we have close to 50 million Americans who are one debit card payment away from being in complete financial trauma.  What is happening to our country?

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Sep 13 2011

The $1 trillion student loan market begins to implode – Department of Education shows two-year default rates at for-profit colleges up to 15 percent. Student loan debt increasing at a rate of $170,000 per minute.

We seem to have entered an era of perpetual and unshakeable financial bubbles and the next ripe bubble to burst is in the student loan market.  Student loan debt has become the fastest growing debt sector throughout the economic recession.  Growth at for-profit colleges has been incredible and tactics used at these institutions reflects patterns seen with the subprime mortgage operators.  They target low income markets and exploit government backed loans and pump them through local area lenders.  It is a bubble of mammoth proportions and it is no surprise that data released by the Department of Education only a few days ago reflects a default pattern reminiscent of the subprime crisis.  Default rates on student loans at for-profit institutions are absolutely abysmal.  There is no question now that the student loan bubble is now the next market to pop.  What will be the consequences of the $1 trillion student loan market contracting?

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Sep 9 2011

How Wall Street and the media forgot about the middle class – 10 incredible charts highlighting the problems facing the middle class. China labor costs, debt ratios, Euro-zone finances, and balance sheet disequilibrium.

The mainstream press and ego driven politicians have completely forgotten about the middle class in this country, pretending as if ignoring the cacophony of discontent would simply make it go away.  Both parties are simply doing the bidding of the financial upper-crust and that is why you rarely hear about household income being discussed in any television show.  Yet as we are seeing with record low consumer sentiment to accompany a broken balance sheet and empty savings accounts, the public can get a dose of reality by simply examining their own life.  Are things really better?  What Americans should now fully realize is that the bailout schemes were nothing more than a wicked robbery and transfer of wealth from the majority to a slim connected plutocracy.  Those who write and advocate for our laws, the politicians, have made sure a national thievery would go unpunished courtesy of campaign contributions.  The system is completely broken and the disappearing middle class is merely a consequence of this financial plundering.  Since the tech crash, the housing crash, or the energy debacles were completely missed by the media do not expect to have any guidance coming from the paid spokesmen of Wall Street.  When did Wall Street and the media decide the middle class was irrelevant?

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Sep 6 2011

The giant gamble in the desert – how Las Vegas bet big on commercial and residential real estate and lost big. Home prices in Las Vegas now down 60 percent from their peak and nearly 1 out of every 5 mortgages is in foreclosure.

Las Vegas is an economic enigma.  A gambling and resort paradise planted in the middle of the barren Southwest desert like an electrical oasis.  Very few areas witnessed such a large boom in both residential and commercial real estate rolled into one.  In a city known for big wins and even bigger defeats the real estate debacle is exacting a painful toll on the desert region.  An almost perfect storm of a crashing real estate bubble, high energy costs, and a forced austerity are forcing painful cuts in the city of splurge.  It was hard to imagine the rate of growth in the area keeping pace with what experts were predicting but many rushed in buying homes sight unseen.  Las Vegas home values are now down almost 60 percent from their peak reached in 2007.  What came on so quickly may take decades to repair.

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Sep 4 2011

101 years of the most secretive central bank in history – Dollar has fallen over 90 percent since Fed was put into place. Fed running out of ammo with negative interest policy.

Few people realize how secretive the Federal Reserve operates even though it is the central bank to our financial system and wields a sword strong enough to be called Excalibur.  The Federal Reserve came about from a secretive meeting on Jekyll Island by some of the world’s top financiers back in 1910 including the powerful J.P. Morgan.  What very few know is that in November of 2010 Ben Bernanke made a trip to the island off of Georgia to commemorate the 100-year anniversary of the original meeting.  This original meeting was held in the strictest of secrecy lest the public realize how the powerful bankers sought to aggregate power in a few hands.  With the too big to fail becoming even bigger and the Fed blocking full out audits like a hockey goalie, it is nice to see few things change even after 100-years of destroying the U.S. dollar.

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