Dec 3 2010

The con of the century – Federal Reserve made $9 trillion in short-term loans to only 18 financial institutions. Since 2000 the US dollar has fallen by 33 percent. The hidden cost of the bailouts.

The Federal Reserve released a stunning report showing the details of bailouts that occurred during the peak of the credit crisis.  They won’t call it “bailouts” but giving money when others won’t is exactly that.  What the report shows is that the Fed operated as a global pawnshop taking in practically anything the banks had for collateral.  What is even more disturbing is that the Federal Reserve did not enact any punitive charges to these borrowers so you had banks like Goldman Sachs utilizing the crisis to siphon off cheap collateral.  The Fed is quick to point out that “taxpayers were fully protected” but mention little of the destruction they have caused to the US dollar.  This is a hidden cost to Americans and it also didn’t help that they were the fuel that set off the biggest global housing bubble ever witnessed by humanity.  A total of $9 trillion in short-term loans were made to 18 financial institutions.  Still think the banking bailout didn’t happen or cost us nothing?  Let us first look at the explosion of assets on the Fed balance sheet.

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Nov 30 2010

The magical 2.2 housing ratio between median nationwide home prices and household income – Nationwide home prices still inflated by 30 percent based on 50 years of household data.

The typical American family is facing the biggest economic uncertainty since the Great Depression and must feel like their lives are in a washer spin cycle.  Many unemployed Americans are now entering a stage where unemployment insurance is being cut off which will send tens of thousands of people into the street.  The mainstream media won’t cover this because they rather gossip about the next tan face to drink themselves into a gutter at a nightclub.  43 million Americans are receiving some kind of food assistance yet this is some kind of recovery?  Many are wondering how banks can produce such large profits without actually producing anything real or of substance in the economy.  Yet banks are largely casinos that now operate to siphon off real wealth from the economy through bailouts, frauds, and other activities that harm the overall economy.  In a decade where banks were unleashed to do what they may with limited regulation and a cozy Fed, we are now left with an economy in tatters but a banking sector that is still healthy based on oversized bonuses.  I wanted to gather data over the last 60 years and measure how most Americans are now fairing.  The data shows a largely underwater nation.

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Nov 26 2010

The shadow bailout of the commercial real estate industry – bailing out the Ritz, failed million dollar unit condo projects, and buying empty shopping malls. Why the Fed wants to destroy the US dollar and continue the failed bailouts of the banking sector.

It is amazing that so little information about commercial real estate has made it onto the mainstream media.  Few in the public realize that commercial real estate (CRE) has actually fallen harder than residential real estate yet 99.9 percent of all media coverage has been strictly on residential real estate.  The CRE market is enormous with over $3 trillion in CRE loans still outstanding and festering on the balance sheet of banks.  At one point, CRE values reached over $6 trillion in the US with $3 trillion in loans.  Today, CRE values are down to roughly $3.3 trillion yet the loan amount still hovers at $3 trillion.  This is the disastrous end game of being underwater in real estate.  While people fill the stores this holiday season consuming money they don’t have (after all nothing says thank you America like buying imported goods) property values are still in the dark levels of the trough.  The banking sector is doing a complicated shadow bailout through quantitative easing, ignoring missed payments, rolling over CRE loans, and ultimately trying to sucker taxpayers into paying the entire bill.  Ultimately this shadow bailout has been going on for years and no one seems to even care.

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Nov 22 2010

The infection of massive global debt and the era of permanent bailouts – Global bankers on a mission to dilute currencies around the world. Ireland GDP equal to Louisiana GDP.

The problems plaguing Ireland are common and something very familiar with Americans.  Irish banks got drunk on housing bubble beer and loans were made without any actual thoughtful analysis of whether the loans would be paid back.  Now the European Union is stepping in with the IMF to bailout Ireland not because it has a soft heart or cares about the people in the Celtic country but because it is trying to protect the big interconnected web of banking interests of German, Spanish, English, and US banks.  That is the ultimate issue at hand.  After all, Ireland has a GDP of $222 billion or roughly the same amount as Louisiana so it doesn’t seem like such a small country could captivate financial news for weeks on end.  But if you look at the external debt of Ireland it just blows you away in relation to the size of the country.  Let us take a look at these metrics:

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Nov 19 2010

When peak credit implodes on the consumer balance sheet – $1 trillion in consumer debt has been removed from the market since 2008. Only consumer debt category growing is student loan debt.

The U.S. insatiable consumer machine has reached a peak debt scenario.  Household balance sheets are simply unable to take on more debt on their already financially sore shoulders.  At the core of the Federal Reserve quantitative easing actions is the mission to lower the interest rate since consumers simply are unable to borrow more.  By lowering interest rates, it provides a shadow boost to purchasing power.  The way this occurs is through allowing borrowers to pay more for assets yet keep their monthly payments low enough to coincide to their now lower standard of living and stagnant wages.  Being in a position like this is troubling to most Americans who hold very dearly the idea that the core mission of their government and financial institutions is to grow a healthy middle class.  Many are starting to painfully realize that the government and banks are primarily looking out for their bottom line and this translates to exporting the U.S. middle class standard of living.  As you will see with the chart below, consumer debt peaked early in 2008.

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Nov 16 2010

California facing $20 billion budget deficits deep into 2016 – $25 billion budget deficit starring California in the face for the next fiscal year and overly optimistic economic predictions.

California, the wealthiest state in our nation is facing some Herculean financial troubles yet again.  As the elections came to a dramatic close, it was announced that a $6 billion budget deficit emerged from “miscalculations” of potential revenue streams.  The current Governor was overly optimistic in many respects including an expectation that the Federal government would somehow throw like a wild pitch billions of dollars onto California’s doorstep.  This did not materialize.  So a lame duck session of Congress is left to deal with the current fiscal year gap of $6 billion but there is little incentive for the state Congress to act when new state legislatures are sworn in early in December.  The new Governor will have no honeymoon period and the 2011-12 fiscal budget is expected to have a $25 billion budget deficit.  The challenges California face are magnified by its decade long reliance on the housing industry for jobs and tax revenues.  Let us examine the challenges facing California moving forward.

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Nov 12 2010

The stalling of the California housing market – California Foreclosure Prevention Act has institutionalized a drawn out foreclosure process. 470,000 MLS listed and distressed homes in the state. California construction industry employing the same number of workers as it did in the early 1990s.

The state of California continues to grapple with the collapse of the enormous housing bubble.  The Governor earlier in the week called for a special emergency session to deal with a $6 billion deficit that emerged just weeks after the state budget was signed and the ink dried.  States with a large dependence on the housing market are suffering with larger issues since much of their economy was reliant on the volatile housing market.  This came in the form of construction employment, property taxes, jobs in the finance industry, and home spending typically through home loans.  In California, 470,000 homes are potential for sale properties with MLS inventory, homes with notice of defaults, those scheduled for auction, and properties that are bank owned.  The public can only view and can only put in a bid on roughly 170,000 homes but the large amount of problem housing will keep the state budget in limbo for years to come unfortunately.  To understand the California housing market, the biggest and most expensive in some areas, we need to first see the total potential inventory.

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