(Bloomberg.com) Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
The $12 trillion of outstanding government debt is 23 times the $517 billion Lehman owed when it filed for bankruptcy on Sept. 15, 2008. As politicians butt heads over raising the debt ceiling, executives from Berkshire Hathaway Inc.’s Warren Buffett to Goldman Sachs Group Inc.’s Lloyd C. Blankfein have warned that going over the edge would be catastrophic.
Paul Craig Roberts
October 3, 2013
The inability of the media and politicians to focus on the real issues never ceases to amaze.
Image: US Dollar.
The real crisis is not the “debt ceiling crisis.” The government shutdown is merely a result of the Republicans using the debt limit ceiling to attempt to block the implementation of Obamacare. If the shutdown persists and becomes a problem, Obama has enough power under the various “war on terror” rulings to declare a national emergency and raise the debt ceiling by executive order. An executive branch that has the power to inter citizens indefinitely and to murder them without due process of law, can certainly set aside a ceiling on debt that jeopardizes the government.
The real crisis is that jobs offshoring by US corporations has permanently lowered US tax revenues by shifting what would have been consumer income, US GDP, and tax base to China, India, and other countries where wages and the cost of living are relatively low. On the spending side, twelve years of wars have inflated annual expenditures. The consequence is a wide deficit gap between revenues and expenditures.
WASHINGTON (MarketWatch) — Household wealth climbed in the second quarter while household debt barely budged, continuing a seesaw pattern as outstanding mortgage obligations declined while auto and student debt mounted, according to data released Wednesday.
Household net worth grew by $1.3 trillion, or 1.8%, to $74.82 trillion, owing to gains in prices that boosted house values by about $525 million as well as a boost of nearly $300 billion from gains in the stock market and mutual funds.
Household debt meanwhile rose a seasonally adjusted annual rate of 0.2% in the second quarter, the Federal Reserve said in its voluminous “financial accounts of the United States” report that’s also known by its former name, the flow-of-funds report.
That marks the sixth straight quarter in which household debt has wavered between gains and losses.
By Shobhana Chandra – Sep 10, 2013 7:25 AM PT
(Bloomberg) – Job openings in the U.S. fell in July to the lowest level in six months, signaling uneven progress in employment.
The number of positions waiting to be filled declined by 180,000 to 3.69 million, from a revised 3.87 million the prior month that was weaker than initially reported, the Labor Department said today in Washington. Hiring rose and firings cooled.
The report, following data last week showing payrolls grew less than forecast in August, indicates the labor market was struggling to gain momentum at the start of the third quarter. Federal Reserve officials, due to meet Sept. 17-18, are debating whether the economy and job market have improved enough to warrant trimming $85 billion in monthly bond purchases.
July 28, 2013
Federal Reserve Policy Mainly Benefits Big Foreign Banks
We’ve extensively documented that the Federal Reserve is intentionally locking up bank money so that it is not loaned out to Main Street. Specifically – due to Fed policy – 81.5% of all money created by quantitative easing is sitting there gathering dust in the form of “excess reserves” … instead of being loaned out to help Main Street or the American economy.
And we’ve extensively documented that a large percentage of the bailouts went to foreign banks (and see this and this). (A 2010 Fed audit also revealed that of the $1.25 trillion of mortgage-backed securities the central bank purchased after the housing bubble popped, some $442.7 billion – more than 35% – were bought from foreign banks.)
It turns out that these themes are all connected.
Previously owned home sales fell unexpectedly in June as tight supply and increasing rates for mortgages imperiled the real-estate market recovery in the U.S.
Purchases (ETSLTOTL) fell 1.2 percent to a 5.08 million annualized rate, the National Association of Realtors reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg called for a 5.26 million pace. Demand was the second-strongest since November 2009 following May’s downwardly revised 5.14 million rate.
First-time buyers are having difficulty finding properties for less than $100,000 as a lack of inventory pushes up property values, and higher mortgage rates are also starting to cool demand for more expensive houses in the West and Northeast, the real-estate agents group said. Federal Reserve Chairman Ben S. Bernanke last week said housing was one of the bright spots for growth and added policy makers will monitor the recent jump in borrowing costs to ensure it won’t derail the nascent recovery.
“Demand is still fairly strong, but this is where the inventory constraints come into play,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama, who predicted sales would decline to a 4.99 million pace. “Inventories still remain fairly tight, particularly on the low end of the price scale.”
The Standard & Poor’s 500 Index climbed 0.2 percent to 1,695.53 at the close in New York as investors analyzed corporate earnings and home sales to gauge the prospects for continued central bank stimulus. The S&P Supercomposite Homebuilding Index dropped 1.8 percent.