We did a post recently about the problems of the California pension system. That prompted a somewhat lively discussion in the comments section about the population of California. Thanks to those comments, I was reminded of an article I read several months ago that is “exactly on point”, as we lawyers say. Read more
Ouch. Although some analysts suggested July home sales would drop around 12 percent, the figures just in from the National Association of Realtors indicate July existing home sales numbers dropped more than 27 percent.
These reports are based on two different measures, new housing sales and existing housing sales, but tell me if there is a difference in the way the economic news is pitched.
I know, I know … the recession is over. But somehow statistical confirmation is outweighed by friends and family who still can’t find jobs, and 9.7% unemployment (new figures come out this week ) is hardly reassuring. I can assure you Wall Street is worried.
Predicting economic direction is tricky business .. especially now. I always hold off on this kind of stuff, especially since its so easy to misread the monthly tea leaves. But based on the following, and what my former colleagues on Wall Street tell me casually, I worry, although I can’t speak for my Mom, the eternal optimist.
Dead End Kids: Unemployment for people aged 16 to 24 is disastrous. Mom and Dad … remember the recession is over. And can I have some gas money?
The unemployment rate for young Americans has exploded to 52.2 percent — a post-World War II high, according to the Labor Dept. — meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time.
And worse, without a clear economic recovery plan aimed at creating entry-level jobs, the odds of many of these young adults — aged 16 to 24, excluding students — getting a job and moving out of their parents’ houses are long. Young workers have been among the hardest hit during the current recession — in which a total of 9.5 million jobs have been lost.
Home Sales Fall … Again: I know, I know … the recession is over. How’s that tax credit working out for you?
First-time buyers accounted for about 30% of sales in July and August, Yun said.
Without an extension of the taxpayer subsidy, the housing market could fall into a “double-dip” downturn, Yun said, which would stall the overall economic recovery.
Durbale Goods Down 2.4%: That’s manufacturing … blue collar jobs.
Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health. U.S. stock index futures fell on the report, while government bond prices rose.
“This is a bit of a reality check for people. It means there is more to be done and we are not out of the woods yet,” said Doug Roberts, chief investment strategist at Channel Capital Research.com in Shrewsbury, N.J.
Fresh Bank Bailouts: Small banks this time. But not a good sign for an economy that depends on lending, especially the lending power that small banks provide small businesses. It also doesn’t say much for “the recession is over”.
Geithner has trumpeted the end of some emergency financial programs as signs the economy is recovering. The department expects to see tens of billions of dollars in additional repayments to the fund in coming months.
But Doyle said FDIC officials still expect up to 150 bank failures this year. So far, 95 banks have been closed. That’s the most since 1992, during the savings-and-loan crisis.
Large Bank Loan Losses Tripple to $53 billion: Remember the recession is over, it’s just the engine that will drive us out is still pretty sick.
According to an annual report released by the four federal bank-regulatory agencies on Thursday, credit quality deteriorated to record levels this year.
The report said total identified losses of $53.3 billion in 2009 surpassed last year’s total of $2.6 billion, and nearly tripled the previous peak in 2002, when losses totaled $19.1 billion.
“While we expected a year-over-year increase in problem assets, given the weak economic environment, declining (commercial real estate) values, and previously weak underwriting, we were surprised by the magnitude of the increase,” wrote FBR Capital Markets analyst Scott Valentin in a research note to clients Friday.
With new figures coming out this week on jobs and housing, all of this could change. But not likely. If the stimulus was meant to jump start the economy then it has failed. If it was meant to simply grow government azt the expense of the private sector (which is precisely what it was meant to do) … that’s something Americans needed to know.
A proposal to hand out $3,000 to individuals who did not have good enough credit score to qualify for mortgages has been crossed off the Houston city council agenda this week.
The idea was to use the $3,000 to help individuals improve their credit score by a few points so they would qualify to buy a home.
Of course, it really does not matter that these individuals should not be buying a home in the first place.
The mayor got a bit embarrassed by all of the news coverage on Web sites like Drudge Report and nixed the idea before it got to council. You can bet if liberals were able to do this on the sly, it would have gone through and taxpayers would be paying off credit card debts and car loans for folks with crappy credit scores so they can buy a house that they can not afford.
From the Houston Chronicle…
Mayor Bill White this afternoon announced that a plan for the city to pay off some debts for first-time home buyers has been pulled from tomorrow’s City Council agenda.
Council members are now professing their “embarrassment” about the proposal, which has hit the national news circuit, including drudgereport.com., which picked up this morning’s Houston Chronicle story about the plan
“This issue has hit a nerve across this country,” said Councilwoman Anne Clutterbuck. “Not just here in the city of Houston. Giving people the ability to increase their credit score artificially because we’re allowing them to pay off their credit cards is exactly what got us into this (national economic) crisis in the first place.”
No kidding?
Thomas Sowell is a very bright man with uncommon common sense. A guest on my show only once (he is very tough to nail down), a free market thinker he does a great job of tracing the root cause of the current financial crisis, an even if you are one to believe that “greedy bankers” caused the collapse by eagerly plunging into the sub-prime market, you need to know who encouraged the “greed” and enabled these bankers and mortgage brokers to make loans that in years past would never have been considered. As usual Thomas Sowell touches on the very erosion of America’s soul: a willingness to compromise values and principals in the name of the “greater society”. The results as you will read, were disastrous.
What was lacking in the housing market, they say, was government regulation of the market’s “greed.” That makes great moral melodrama, but it turns the facts upside down.
It was precisely government intervention which turned a thriving industry into a basket case.
An economist specializing in financial markets gave a glimpse of the history of housing markets when he said: “Lending money to American homebuyers had been one of the least risky and most profitable businesses a bank could engage in for nearly a century.” That was what the market was like before the government intervened. Like many government interventions, it began small and later grew.
Take the time to read the entire article. It is short. It is the truth and is an example where the best intentions of governments can go so awry.