Sunday, October 12, 2008
First a reminder from 2 years ago that Greenspan set this crash up! Now it's too late but theyre Taking Hard New Look at a Greenspan Legacy
02/21/07 "ICH" -- -- This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way. “The slump in home prices from the end of 2005 to the end of 2006 was the biggest year over year drop since the National Association of Realtors started keeping track in 1982.” (New York Times) The Commerce Dept announced that the construction of new homes fell in January by a whopping 14.3%. Prices fell in half of the nation’s major markets and “existing home sales declined in 40 states”. Arizona, Florida, California, and Virginia have seen precipitous drops in sales. The Commerce Department also reported that “the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate.” (Marketwatch)
The bottom line is that inventories are up, sales are down, profits are eroding, and the building industry is facing a steady downturn well into the foreseeable future. The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines. Congress is now looking into the shabby lending practices that shoehorned millions of people into homes that they clearly cannot afford. But their efforts will have no affect on the loans that are already in place. $1 trillion in ARMs (Adjustable Rate Mortgages) are due to reset in 2007 which guarantees that millions of over-leveraged homeowners will default on their mortgages putting pressure on the banks and sending the economy into a tailspin. We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down. The banks and mortgage lenders are scrambling for creative ways to keep people in their homes but the subprime market is already teetering and foreclosures are on the rise.
There’s no doubt now, that Fed chairman Alan Greenspan’s plan to pump zillions of dollars into the system via “low interest rates” has created the biggest monster-bubble of all time and set the stage for a deep economic retrenchment. Greenspan’s inflationary policies were designed to expand the “wealth gap” and create greater economic polarization between the classes. By the time the housing bubble deflates, millions of working class Americans will be left to pay off loans that are considerably higher than the current value of their home. This will inevitably create deeper societal divisions and, very likely, a ">permanent underclass of mortgage-slaves. A shrewd economist and student of history like Greenspan knew exactly what the consequences of his low interest rates would be. The trap was set to lure in unsuspecting borrowers who felt they could augment their stagnant wages by joining the housing gold rush. It was a great way to mask a deteriorating economy by expanding personal debt. The meltdown in housing will soon be felt in the stock market which appears to be lagging the real estate market by about 6 months. Soon, reality will set in on Wall Street just as it has in the housing sector and the “loose money” that Greenspan generated with his mighty printing press will flee to foreign shores. It looks as though this may already be happening even though the stock market is still flying high. On Friday, the government reported that net capital inflows reversed from the requisite $70 billion to AN OUTFLOW OF $11 BILLION! Michael Whitney "The Second Great Depression
Now that it's too late they are Taking Hard New Look at a Greenspan Legacy: Many of you know I was waiting for this Coolapse. It hurt to watch this set up for years! Remember what the double speak idiot said? “Not only have individual financial institutions become less vulnerable to shocks from underlying risk factors, but also the financial system as a whole has become more resilient.” — Alan Greenspan in 2004! George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.” And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
One prominent financial figure, however, has long thought otherwise. And his views held the greatest sway in debates about the regulation and use of derivatives — exotic contracts that promised to protect investors from losses, thereby stimulating riskier practices that led to the financial crisis. For more than a decade, the former Federal Reserve Chairman Alan Greenspan has fiercely objected whenever derivatives have come under scrutiny in Congress or on Wall Street. “What we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so,” Mr. Greenspan told the Senate Banking Committee in 2003. “We think it would be a mistake” to more deeply regulate the contracts, he added.
Today, with the world caught in an economic tempest that Mr. Greenspan recently described as “the type of wrenching financial crisis that comes along only once in a century,” his faith in derivatives remains unshaken. Too late but they are taking a hard look at a Greenspan Legacy
* I have been saying for years now that this manufactured perfect storm will dwarf WW2 abd the Great Depression combined. It is just starting! The bankrupting of America is only one part of it. If this election cannot be stolen for McCain Bush has till January 20th to do his worst damage to our Democracy yet! Anywar two years ago I said the Dow has to get back to where it was before Bush and Greenspan inflated it with their lies of harmful Bravedo then it will go down from there! This is serving two purpposes! It is giving Bush more control over our America and us and at the same time The financial crisis could yield a bumper crop of U.S. military recruits if the recent plunge in stocks translates into job losses and an even weaker economy, defense officials said on Friday.
"We do benefit when things look less positive in civil society," said David Chu, under secretary of defense for personnel and readiness. "That is a situation where more people are willing to give us a chance. I think that's the big difference: people are willing to listen to us." Chu was speaking to Pentagon reporters after announcing that all four branches of the U.S. armed forces -- Army, Navy, Marines and Air Force -- met their respective recruiting goals for the federal fiscal year that ended on September 30. All told, 185,000 men and women entered active-duty military service, the highest number since 2003, according to Pentagon statistics. Another 140,000 signed up for duty in the National Guard and reserve.
With the wars in Iraq and Afghanistan, the Pentagon in recent years has been under pressure to expand recruitment to alleviate strains on the military structure and increase the size of the Army and Marines. What a set up