Housing Bubble Bursting?

[Randolph Kinney]

Hair of the dog that bit you cure leads to collapse & deflation

When the central banks created $19 trillion of new balance sheet out of thin air they fueled a worldwide credit bubble of epic proportions. After two decades of maniacal central bank money printing, the world’s credit outstanding has grown from $40 trillion to $225 trillion or nearly 4X more than the interim expansion of global GDP.

And even that latter figure is exaggerated because it includes massive amounts of malinvestment and economic waste that will eventually be written off and abandoned; it does not comprise a permanent component of the world’s productive economy.

This massive expansion of cheap debt, in turn, fueled a runaway capital investment boom that has left the global economy drowning in excess capacity and malinvestment. This occurred in the form of a central bank enabled doubly whammy over the last two decades.

Stated differently, the credit fueled commodity and CapEx boom of 1995-2014 did not generate a miracle of global growth and prosperity as the Wall Street Keynesians would have you believe; it simply stole demand from the future and wasted massive amounts of real labor, capital and energy resources in the process.

Accordingly, the world does not suffer from a lack of “aggregate demand”. Sustainable demand everywhere and always is derived from production and income, and the latter are now falling due to the wasteful capacity excesses overhanging the global economy.

And there is no short-cut way out via credit based spending. That’s because the world is now saturated with “peak debt” in the household and business sector, as well as the official institutions of the state. More central bank enabled credit will only fuel speculation in financial assets.

On a worldwide basis, the price of commodities are falling due to excess supply. Likewise, prices of goods are being flattened by cheaper raw materials and the excess supply of labor that was drafted into the world’s tradeable goods economy from the rice paddies of Asia during the credit and CapEx boom of the last two decades.

The developing deflationary cycle stunting the world economy has arisen from the monumental harm that central bankers have already done, not from lack of sufficient vigor and boldness in attempting to contravene its consequences.

http://www.zerohedge.com/news/2015-...rned-global-financial-system-doomsday-machine

 

[Randolph Kinney]

Another Phony Payroll Jobs Number

The Bureau of Labor Statistics announced today that the US economy created 271,000 jobs in October, a number substantially in excess of the expected 175,000 to 190,000 jobs. The unexpected job gain has dropped the unemployment rate to 5 percent.

What is wrong with these numbers? Just about everything. First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the number by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we eliminate the birth-death model’s contribution, new jobs were 126,000.

Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indication that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.

Now assume the 271,000 reported jobs in October is the real number, and not 126,000 or less, where are those jobs? According to the BLS not a single one is in manufacturing. The jobs are in personal services, mainly lowly paid jobs such as retail clerks, ambulatory health care service jobs, temporary help, and waitresses and bartenders.

For example, the BLS reports 44,000 new retail trade jobs, a questionable number in light of sluggish real retail sales. Possibly what is happening is that stores are turning a smaller number of full time jobs into a larger number of part time jobs in order to avoid benefit costs associated with full time workers.

The new reported jobs are essentially Third World type of jobs that do not produce sufficient income to form a household and do not produce exportable goods and services to help to bring down the large US trade deficit resulting from jobs offshoring.

The problem with the 5% unemployment rate is that it does not include any discouraged workers. When discouraged workers—those who have ceased looking for a job because there are no jobs to be found—are included the unemployment rate is about 23%.

Another problem with the 5% number is that it suggests full employment. Yet the labor force participation rate remains at a low point. Normally during a real economic recovery, people enter the labor force and the participation rate rises.

If the US economy were actually in economic recovery, would half of the 25-year-old population be living with parents? The real job situation is so poor that young people are unable to form households.

http://www.paulcraigroberts.org/2015/11/06/another-phony-payroll-jobs-number-paul-craig-roberts/

Gee, the economy is rocketing full speed ahead. If the FED really believes that, the December rate hike is in the bag!

 

[Randolph Kinney]

Fed Proves Irrelevant in $2.6 Trillion Slice of U.S. Debt Market

• Money-market rules may push $650 billion into safest assets
• Treasury's plans to increase bill issuance won't meet demand

The blowout U.S. jobs report for October means the Federal Reserve may be weeks away from raising interest rates. For U.S. savers earning next to nothing on $2.6 trillion of money-market mutual funds, the move will barely register.

The reason is that there’s an unprecedented shortfall in the safest assets, especially Treasury bills -- a mainstay of those funds and traditionally the government obligations that are most sensitive to changes in Fed policy. The shortage means some key money-market rates will probably remain near historic lows even if the central bank increases its benchmark from near zero next month.

As a share of U.S. government debt, the amount of bills is the lowest since at least 1996, at about 10 percent, and the Treasury is just beginning to ramp up issuance of the securities after slashing it amid the debt-ceiling impasse. Meanwhile, regulators’ efforts to curb risk after the financial crisis are stoking increased demand: Money-market industry rules set to take effect in October 2016 may lead investors and fund companies to shift as much as $650 billion into short-maturity government obligations, according to JPMorgan Chase & Co.

“The demand for high-quality short-term government debt securities is insatiable and there is just not enough supply,” said Jerome Schneider, head of short-term strategies at Newport Beach, California-based Pacific Investment Management Co., which oversees $1.47 trillion. “Even given the increased bill sales coming as the debt-limit issue has passed, it won’t keep up with rising demand from regulatory forces. This will keep rates low.”

While the U.S. government stands to benefit as the imbalance holds down borrowing costs, it’s proving the bane of savers. Average yields for the biggest money-market funds, which buy a sizable chunk of the $1.3 trillion Treasury bills market, haven’t topped 0.1 percent since 2010, according to Crane Data LLC. In 2007, they were above 5 percent before the Fed started slashing rates to support the economy.

With returns this low, investors have less incentive to sock away cash. The Standard & Poor’s 500 index has earned 3.8 percent this year, including dividends, according to data compiled by Bloomberg.

The one-month bill yield was at 0.03 percent as of 6:32 a.m. New York time, after touching as low as negative 0.05 percent last month. The Fed effective rate, the average rate on overnight loans between banks, is 0.12 percent.

Adding to the supply-demand imbalance in bills, higher capital requirements have led some banks to place fees on deposits, pushing savers into short-term government securities.

“There has been tens of billions that has flowed into the government money-market sector, but it’s about to turn into hundreds of billions,” said Peter Crane, president of Crane Data, a Westborough, Massachusetts-based firm that tracks the industry. That pressure will “keep government and Treasury rates nailed to zero.”

The upshot is that the history of bill rates during past Fed tightening cycles won’t serve as a guide this time around. The last time the Fed was raising rates, it pushed its benchmark from 1 percent in June 2004 to 5.25 percent two years later. In that period, one-month bill rates rose from about 1 percent to around 4.5 percent.

http://www.bloomberg.com/news/artic...vant-in-2-6-trillion-slice-of-u-s-debt-market

Maybe the financial geniuses have miscalculated the effect of FED policy versus Dodd-Frank and other laws that were passed to make sure the banking and financial institutions are safe.

Place your bets! With the FED or won't the FED hike interest rates?

 

[Randolph Kinney]

SD worst city in America to build wealth

The burden of the Sunshine Tax may be too heavy for the American Dream.

San Diego is the worst city in the United States for building wealth, a study released Monday by Bankrate.com showed.

The Florida-based personal finance website looked at what it felt were the most important factors to save money and earn more, including housing prices, income after taxes, average debt, employment and access to education.

San Diego ranked dead last, behind Los Angeles, San Francisco, New York City and Chicago. Houston ranked No. 1.

San Diego’s high home and rent prices compared to salaries leave residents unable to build equity, the study said.

“West Coast cities didn’t do well,” Bankrate researcher Claes Bell said. “If you are accumulating most of your wealth through wages, then that is going to be a problem for you.”

The median home price in San Diego County was $460,000 in September, according to CoreLogic and median household income is roughly $63,000, according to state data. Although San Francisco is known for pricey housing, it makes up for that in part with higher salaries. For this study, its median income was $75,604.

Some factors considered:

▪ Resident debt: The average San Diegan is $78,282 in debt — which can include mortgages, student loans and credit cards — making it the fifth most-indebted city residents on the list. Houston residents have the least, $42,784, and Washington, D.C., residents have the most, $95,560.

▪ Unemployment rate: The study used the average jobless numbers from 2010 to 2014, leaving San Diego at 8.7 percent. During that time, Minneapolis-St.Paul had the lowest at 5.26 percent. (San Diego unemployment fell to 4.6 percent last month.)

▪ Access to education: Furthering one’s career through education (and earning potential) was given high marks by the study. San Diego may seem like it has a lot of colleges but the number of students admitted is one of the lowest in the country for metropolitan areas. Its capacity for students is the fourth lowest on the list. New York City has the most and Cleveland has the least.

▪ Retirement: Just 36 percent of San Diego residents participate in an employer-based retirement plan, such as a 401-k. That is tied for the third-lowest rate in the country. Bell said it could mean employers aren’t offering a retirement savings plan, but it also could mean that workers are not participating. Miami has the least, 35 percent, and Washington, D.C. has the most, 53 percent.

http://www.sandiegouniontribune.com...3720657&goal=0_c2357fd0a3-0ca893e4e6-83720657

 

[Randolph Kinney]

U.S. Is No Longer Among the 10 Most Prosperous Countries

Ten countries have now become more prosperous than the United States.

The U.S. is ranked No. 11 in the latest annual Prosperity Index, which was released this week by the Legatum Institute, an international think tank based in London.

The index ranks 142 countries overall and in eight categories:

• The economy
• Entrepreneurship and opportunity
• Governance
• Education
• Health
• Safety and security
• Personal freedom
• Social capital

The Legatum Institute states that its index is unique in that it’s based on both income and well-being:

Prosperity is more than just the accumulation of material wealth, it is also the joy of everyday life and the prospect of an even better life in the future.

Norway came in No. 1 overall for the seventh consecutive year. According to a Legatum press news release:

Norway comes out on top due the freedom it offers its citizens, the quality of its healthcare system and social bonds between its people.

The Scandinavian country had its highest ranking in the social capital category (No. 2), with 94 percent of people saying they can rely on friends and family in times of need. It had its lowest rankings in the safety and security category (No. 8) and the governance category (No. 8).

Overall, the United States fell one spot this year. Its highest ranking was in the health category (No. 1) and its lowest ranking was in the safety and security category (No. 33).

Nathan Gamester, director of the Prosperity Index at the Legatum Institute, states in the news release:

“The Prosperity Index tells us that human progress goes beyond economics. Norway and other countries at the top of the Index provide opportunity and freedom to their citizens, access to quality healthcare and education, and provide safe environments for people to flourish in.

“By contrast, those countries or regions of the world where people feel unsafe, where they are forced to flee from their homes, and where the education and healthcare systems are failing do not provide prosperity to their citizens.”

The countries that made the top 10 based on their overall scores this year are:

1. Norway
2. Switzerland
3. Denmark
4. New Zealand
5. Sweden
6. Canada
7. Australia
8. Netherlands
9. Finland
10. Ireland

http://finance.yahoo.com/news/u-no-longer-among-10-203045054.html

The U.S. has ObamaCare and green energy. I guess the fact that we have mass shootings and gang violence with people not knowing right from wrong, or not being able to depend on family and friends, outweighs income, wealth and government programs.

 

[Randolph Kinney]

Astonishing report from the Fed says US banks are not “sound”

Late last week, a consortium of financial regulators in the United States, including the Federal Reserve and the FDIC, issued an astonishing condemnation of the US banking system.

Most notably, they highlighted “continuing gaps between industry practices and the expectations for safe and sound banking.”

This is part of an annual report they publish called the Shared National Credit (SNC) Review. And in this year’s report, they identified a huge jump in risky loans due to overexposure to weakening oil and gas industries.

Make no mistake; this is not chump change.

The total exceeds $3.9 trillion worth of risky loans that US banks made with your money. Given that even the Fed is concerned about this, alarm bells should be ringing.

https://www.sovereignman.com/trends...ab3d064e1799a05dbb63fbf1eb7086f436986b7fc8845

Once the domino falls, it will hit the next domino, and the next ... etc.

That green energy and EPA carbon regulation is going to add up to real problems.

China, Europe and emerging markets have cut back their usage of oil. Plus, the U.S. has more high mileage cars on the road.

Let's see if that green economy can take the place of oil in the overall economy.

 

[Randolph Kinney]

The failure of the FED’s policies of massive money creation, corporate bailouts, and quantitative easing to produce economic growth is a sign that the fiat money system’s day of reckoning is near.

 

[Meandering]

Most notably, they highlighted “continuing gaps between industry practices and the expectations for safe and sound banking.”

What? No public trust?



Just fine them and let them keep on keeping on.



Does not matter. They are TBTF. Next fail will take out many more municipal pension funds.

3rd world here we come..........

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[TD Morgan]

I've got some pocket change left. Will that help them?

Astonishing report from the Fed says US banks are not “sound”

Late last week, a consortium of financial regulators in the United States, including the Federal Reserve and the FDIC, issued an astonishing condemnation of the US banking system.

Most notably, they highlighted “continuing gaps between industry practices and the expectations for safe and sound banking.”

This is part of an annual report they publish called the Shared National Credit (SNC) Review. And in this year’s report, they identified a huge jump in risky loans due to overexposure to weakening oil and gas industries.

Make no mistake; this is not chump change.

The total exceeds $3.9 trillion worth of risky loans that US banks made with your money. Given that even the Fed is concerned about this, alarm bells should be ringing.

https://www.sovereignman.com/trends...ab3d064e1799a05dbb63fbf1eb7086f436986b7fc8845

Once the domino falls, it will hit the next domino, and the next ... etc.

That green energy and EPA carbon regulation is going to add up to real problems.

China, Europe and emerging markets have cut back their usage of oil. Plus, the U.S. has more high mileage cars on the road.

Let's see if that green economy can take the place of oil in the overall economy.

 

[Meandering]

New York cancer patients are ObamaCare’s latest victims

Add 250 New York cancer patients to the long list of victims of ObamaCare’s lies — just one more snapshot of the program’s ongoing death spiral.

These New Yokers are getting treatment at world-renowned Memorial Sloan-Kettering Cancer Center — but their ObamaCare policies are about to vanish, as Health Republic, one of the largest health insurers on New York state’s exchange, and the only one to cover Sloan-Kettering treatment, is shutting down at month’s end after losing $130 million.

The state exchange’s “solution”: It’ll give them an extra two weeks to find a new policy — but it has nothing that will save them from having to change hospitals and medical teams. (It is in talks with the hospital about trying to give them an extra year of coverage there — but with no word on who’ll pay.)

Robert Goldberg, vice president of the Center for Medicine in the Public Interest, warned of the problem two years ago in The Post: ObamaCare’s design screws cancer patients, as well as those with AIDS and other serious conditions.

To save cash, exchange policies offer very narrow networks of providers, and also stint on which medications are covered, while imposing hefty out-of-pocket costs on patients.

“The whole point of the Affordable Care Act was to make it affordable,” Vince Capone, a retired dentist with pancreatic cancer told Newsday. “If this plan was set up but was priced too low and then went out of business, then I guess the whole thing was a sham.”

Yeah, sham is a good name for it.

The wheels on the ObamaCare bus are falling off one by one. Then again, this isn’t anything new.

Take Health Republic, whose failure is forcing 100,000 New Yorkers to find new coverage. It’s just one of 23 “health cooperatives” across the country launched with a total in $2.5 billion in taxpayer cash — and eight are closing, with another 13 headed there.

ObamaCare’s defenders insist the problem is that Congress wouldn’t give the co-ops even more cash. Others point to how the health “reform” law said the co-ops couldn’t hire anyone with insurance-industry expertise, or spend a dime on marketing.

Anyway, the exchange policies run by for-profit insurers aren’t far behind. They’re hiking premiums big-time this year – up 13 percent on average for the cheapest (“bronze”) plans, according to an Avalere Health study.

And, by the way, new sign-ups are running at half the level once predicted by the Congressional Budget Office.
Worse, the folks who are buying exchange coverage tend to be sicker and older than the “reformers” had expected — which means they’re more expensive to cover, which means premiums will have to keep rising.

Which means that folks who aren’t sick will be even less inclined to buy an ObamaCare plan.

And 2016 is the last year the taxpayers have to provide extra “risk corridor” payments to ObamaCare insurers who lose money because they didn’t charge high-enough premiums — which makes it likely future price-spikes will be even larger.

So much for affordable health care.
http://nypost.com/2015/11/09/new-york-cancer-patients-are-obamacares-latest-victims/

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