Decrease in Starts Curbs U.S. Housing Rebound: Economy

David Paul Morris/Bloomberg
The decline was led by a slump in multifamily projects, which can be volatile, and the level of permits remained higher than starts, which may point to a rebound this month.

SOURCE

The residential real-estate rebound suffered a setback in June as housing starts unexpectedly fell to the lowest level in almost a year, curbing how much construction contributed to U.S. economic growth last quarter.

Work began on 836,000 houses at an annualized rate, the least since August and down 9.9 percent from a revised 928,000 pace in May, figures from the Commerce Department showed today in Washington. The drop was led by a 26.2 percent plunge in multifamily projects, which are more volatile than work on single-family homes.

The figures were in contrast to a report yesterday showing homebuilders this month were the most optimistic in seven years as sales improved, indicating the reversal will probably prove temporary. The slump came as Federal Reserve Chairman Ben S. Bernanke said monthly asset purchases aimed at spurring the economy could be reduced or expanded as conditions warrant, with housing one area policy makers will monitor.

The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

Michael Snyder
Economic Collapse
July 2, 2013

Did you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us?  We were always told that the goal of quantitative easing was to “help the economy”, but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system.  Instead, most of it is sitting at the Fed slowly earning interest for the bankers.  Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed.  This caused an absolute explosion in the size of these reserves.  Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed.  Today, they have more than 1.8 trillion.  In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger.  This is utter insanity, and it will have very serious consequences down the road.

Price of Gold Plunged, Panic Deepens on World Financial Markets

SOURCE

Global stocks plunged Thursday in the biggest one-day sell-off so far this year, after Federal Reserve Chairman Ben Bernanke said the US central bank might consider paring back its cash infusions into the financial markets within the next six months.

The panic in stock and bond markets sparked by the remarks of Bernanke, who on Wednesday suggested the Fed might start winding down its $85 billion per month in asset purchases, was compounded by the release of data on Thursday showing that Chinese manufacturing activity hit its lowest level in nine months.

The Financial Markets Freak Out When The Fed Hints That It May Slow Down The Injections

Michael Snyder
Economic Collapse
June 20, 2013

U.S. financial markets are exhibiting the classic behavior patterns of an addict. Just a hint that the Fed may start slowing down the flow of the “juice” was all that it took to cause the financial markets to throw an epic temper tantrum on Wednesday. In fact, one CNN article stated that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves. And please note that Bernanke did not announce that the money printing would actually slow down any time soon. He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good. For now, the Fed is going to continue wildly printing money and injecting it into the financial markets. So nothing has actually changed yet. But just the suggestion that this round of quantitative easing would eventually end if the economy improves was enough to severely rattle Wall Street on Wednesday. U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away. When that day comes, will the largest bond bubble in the history of the world burst? Will interest rates rise dramatically? Will it throw the U.S. economy into another deep recession?

Whats Next? War with North Korea And Economic Collapse?

Global Elite Preparing New Korean War to Coincide with Economic Implosion?

Kurt Nimmo
Infowars.com
April 3, 2013

The Federal Reserve plan to crash the economy and make room for world government and an authoritarian globalist economic and accompanying police state control system will necessitate a sufficient prerequisite – and that prerequisite may very well be a new war on the Korean peninsula.

It should be obvious by now that the Federal Reserve’s so-called quantitative easing – bankster shorthand for pumping fiat dollars into rigged financial markets by buying bonds, treasury bills, etc. – is creating a huge financial asset bubble that is going to burst with an ear-splitting boom… and soon.

If you’d like to get a handle on what Federal Reserve policy will ultimately mean, read David Stockman’s article published in the New York Times last Sunday.

Funny money cranked out by the Fed “has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble,” Stockman writes. And when the Wall Street bubble “bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.”

Economic depressions are highly scripted affairs and the banksters use them to initiate big wars – not only because wars are remarkably profitable for the military-industrial complex, but because they serve as an ideal tool for wealth consolidation and fire sales held in their aftermath. Big wars are also exploited to enforce rigid discipline on the masses. It gives the plebs an excuse to accept grinding poverty and servitude.

World War II followed the last Great Depression – directly caused by the Fed, as Helicopter Ben has admitted. Communism, as the late Antony C. Sutton has documented, was created and franchised by Wall Street. The arch globalist kingpin David Rockefeller has praised its ruthless effectiveness in China under the mega-mass murderer Mao.

“As the economic crisis escalates and the debt-based central banking system shows it can no longer re-inflate the bubble by creating assets out of thin air, an economic and political rationale for war is easy to come by,” writes Justin Raimondo.

“It is said that FDR’s New Deal didn’t get us out of the Great Depression, but World War II did,” Raimondo continues. “The truth is that, in wartime, when people are expected to sacrifice for the duration of the ‘emergency,’ economic problems are anesthetized out of existence by liberal doses of nationalist chest-beating and moral righteousness. Shortages and plunging living standards were masked by a wartime rationing system and greatly lowered expectations. And just as World War II inured us to the economic ravages wrought by our thieving elites, so World War III will provide plenty of cover for a virtual takeover of all industry by the government and the demonization of all political opposition as ‘terrorist.’”

It will also provide cover for the “global governance” scheme the globalists are itching to install.

Next Up: A New Korean War

It certainly looks like the elite are planning a war against North Korea. Consider the following remarkable events over the last few days (h/t to Moon of Alabama for contributing).

April 2, 2013 – North Korea Says It Will Restart Reactor to Expand Arsenal

North Korea said on Tuesday that it would put all its nuclear facilities… to use in expanding its nuclear weapons arsenal, sharply raising the stakes in the escalating standoff with the United States and its allies.

April 2, 2013 – Ban Ki-Moon: North Korea On ‘Collision Course’ That Could Lead To War

The U.N. chief says he fears North Korea is on a collision course with other nations that could lead to war.

April 1, 2013 – U.S. moving key vessels nearer North Korea

As analysts try to weigh the weight in North Korea’s military posturing, the U.S. has made a show of increasing its military hardware in South Korea.

April 1, 2013 – U.S. moves missile-tracking radar platform closer to North Korea

The sea-based X-band radar is heading over from Pearl Harbor, a Pentagon official says. The John S. McCain guided missile destroyer is also being sent.

March 31, 2013 – U.S. F-22 Stealth Jets Join South’s Military Drills Amid Saber-Rattling From North

Advanced, radar-evading F-22 Raptors deployed to Osan Air Base, the main U.S. Air Force base in South Korea, from Japan to support ongoing bilateral exercises…

March 30, 2013 – U.S. denounces North Korea’s ‘bellicose rhetoric’ as Kim Jong-un’s regime issues ‘final warning’

“We take these threats seriously and remain in close contact with our South Korean allies,” White House spokeswoman Caitlin Hayden said…

March 29, 2013 – Hagel says U.S. has to take North Korean threats seriously

Defense Secretary Chuck Hagel said on Thursday that North Korea’s provocative actions and belligerent tone had “ratcheted up the danger” on the Korean peninsula, …

March 28, 2013 – US sends nuclear-capable B-2 bombers to SKorea

The U.S military says two nuclear-capable B-2 bombers have completed a training mission in South Korea …

The U.S. says the B-2 stealth bombers flew from a U.S. air base and dropped munitions on a South Korean island range before returning home.

March 26, 2013 – U.S. Army learns hard lessons in N. Korea-like war game

The Unified Quest war game conducted this year by Army planners posited the collapse of a nuclear-armed, xenophobic, criminal family regime that had lorded over a closed society and inconveniently lost control over its nukes as it fell. Army leaders stayed mum about the model for the game, but all indications — and maps seen during the game at the Army War College — point to North Korea.

March 20, 2013 – U.S. flies B-52s over South Korea

The U.S. Air Force is breaking out some of its heaviest hardware to send a message to North Korea.

A Pentagon spokesman said Monday that B-52 bombers are making flights over South Korea as part of military exercises this month.

March 19, 2013 – S. Korea, U.S. carry out naval drills with nuclear attack submarine

South Korean and U.S. forces have been carrying out naval drills in seas around the peninsula with a nuclear attack submarine as part of their annual exercise, military sources said Wednesday, in a show of power against North Korea’s threat of nuclear attack.

March 17, 2013 – Troops remember sacrifices of Cheonan sailors

Halfway through the around-the-clock Key Resolve drills Friday, 8th U.S. Army Commander Lt. Gen. John D. Johnson remained full of energy as he underscored that the allied forces were ready to cope with North Korean threats.

March 12, 2013 – First day of SK-US military exercises passes without provocation

Around 10,000 ROK troops and 3,000 US soldiers, including 2,500 reinforcements from US Pacific command in Hawaii, are taking part in the military exercise, which will continue through Mar. 21. Another 10,000 US soldiers will be deployed by the end of this month for the Foal Eagle exercises. Also flown in to participate in the exercises were B-52 bombers and F-22 stealth fighters, which boast the world’s highest levels of performance. These two kinds of aircraft can maneuver throughout Korean airspace without landing. In addition, the 9750t Aegis destroyers USS Lassen and USS Fitzgerald arrived in South Korea.

March 8, 2013 – Air Assault Course increase 2ID capabilities

For the first time in 15 years, 2nd Infantry Division and Eighth U.S. Army soldiers tackled the rigorous Air Assault Course at Camp Hovey, South Korea…. The course qualifies soldiers to conduct air assault and helicopter sling-load operations and proper rappelling and fast-rope techniques.

March 8, 2013 – “Frozen Chosen” Marines

Marines from I Company, 3rd Battalion, 6th Marine Regiment, slog through wind and snow during a joint training exercise with Japanese troops at the Hokkaido-Dai Maneuver Area in northern Japan last week.

March 6, 2013 – S. Korea says it will strike against North’s top leadership if provoked

[T]he rhetoric sets up an especially tense period on the Korean Peninsula, with the U.S. and South Korean militaries planning joint training drills that the North considers a “dangerous nuclear war” maneuver, and with the U.N. Security Council deliberating new sanctions to limit Pyongyang’s weapons program.

.

top of page ^

Are We Headed For Economic Collapse?!

The Dow Hits An All-Time High! Translation: A Bubble Is Always Biggest Right Before It Bursts

English: President Barack Obama confers with Federal Reserve Chairman Ben Bernanke following their meeting at the White House. (Photo credit: Wikipedia)

March 6, 2013

SOURCE

Reckless money printing by Federal Reserve Chairman Ben Bernanke has pumped up the Dow to a brand new all-time high.  So what comes next?  Will the Dow go even higher?  Hopefully it will.  In fact, it would be great if the Dow was able to hit 15,000 before it finally came crashing down.  That would give all of us some more time to prepare for the nightmarish economic crisis that is rapidly approaching.  As you will see below, the U.S. economy is in far, far worse shape than it was the last time the Dow reached a record high back in 2007.  In addition, all of the long-term trends that are ripping our economy to shreds just continue to get even worse and our debt just continues to explode.  Unfortunately, the Dow has become completely divorced from economic reality in recent years because of Fed manipulation.  All of this funny money that the Federal Reserve has been cranking out has made the wealthy even wealthier, but this bubble will not last for too much longer.  What goes up must come down.  And remember, a bubble is always biggest right before it bursts.

Fortunately, it looks like an increasing number of people out there are starting to recognize that the primary reason why stocks have been going up is because of the Fed.  Just check out this excerpt from a recent article by the USA Today editorial board…

The Federal Reserve’s purchases have driven interest rates to near zero. This has stimulated the economy but not without cost. Savers, particularly older ones trying to live on income from their investments, are starved for safe options. They’ve been forced into stocks, which is one reason the market has been acting as if it’s on steroids. Further, with borrowing costs low, Congress and the White House have less incentive to rein in the national debt. Rock-bottom interest rates have also distorted markets.

The best indication that the Fed’s bond-buying purchases are pushing stocks up artificially is that investors run for cover whenever there is a hint that the Fed might change course, as happened recently. On Monday, billionaire superinvestor Berkshire Hathaway CEO Warren Buffett told CNBC that markets are on a “hair trigger” waiting for signs of change from the Fed. The market is “hooked on the drug” of easy money, Dallas Fed President Richard Fisher told Reuters.

Fisher’s comparison of Fed policies to a drug is apt. Markets might not like the idea of the drug being withdrawn now, when the Fed holds a portfolio of $3 trillion. But the withdrawal symptoms will be a lot worse once the portfolio grows to $4 trillion, or more.

Those sentiments were echoed by Gordon Charlop, a trader at Rosenblatt Securities, during a recent appearance on CNBC…

“The Wizard of the Fed, Ben [Bernanke], has done a great job propping up the market, but the question is how does the wizard move the pin from the balloon without blowing the whole thing up?” said Charlop. “This is getting out of balance and he’s got to figure out a way to justify the levels that we’ve gotten to and draw back on some of the stimulus.”

Of course, in the end, the bursting of this bubble is going to be very messy.

The Fed has dramatically distorted the market in an attempt to make things look good, but now the financial markets are completely and totally addicted to easy money.  Is there any chance that the Fed will be able to take away that easy money without causing disaster?

There are only a few ways that this current scenario can play out.  The following is what Stanley Druckenmiller recently told CNBC…

“I don’t know when it’s going to end, but my guess is, it’s going to end very badly; and it’s going to end very badly because, again, when you get the biggest price in the world, interest rates, being manipulated you get a misallocation of resources and this is going to end in one of two ways – with a malinvestment bust which we got in ’07-’08 (we didn’t get inflation). We got a malinvestment bust because of the bubble that was created in housing. Or it could end with just monetizing the debt and off we go in inflation. So that’s a very binary outcome – they’re both bad.”

What the Fed has done to the money supply in recent years has been absolutely unprecedented.  Just check out how our money supply has skyrocketed since the last financial crisis…

So what happens when the amount of money in an economy rises rapidly?

Well, if I remember Econ 101 correctly, that would mean that prices should go up.

And that is exactly what has happened.  And since most of the money that the Fed has created has gone into the financial system first, it should not be a surprise that we have seen a bubble in financial assets.

In a previous article that I wrote last September, I warned that QE3 would cause stocks to go up…

So what have the previous rounds of quantitative easing accomplished?  Well, they have driven up the prices of financial assets.  Those that own stocks have done very well the past couple of years.  So who owns stocks?  The wealthy do.  In fact, 82 percentof all individually held stocks are owned by the wealthiest 5 percent of all Americans.  Those that have invested in commodities have also done very nicely in recent years.  We have seen gold, silver, oil and agricultural commodities all do very well.  But that also means that average Americans are paying more for basic necessities such as food and gasoline.  So the first two rounds of quantitative easing made the wealthy even wealthier while causing living standards to fall for all the rest of us.  Is there any reason to believe that QE3 will be any different?

Of course not.

So will stocks continue to go up indefinitely?

No way.

As I have also written about previously, the money printing that the Fed is doing right now is not nearly enough to stop the mammothderivatives crisis that is coming.

A derivatives crisis was one of the primary reasons for the financial crash of 2008, but most Americans still have no idea what derivatives are.

They can be very complex, but I think that it is easiest just to think of them as side bets.

When someone buys a derivative, they are not buying anything real.  They are simply betting that something will or will not happen.

For example, if you bet $100 that the Chicago Cubs will win the World Series this year, would you be “investing” in anything real?

Of course not.

Well, it is the same with most derivatives.

Today, Wall Street has become the biggest casino in the entire world and trillions of dollars of very reckless bets have been made.

In fact, most Americans would be absolutely shocked to learn how exposed to derivatives some of our largest financial institutions are.  The following is an excerpt from one of my previous articles entitled “The Coming Derivatives Panic That Will Destroy Global Financial Markets“…

It would be hard to overstate the recklessness of these banks.  The numbers that you are about to see are absolutely jaw-dropping.  According to the Comptroller of the Currency, four of the largest U.S. banks are walking a tightrope of risk, leverage and debt when it comes to derivatives.  Just check out how exposed they are…

JPMorgan Chase

Total Assets: $1,812,837,000,000 (just over 1.8 trillion dollars)

Total Exposure To Derivatives: $69,238,349,000,000 (more than 69 trillion dollars)

Citibank

Total Assets: $1,347,841,000,000 (a bit more than 1.3 trillion dollars)

Total Exposure To Derivatives: $52,150,970,000,000 (more than 52 trillion dollars)

Bank Of America

Total Assets: $1,445,093,000,000 (a bit more than 1.4 trillion dollars)

Total Exposure To Derivatives: $44,405,372,000,000 (more than 44 trillion dollars)

Goldman Sachs

Total Assets: $114,693,000,000 (a bit more than 114 billion dollars – yes, you read that correctly)

Total Exposure To Derivatives: $41,580,395,000,000 (more than 41 trillion dollars)

That means that the total exposure that Goldman Sachs has to derivatives contracts is more than 362 times greater than their total assets.

When the derivatives crash happens, there won’t be enough money in the entire world to fix it.

So enjoy this little stock market bubble while you can.

It will end soon enough.

And of course stocks should not be this high in the first place.  The underlying economic fundamentals do not justify these kinds of stock prices whatsoever.

A recent CNN article noted that the last time the Dow hit a record high that unemployment in the U.S. was much lower…

Consider this. When the Dow hit its now old record high back in October 2007, the economy was still in good shape — although it was just a few months away from the beginning of the Great Recession.

The unemployment rate in October 2007 was 4.7%. In January of this year, the unemployment rate was 7.9%.

And that same article also pointed out that GDP growth and housing prices were also much stronger back in 2007…

Gross domestic product grew 3% in the third quarter of 2007. Revised figures from the government last week showed that GDP in the fourth quarter of 2012 rose a scant 0.1%. But I guess that’s good news considering the first estimate showed a 0.1% decline.

And despite all the hoopla about the steady recovery in the housing market over the past year, real estate is still in a bear market. The most recent level of the S&P Case-Shiller 20-City Home Price Index, one of the most widely watched gauges of the health of housing, is still 24% below where it was in October 2007.

We have never even come close to recovering from the last economic crisis.  Most Americans seem to have forgotten how good things were back then, but a recent Zero Hedge article included some more points of comparison between October 2007 and today…

• Dow Jones Industrial Average: Then 14164.5; Now 14164.5
• Regular Gas Price: Then $2.75; Now $3.73
• GDP Growth: Then +2.5%; Now +1.6%
• Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
• Americans On Food Stamps: Then 26.9 million; Now 47.69 million
• Size of Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
• US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
• US Deficit (LTM): Then $97 billion; Now $975.6 billion
• Total US Debt Oustanding: Then $9.008 trillion; Now $16.43 trillion
• US Household Debt: Then $13.5 trillion; Now 12.87 trillion
• Labor Force Particpation Rate: Then 65.8%; Now 63.6%
• Consumer Confidence: Then 99.5; Now 69.6

And of course anyone that reads my site regularly knows that the U.S. economy has been in a state of persistent decline over the past several years.

Just consider the following data points…

-The percentage of the civilian labor force in the United States that is actually employed has been steadily declining every single year since 2006.

-In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent.  Today, the unemployment rate for that same age group isabout 13 percent.

-According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.

-Median household income in America has fallen for four consecutive years.  Overall, it has declined by more than $4000 during that time span.

-At this point, an astounding 53 percent of all American workers make less than $30,000 a year.

That is the other side of the Fed’s insidious money printing.  Incomes in the United States are going down, but the cost of living is skyrocketing.  This is squeezing millions of Americans out of the middle class…

When Debbie Bruister buys a gallon of milk at her local Kroger supermarket, she pays $3.69, up 70 cents from what she paid last year.

Getting to the store costs more, too. Gas in Corinth, Miss., her hometown, costs $3.51 a gallon now, compared to less than three bucks in 2012. That really hurts, considering her husband’s 112-mile daily round-trip commute to his job as a pharmacist.

Perhaps you can identify with this.  Perhaps your paychecks are about the same as they used to be back in 2007 but the cost of living has gone up dramatically since then.

I wish I could tell you that things were going to get better, but unfortunately there are all kinds of indications that things are about to get even worse for the U.S. economy.  If you doubt this, just read this article and this article.

Yes, the Dow is at an all-time high.  But do you want to know what else has hit an all-time high up in New York?

Homelessness.

The following is from a recent report in the New York Times…

An average of more than 50,000 people slept each night in New York City’s homeless shelters for the first time in January, a record that underscores an unsettling national trend: a rising number of families without permanent housing.

And apparently families and children have been hit particularly hard over the past year…

More than 21,000 children—an unprecedented 1% of the city’s youth—slept each night in a city shelter in January, an increase of 22% in the past year, the report said, while homeless families now spend more than a year in a shelter, on average, for the first time since 1987. In January, an average of 11,984 homeless families slept in shelters each night, a rise of 18% from a year earlier.

Of course New York is far from alone.  There has been a surge in homelessness all over the United States.  In fact, at this point more than a million public school students in the United States are homeless.  This is the first time that has ever happened in U.S. history.

But the Dow just hit a record high so we should all be wildly happy, right?

Hopefully we can get more Americans to understand that the “prosperity” that we are enjoying right now is just an illusion.  It isn’t real.  It is a bubble created by reckless money printing by the Fed and reckless borrowing by the U.S. government.  If you can believe it, the U.S. government borrowed another 253 billion dollarsduring the month of February alone.

The Fed and the U.S. government will continue to engage in this kind of reckless behavior until the bubble eventually bursts.

So what should all the rest of us do?

We should be feverishly preparing for the hard times that are coming.  As Daisy Luther recently wrote about, one of the most important things to do is to create an emergency fund.  Instead of going out and blowing your money on the latest toys and gadgets, set some money aside so that you will have something to live on if the economy crashes and you suddenly lose your income.

Just remember what happened back in 2008.  Millions of Americans suddenly lost their jobs, and because many of them had no financial reserves, a lot of Americans suddenly could not pay their mortgages and they lost their homes.

So put some money away in a place where it will be safe – and that does not mean the stock market.

Jim Cramer of CNBC and a lot of the other talking heads on the financial news channels are trying to encourage ordinary Americans to jump into “the bull market” right now and make some money, and many people will take their advice.

But the truth is that a bubble is always biggest right before it bursts.

This bubble is awfully big right now, and I don’t know how much larger it can possibly get.

.

top of page ^