Depression in America

[Christina]

Economic depression in America: Evidence of a withering economy is everywhereBy Mike Whitney Global Research, June 2, 2008 Information Clearing House Look around. The evidence of a withering economy is everywhere. In "good times" consumers shun the canned meat aisle altogether, but no more. Today, Spam sales are soaring; grocery stores can't keep it on the shelves. Everyone is looking for cheaper ways to feed their families. The Labor Dept. assures us that core-inflation is only 4 per cent, but everybody knows it's load of malarkey. Food prices are going through the roof. White bread is up 13 percent, bacon is up 7 percent and peanut butter is up 9 percent. Inflation is rampant and there's no end in sight. The dollar is closing in on the peso and working people are struggling just to get by. The bottom line is that more and more people in "the richest country on earth" are now surviving on processed pig-meat. That says it all. In Santa Barbara parking lots are being converted into hostels so that families that lost their homes in the subprime fiasco can sleep in their cars and not be hassled by the cops. The same is true in LA where tent cities have sprung up around the railroad yards to accommodate the growing number of people who've lost their jobs or can't afford to rent a room on service-industry wages. It's tragic. Everywhere people are feeling the pinch; that's why 9 out of 10 Americans now believe the country is now headed in the wrong direction and that's why consumer confidence is at its lowest ebb since the Great Depression. This is the great triumph of Reagan's free trade "trickle down" Voodoo economics; whole families living out of their cars waiting for the pawn shop to open. The economy is on life-support. The rest of the world would be doing us all a favor if they decided to chuck the dollar and boycott US financial products altogether. That would put an end to Wall Street's chicanery once and for all. Foreign investors should be demanding restitution and impounding American assets to compensate for the trillions of dollars they lost in the subprime/securitization swindle. Litigate, litigate, litigate; that's the only way to make the guilty parties pay for their crimes. Either that or set up a gallows on Wall Street and get down to business. The pundits on the business channel are telling us that the "worst is over"; that the Force 5 hurricane in the financial markets has weakened to a squall. Don't believe it. The corporate bond market is still frozen, housing is in free fall, and the banking system is buckling from the overload of bad investments. The FDIC is even trying to lure former employees out of retirement to deal with the tsunami of bank failures set to touch down later in 2008. Corporate defaults are on the rise and and commercial real estate is crashing. "Commercial property prices in the US in February saw their sharpest decline since records began nearly 15 years ago as sources of finance for deals has dried up, according to data from Standard & Poor’s out yesterday. Sales of commercial properties were down 71 per cent in the first quarter compared with a year earlier." (Financial Times) Commercial real estate is following the same downward trajectory as residential housing. They're both headed for the bottom of the fish-tank. Any slump in CRE will send unemployment skyrocketing while adding to the solvency problems facing the banks. We're not out of the woods by a long shot, and won't be for years to come. According to Bloomberg News, soaring raw material costs have caused a sharp rise in costs to producers that they won't be able to pass on to cash-strapped consumers. That means that corporate profits will fall and stock values will plunge. Last week, Oppenheimer analyst Meredith Whitney announced that: "The real harrowing days of the credit crisis are still ahead of us and will prove more widespread in effect than anything yet seen. Just as strained liquidity pushed so many small and mid-sized specialty finance companies to the brink, we believe it will do the same to the US consumer. We believe losses will only accelerate further and far worse than the most draconian estimates." Whitney has been one of the few consistently accurate analysts of the current market meltdown. The fate of the larger investment banks is just as uncertain as the smaller "depository" banks. Carlyle Group Chairman David Rubenstein summed it up like this last week, "US and European banks and financial institutions have enormous losses from from bad loans they haven't yet recognized and may have a harder time wooing sovereign fund rescuers. Based on information I see, it will take at least a year before all losses are realized, and some financial institutions may fail. Many financial institutions aren't going to be able to survive as independent institutions." That means there will be greater consolidation and more formidable banking monopolies, all of which is bad for the consumer. The banks and financial institutions have never been in worse shape. They've already written down $344 billion since the credit crisis began last August and they'll write down another $200 billion next year. By the time the crisis is over, they will have racked up an estimated $1 trillion in losses. That represents a $3 trillion contraction in loans to consumers and businesses. Also, these estimates don't take into account the losses of revenue from the slowdown in consumer spending, shrinking GDP, and massive business failures; all of which will wreak further havoc on the financial sector. The amount of stress on the banking system is unprecedented. The Fed is loaning out money hand-over-fist just to keep the scaffolding in place. Take a look at what is going on at the Fed's so-called "auction facilities" where the Fed is providing loans and US Treasuries for "unsellable" mortgage-backed junk and other toxic bonds. The numbers are staggering. According to the Seattle Times: "The Federal Reserve's emergency loans to banks climbed to the highest level on record even as Wall Street investment companies scaled back their borrowing....Banks stepped up their borrowing, according to the Fed report. They averaged $15.95 billion in daily borrowing for the week ending May 28, compared with $13.5 billion for the previous week, and the total was a record. The previous high of $14.4 billion came in the week ending May 14...In the broadest use of the central bank's lending power since the 1930s, the Fed in March scrambled to avert a market meltdown by giving investment houses a place to go for emergency overnight loans....The Fed also announced Thursday it will make a fresh batch of short-term cash loans available to banks as part of an effort to ease stressed credit markets...The Fed said it will conduct three auctions in June; each will offer $75 billion in short-term cash loans. It would mark the latest round in a program that the Fed launched in December to help banks overcome credit problems so they will keep lending to customers." ("Banks step up Fed loans, investment firms scale back", Seattle Times) Another $225 billion?!? The Fed is trashing its balance sheet--to the tune of $225 billion--when the money could be used to provide free college tuition and universal health care. What a waste. Instead, the money is being used to throw a lifeline to dodgy speculators would were trying to snooker foreign investors with garbage securities. At the same time, the Fed's emergency facilities have done nothing to restore trust between the individual banks who are more reluctant to lend to each other than ever. The ongoing scandal surrounding Libor (the interest rate that banks charge each other and which determines the rates on $3 trillion of financial products including mortgages) strongly suggests that the banks are lying about the true rate they are paying so the public doesn't find out how battered they really are. Bloomberg News: "Banks routinely misstated borrowing costs to the British Bankers' Association to avoid the perception they faced difficulty raising funds as credit markets seized up."Consumer spending is sluggish too, since lending standards have tightened and home equity continues to vanish. Subprime problems have migrated from Wall Street to Main Street as credit trends appear to be getting worse. Consumers are maxed-out on their credit cards, student loans, mortgages and car loans. The lack of personal savings is not the result of a profligate lifestyle (as the right wing media likes to opine) but 30 years of stagnant wages and class warfare waged via big business and the federal tax code. None of the baby boomers are counting on Social Security to pay the bills when they retire but, still, that doesn't justify the money being ripped-off from their paychecks every week and slipped into the general fund where it is used to pave roads and purchase cluster-bombs. Social security is nothing but a flat tax for paupers. (The rich get a free-ride after the first $87,000 income) These are some of the factors that are bearing down on an American economy like a Daisy Cutter. 2009 is looking is looking more and more like a chapter out of Revelation.An article is this week's The Economist summarizes the malaise in housing in particularly apocalyptic terms: "America's house prices are falling even faster than during the Great Depression. As house prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year." ("The Economist") The country is undergoing a collapsing real estate market that surpasses the Great Depression and former Fed-chief Alan Greenspan's book is still on the New York Times Best Seller list. How's that for irony?Regrettably, there's no sign of a bottom yet in housing. Some markets have already dropped by 30% costing the states (like California and Florida) billions in tax revenue and triggering a steep increase in foreclosures. In California, sales are not only down by roughly 50 per cent, but 40 per cent of new sales are sales of foreclosed homes. The pool of potential buyers has dried up. Now the vultures are circling and picking up homes for $.50 on the dollar. The losses are enormous. If the downward trend continues, (as many now expect) and housing prices drop 30 per cent nationwide; the market will shed $6.5 trillion in aggregate value and lower household spending by $300 billion. That means GDP will shrink at least another full percentage point.The crisis in the financial markets won't be resolved until housing prices stabilize, that's why the Fed and Congress are scrambling to put together a plan (Hope Now) that will slow the rate of foreclosures. Trillions of dollars in complex bonds and mortgage-backed securities will continue to be downgraded until investors see that it is safe to "dip their toes in the water" again and reinvest in a (currently) moribund market. So far, Congress has made little headway in keeping homeowners from defaulting on their mortgages. Credit Suisse predicts that foreclosures will be somewhere north of 6.5 million homeowners over the next few years. It is the equivalent of Hurricane Katrina sweeping from one side of the country to the other.The next administration---whether it's McCain or Obama---will be forced to restore the Resolution Trust Corp., which was created in 1989 to dispose of assets of insolvent savings and loan banks. The RTC would create a government-owned management company that would buy distressed MBS from banks and liquidate them via auction. The state would pay less than full-value for the bonds (The Fed currently pays 85 per cent face-value on MBS) and then take a loss on their liquidation. "According to Joseph Stiglitz in his book, Towards a New Paradigm in Monetary Economics, the real reason behind the need of this company was to allow the US government to subsidize the banking sector in a way that wasn't very transparent and therefore avoid the possible resistance."There it is; a taxpayer-funded bailout of Biblical proportions looming on the horizon, possibly as soon as 2009. Ultimately, it is the only sure-fire way to stabilize the crumbling banking system and put a floor under housing prices. The effects on the dollar, however, will be catastrophic. Don't expect the greenback to survive as the world's "reserve currency". Those days are about over. The troubles in the financial markets will be with us for some time. The massive expansion of credit has created numerous equity bubbles that are unwinding at an unpredictable pace. Author James Howard Kunstler calls the present process "the remorseless algebra of a deflationary death spiral". That's about as close to a perfect description as imaginable. There's bound to be considerable disagreement about the origins of the bubble and who is to blame. Was it the Fed's "low interest " policy following the dot.com bust in 2000, or the lack of government regulation in the securitzation process, or was it just the natural corollary of a political system which invariably bows and scrapes to Wall Street? The real origin of the problem is ideological. It's rooted in the prevailing "trickle down" orthodoxy which opposes any increases in wages or benefits for working people. Henry Ford realized what today's captains of industry and finance refuse to accept; that if workers aren't adequately paid for their labor---and wages do not keep pace with production---then the economy cannot grow because consumers do not have the money to buy the things they make. It's just that simple. Greenspan and his ilk believed that they could prosecute the class war and make up the difference by relaxing lending standards, changing bankruptcy laws, and by creating a nearly endless array of exotic financial products that expanded credit. But shifting wealth from one class to another has its costs. By crushing the worker the Friedmanites have killed the golden goose. The world's most prosperous consumer society is in terminal distress and no amount of "free market" gibberish will keep it from crashing. --------------------------------------------------------------------------------

 

[Christina]

Heavy Rains Drowning U.S. Crop Production HopesJune 11, 2008 | From theTrumpet.comWhether from drought or rain, American crops are being destroyed as the global food crisis escalates. When the full scope of the developing global food crisis first became evident last winter, grumbling broke out in America and riots broke out in two dozen other countries. Now, at a time when the world vitally needs bumper crops to ease the threat of pervasive food shortages, America’s breadbasket has been hit with torrential flooding. Many farms in Iowa, Illinois, Indiana and Nebraska have received as much as 12 inches of rain this month so far, according to the National Weather Service. That is over four times the normal amount. Bridges have been wiped out by swollen rivers, homes have been evacuated due to rising water levels, and fields have been inundated. This could be the worst flooding the Midwest has experienced in 15 years. Areas of Wisconsin, Minnesota and Missouri also experienced flooding last week. Due to this flooding, at a time of year when the country’s corn crop should be flourishing one plant in ten has not even emerged from the ground, the Agriculture Department said on Monday. The crop damage caused by this flooding has caused the Agriculture Department to slash its estimate of this year’s corn crop. As a result, U.S. corn prices have surged to record highs on Chicago future exchanges. Contracts for corn deliveries after July have already hit levels soaring above $7.25 a bushel—over double 2006 levels. Many fear the next problem for corn crops will be yield losses caused by weeds and crop diseases that thrive in over-saturated soils. Increasing grain prices mean increasing livestock feed prices, which means that consumers may also soon face even higher prices for animal-based food products such as meat, eggs and dairy products. American farmers produce 60 percent of the world’s corn, a third of the world’s soybeans, a quarter of the world’s wheat and a tenth of the world’s rice. Bad weather in the Midwest is greatly reducing America’s capacity to meet even normal levels of production, much less make up food shortages in the rest of the world. Drought in California and Australia are only serving to make the crisis even worse. When Third World nations do not have food to export and First World nations are having their crops destroyed by inclement weather, where does the food come from? If current trends intensify, the food riots that two dozen countries have already experienced will move to America.

 

[Wakka]

Honestly, I don't see much of a problem with real estate in my neck of the woods. All of my cousin's homes are selling. Not exactly like hot cakes, but they're selling.

 

[crooner]

KrissI have to believe a lot of this is political. Nothing will get done election year. No one wants to give Bush any credit before he leaves office. 80% of new media is slanted. I believe gas will turn around by the end of year. There is going to be plenty of time for doom and gloom.

 

[Jerusalem Junkie]

(crooner;52577)
KrissI have to believe a lot of this is political. Nothing will get done election year. No one wants to give Bush any credit before he leaves office. 80% of new media is slanted. I believe gas will turn around by the end of year. There is going to be plenty of time for doom and gloom.
Crooner do you actually believe anything is ever going to get done? No unless they get rid of the gridlock. Anyone ever been to a third world country? Thats depressing.

 

[crooner]

(Jerusalem Junkie;52580)
Crooner do you actually believe anything is ever going to get done? No unless they get rid of the gridlock. Anyone ever been to a third world country? Thats depressing.
I hear ya! I am still optimistic that after the election things can get a little better. Lots of lies and deception going on right now. Makes me sick the games the liberal press plays and people buy into it. I believe this gas thing is artificial from lack of trade restrictions in the futures market.When you see polititions working on trade restrictions you will see futures mkt go down and then gas and food will follow.It wont happen til after election, because no one wants Bush to get credit.

 

[Christina]

I agree with some of what you say but Bush is the worst President in History IMHO When he announced all religions were right. God took away his blessings and from that time on he has been a failure. And I dont agree about trade completly yes it is nessary but it needs fixing when imports are so muich more than you export, by the extreme large margins we have you need to fix the problems he has ignored them and made them worse. I could point out removing the tariff on Sugar Ethonal from Brazil for one. But that might upset his Saudi friends. Enough said, dont get me startedUnfortunatley as wrong as I think he is about many things we may think it the good ole days soon.

 

[followerofchrist]

(crooner;52583)
I hear ya! I am still optimistic that after the election things can get a little better. Lots of lies and deception going on right now. Makes me sick the games the liberal press plays and people buy into it. I believe this gas thing is artificial from lack of trade restrictions in the futures market.When you see polititions working on trade restrictions you will see futures mkt go down and then gas and food will follow.It wont happen til after election, because no one wants Bush to get credit.
Well as far as the gas prices goes, if people would just do a little studying they would find that owning a diesel truck is actually the cheapest mode of transportation, in fact it can be quite profitable. Fast food company's will pay people to haul off the grease from their fryers which is basically vegetable oil with a few pieces of french frie in their. And that oil can be used as fuel in any diesel vehicle, no changes needed to the engine. In fact, it burns so much hotter than diesel that it will actually add horse power to your engine. The only thing you would need to do is to sift out the oil and make sure there's no food in there. But as far as profit goes, the companies usually pay by the gallon to have it hauled off and they will more times than not pay you more by the gallon than diesel cost right now.

 

[Jerusalem Junkie]

(crooner;52583)
I hear ya! I am still optimistic that after the election things can get a little better. Lots of lies and deception going on right now. Makes me sick the games the liberal press plays and people buy into it. I believe this gas thing is artificial from lack of trade restrictions in the futures market.When you see polititions working on trade restrictions you will see futures mkt go down and then gas and food will follow.It wont happen til after election, because no one wants Bush to get credit.
Agreed. They will tell you anything to get elected....also agree with your statement about Bush as well....As far as gas prices he could cap those and keep em from rising but I do not suppose an oil man would want to hurt his bottom line would he...Nixon had the guts to cap them....for that I applaud him.

 

[crooner]

Kriss your probably right about Bush saying that about all relegions and became cursed. Obamas said the same thing. What is this world coming too. Just remember the lib want to keep this caous going througout the election.

 

[Jordan]

Crooner, here is a topic that Bush said it.http://www.christianityboard.com/bush-all-...-god-t4026.html

 

[HammerStone]

The good thing is that our Lord knows his when he sees them.Psalm 91
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. I will say of the LORD, He is my refuge and my fortress: my God; in him will I trust. Surely he shall deliver thee from the snare of the fowler, and from the noisome pestilence. Surely he shall deliver thee from the snare of the fowler, and from the noisome pestilence. Thou shalt not be afraid for the terror by night; nor for the arrow that flieth by day; Nor for the pestilence that walketh in darkness; nor for the destruction that wasteth at noonday. A thousand shall fall at thy side, and ten thousand at thy right hand; but it shall not come nigh thee. Only with thine eyes shalt thou behold and see the reward of the wicked. Because thou hast made the LORD, which is my refuge, even the most High, thy habitation; There shall no evil befall thee, neither shall any plague come nigh thy dwelling. For he shall give his angels charge over thee, to keep thee in all thy ways. They shall bear thee up in their hands, lest thou dash thy foot against a stone. Thou shalt tread upon the lion and adder: the young lion and the dragon shalt thou trample under feet. Because he hath set his love upon me, therefore will I deliver him: I will set him on high, because he hath known my name. He shall call upon me, and I will answer him: I will be with him in trouble; I will deliver him, and honour him. With long life will I satisfy him, and show him my salvation.

 

[Christina]

(crooner;52615)
Kriss your probably right about Bush saying that about all relegions and became cursed. Obamas said the same thing. What is this world coming too. Just remember the lib want to keep this caous going througout the election.
Agree with you there if they win the the Election and the majority of the house and senate we are in big trouble.

 

[verzanumi24]

(crooner;52577)
KrissI have to believe a lot of this is political. Nothing will get done election year. No one wants to give Bush any credit before he leaves office. 80% of new media is slanted. I believe gas will turn around by the end of year. There is going to be plenty of time for doom and gloom.
Credit for what? Can't you see that things have gotten worse since Bush took office? Where are you living? What will it take for you to wake up?

 

[verzanumi24]

(kriss;52639)
Agree with you there if they win the the Election and the majority of the house and senate we are in big trouble.
Assuming if there is an election; remember Bush reserve the right to suspend the constitution. All they would need to do is staged a fake terrorist attack in order to justify stopping the election.

 

[tomwebster]

(verzanumi24;54876)
Assuming if there is an election; remember Bush reserve the right to suspend the constitution. All they would need to do is staged a fake terrorist attack in order to justify stopping the election.
Yes, stage one just like they did on 9/11.

 

[verzanumi24]

(tomwebster;54891)
Yes, stage one just like they did on 9/11.

Exactly!

 

[tomwebster]

(verzanumi24;54916)
Exactly!
You must not have noticed the sarcastic

smily faces.

 

[verzanumi24]

(tomwebster;54918)
You must not have noticed the sarcastic

smily faces.
Yes, I did and my response still stands. But a side issue, you know for years at least since the 60s America was being warned by Hebert W. Armstrong that America would fall, in fact I remember a more recent article that was written by him in the early to mid 80s warning Americans to prepare to greatly reduce their standard of living. I wander how many people listened/took what he was saying seriously? All these years I never forgot what he said, in fact since then I came to really see that what he said is going to happened. Soon after 911 I decided that it was time for me to get out of the U.S.(not that I believed that what was going to happened here was not going to affect other countries as well, but it would be a little better for me), because I saw what was coming next, and for four years I was back in my own country until for some reason God wanted me back here. But I did not waste any time warning others that hard time was a head of us. I am not trying to toot my own horn; just to say as I did before, among others I expected the decline in the American standard of living, but it’s not anywhere near the end….it’s going to get horribly worse.

 

[tomwebster]

verzanumiI think Hebert W. Armstrong is nuts! (I think that about says it!)