THEY’RE GONNA NEED A BIGGER BALANCE SHEET

Driving home from work on Friday night I found it terribly amusing listening to the “business journalists” on the local news station trying to explain the 531 point plunge in the Dow and the 1,105 point plummet from the Tuesday high. The job of these faux journalist mouthpieces for the status quo is not to report the facts, analyze the true factors underlying the market, or seek the truth. Their job is to calm the masses, keep them sedated, and paint the rosiest picture possible.

The brainless twit who reported the stock market bloodbath immediately went into the mode of counteracting the impact of what was happening. She said the market is overreacting, as the country has strong job growth, low inflation, a strongly recovering housing market, and an improving economy. The fact that everything she said was a complete and utter falsehood was exacerbated by her willful ignorance of the Fed created bubble leading to the most overvalued stock market in history. How can these people pretend to be business journalists when they haven’t got a clue about stock market valuations and just say what they are told to say?

Anyone who listens to a mainstream media pundit, talking head, or spokes bimbo deserves the reaming they are going to receive. They are paid to lie, obfuscate, spin, and propagandize on behalf of their corporate media executives, who are beholden to Wall Street bankers, mega-corporations, and the government for their advertising dollars. The mainstream media is nothing but entertainment for the masses, part of the bread and circuses designed to distract the dumbed down, iGadget addicted, ignorant masses.

The entire stock market bubble has been created and sustained by the Federal Reserve and their QE and ZIRP schemes to prop up insolvent Wall Street banks, enrich corporate executives, and produce the appearance of a recovering economy. The wealth was supposed to trickle down to the masses, but the trickle has been yellow in appearance and substance. The average American is far worse off today than they were in 2007, with the Greater Depression Part 2 underway.

Continue reading “THEY’RE GONNA NEED A BIGGER BALANCE SHEET”

Bernanke Blasts Lew’s $10 Bill Woman-ification

I think Llpoh and Bennie would make fine friends. They have a hatred in common.

 

Authored by Ben Bernanke via The Brookings Institute,

I must admit I was appalled to hear of Treasury Secretary Jack Lew’s decision last week to demote Alexander Hamilton from his featured position on the ten dollar bill. My reaction has been widely shared, see for example here, here, here, here, and here.

Hamilton, the first Secretary of the Treasury, would qualify as among the greatest of our founders for his contributions to achieving American independence and creating the Constitution alone. In addition to those accomplishments, however, Hamilton was without doubt the best and most foresighted economic policymaker in U.S. history. As detailed in Ron Chernow’s excellent biography, as Treasury Secretary Hamilton put in place the institutional basis for the modern U.S. economy. Critically, he helped put U.S. government finances on a sound footing, consolidating the debts of the states and setting up a strong federal fiscal system. The importance of Hamilton’s achievement can be judged by the problems that the combination of uncoordinated national fiscal policies and a single currency has caused the Eurozone in recent years. Reflecting on those parallels, as Fed chairman I recommended Chernow’s biography to Mario Draghi, the president of the European Central Bank. Mario told me that he read it with great interest.

Hamilton also played a leading role in creating U.S. monetary and financial institutions. He founded the nation’s first major bank, the Bank of New York; and, as Chernow points out, Hamilton’s 1791 Report on the Mint set the basis for U.S. currency arrangements, which makes his demotion from the ten dollar bill all the more ironic. Importantly, over the objections of Thomas Jefferson and James Madison, Hamilton also oversaw the chartering in 1791 of the First Bank of the United States, which was to serve as a central bank and would be a precursor of the Federal Reserve System.

In the nineteenth century, a principal public role of central banks was to control banking panics, as the Bank of England would do quite successfully. Unfortunately, in large part because of populist opposition, neither the First Bank of the United States nor its successor, the Second Bank of the United States, would have their charters renewed. President Andrew Jackson led the opposition to the Second Bank, vetoing a bill passed by Congress to continue its operations. The expiration of the Second Bank’s charter in 1836 likely worsened the very severe Panic of 1837, which was followed by a prolonged economic depression. The United States would go on to suffer numerous banking panics that would hamper its economic and financial development over the rest of the century.

Hamilton’s demotion is intended to make room to honor a deserving woman on the face of our currency. That’s a fine idea, but it shouldn’t come at Hamilton’s expense. As many have pointed out, a better solution is available: Replace Andrew Jackson, a man of many unattractive qualities and a poor president, on the twenty dollar bill. Given his views on central banking, Jackson would probably be fine with having his image dropped from a Federal Reserve note. Another, less attractive, possibility is to circulate two versions of the ten dollar bill, one of which continues to feature Hamilton.

I was in government long enough to know that decisions like this have considerable bureaucratic inertia and are accordingly hard to reverse. But the Treasury Department should do everything within its power to defend the honor of Jack Lew’s most illustrious predecessor.

*  *  *

So.. keep Hamilton (pro-Fed) but dump Jackson (anti-Fed)…

Did Bernanke just become the internet’s biggest troll? Of course, Bernanke has already reserved the $100 trillion bill for his own omnipotent likeliness.


CONSUMERS NOT FOLLOWING ORDERS

Last week the government reported personal income and spending for April. After months of blaming non-existent consumer spending on cold weather, shockingly occurring during the Winter, the captured mainstream media pundits, Ivy League educated Wall Street economist lackeys, and Keynesian loving money printers at the Fed have run out of propaganda to explain why Americans are not spending money they don’t have. The corporate mainstream media is now visibly angry with the American people for not doing what the Ivy League propagated Keynesian academic models say they should be doing.

The ultimate mouthpiece for the banking cabal, Jon Hilsenrath, who does the bidding of the Federal Reserve at the Rupert Murdoch owned Wall Street Journal, wrote an arrogant, condescending, putrid diatribe, directed at the middle class victims of Wall Street banker criminality and Federal Reserve acquiescence to the vested corporate interests that run this country. Here are the more disgusting portions of his denunciation of the formerly middle class working people of America.

We know you experienced a terrible shock when Lehman Brothers collapsed in 2008 and your employer responded by firing you. 

We also know you shouldn’t have taken out that large second mortgage during the housing boom to fix up your kitchen with granite counter-tops. 

You should feel lucky you’re not a Greek consumer.

Fed officials want to start raising the cost of your borrowing because they worry they’ve been giving you a free ride for too long with zero interest rates.

We listen to Fed officials all of the time here at The Wall Street Journal, and they just can’t figure you out.

Please let us know the problem.

The Wall Street Journal was swamped with thousands of angry responses from irate real people living in the real world, not the elite, QE enriched, oligarchs living in Manhattan penthouses, mansions on the Hamptons, or luxury condos in Washington, D.C. Hilsenrath presumes to know how the average American has been impacted by the criminal actions of sycophantic Ivy League educated central bankers and their avaricious Wall Street owners.

Continue reading “CONSUMERS NOT FOLLOWING ORDERS”

SOMETHING SMELLS FISHY

It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

Continue reading “SOMETHING SMELLS FISHY”

WHY STOCKS WILL CRASH IN TWO CHARTS

“Things always become obvious after the fact”Nassim Nicholas Taleb

“Facts do not cease to exist because they are ignored.”  – Aldous Huxley

The S&P 500 currently stands at 2,126, fractionally below its all-time high. It is now 300% above the 2009 low and 34% above the 2008 and 2001 previous highs. Most people believe this is the new normal. They are comfortably numb in their ignorance of facts, reality, the truth, and the inevitability of a bleak future. When the herd is convinced progress and never ending gains are the norm, the apparent stability and normality always degenerates into instability and extreme anxiety. As many honest analysts have proven, with unequivocal facts and proven valuation measurements, the stock market is as overvalued as it was in 1929, 2000, and 2007.

Facts haven’t mattered, as belief in the infallibility and omniscience of Federal Reserve bankers, has convinced “professionals” to program their high frequency trading supercomputers to buy the all-time high. If central bankers were really omniscient and low interest rates guaranteed endless stock market gains, then why did the stock market crash in 2000 and 2008? The Federal Reserve’s monetary policies created the bubbles in 2000, 2007 and today. There was no particular event which caused the crashes in 2000 and 2008. Extreme overvaluation, created by warped Federal Reserve monetary policies and corrupt Washington D.C. fiscal policies, is what made the previous bubbles burst and will lead the current bubble to rupture.

Benjamin Graham and John Maynard Keynes understood how irrational markets could be over the short term, but eventually they would reach fair value:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Graham

“The market can stay irrational longer than you can stay solvent.” – Keynes

Graham’s quote reflects the difference between hope and reality. This explains the ridiculous overvaluation of Amazon, Shake Shack, Twitter, Linkedin, Tesla, Google, and the other high flying new paradigm stocks. Story stocks soar because the herd believes the stories peddled by Wall Street and company executives. Five of these six stocks don’t have a PE ratio because you need earnings to calculate a PE ratio. In the long run the market will weigh the value these companies based upon profits and cashflow. It is the same story for the market as a whole. There is no question who is to blame for what now amounts to a three headed hydra of bubbles poised to burst.

Continue reading “WHY STOCKS WILL CRASH IN TWO CHARTS”

Bernanke Says “No Large Mispricings In US Securities”; These 5 Charts Say Otherwise

We all know Bennie is a financial guru. His foresight is unquestioned. He saved the world, don’t you know? His wisdom and ability to portend the future is unrivaled. Who could forget his previous market calls?

(October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

(January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

(March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

(July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

(February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

(November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

(January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”

(May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

“The GSEs are adequately capitalized. They are in no danger of failing.”

(Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

(June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Tyler Durden's picture

Retired central banker, blogger, bond guru and hedge fund consultant Ben Bernanke just uttered the following total rubbish…

  • *BERNANKE: NO LARGE MISPRICINGS IN U.S. SECURITIES, ASSET PRICES

In an effort to save whoever it is that will pay him $250,000 next for these wise words, we offer five charts.

 

One of these things is not like the others…

Continue reading “Bernanke Says “No Large Mispricings In US Securities”; These 5 Charts Say Otherwise”

Blogger Ben’s Basically Full Of It

Submitted by David Stockman via Contra Corner blog,

Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.

Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and blatantly misleading monographs about the 1930s. These were essentially zeroxed from Milton Friedman’s monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.

In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency——not the remotest aspect of a great monetary policy error.

Instead, what actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed’s printing presses. This first great credit bubble arose initially from the Fed’s maneuvers to fund the massive war production surge of 1915-1919 and then from its fostering of a vast domestic and international credit bubble during the Roaring Twenties.

Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can’t push on a string, and that a healthy economy requires that busted loans and soured speculations must be purged from the financial system in order for sustainable growth to resume.

Bernanke has never had a clue about this truth. As I showed in The Great Deformation, what he got wrong about the early 1930’s—– he replicated in spades after the September 2008 financial crisis:

Continue reading “Blogger Ben’s Basically Full Of It”

THE MAN WHO SOLD THE WORLD

We passed upon the stairs
Spoken was and when
Although I wasn’t there
He said I was his friend
Which came as a surprise
I spoke into his eyes
I thought you died alone
A long long time ago

Oh no, not me
We never lost control
You’re face to face
With the man who sold the world

I laughed and shook his hand
And made my way back home
I searched for farming land
Years and years I roamed
I gazed a gazer stare
We marked a million hills
I must have died alone
A long long time ago

Who knows?
Not me
I never lost control
You’re face, to face
With the man who sold the world

Who knows?
Not me
We never lost control
You’re face, to face
With the man who sold the world

Can’t Wait To Read Bernanke’s Memoirs? Here Are All The Timeless Statements By The Former Fed Chairman

Tyler Durden's picture

In lieu of a market wrap piece today, because frankly there was no “market” to speak of, just a couple of made by/for HFT stop hunts, we will instead pay homage to the man who made all this commentary on farcial, broken markets possible.

Ben Bernanke.

But first we will let Ben speak for himself.

 

Humble, daring, courageous. All words that promptly come to mind upon reading the following excerpt, and we are confident the Goldman Sachs preface will surely add “patrioticto the trio of adjectives.

And while we know it will be next to impossible to wait until October when this book of toner repair and printer cartridge replacement wisdom comes out, here is a sampling of timeless soundbites by the former Fed Chairman and current blogger, that should be enough to hold readers over.

* * *

10/1/00 – Article published in Foreign Policy Magazine

A collapse in U.S. stock prices certainly would cause a lot of white knuckles on Wall Street. But what effect would it have on the broader U.S. economy? If Wall Street crashes, does Main Street follow? Not necessarily.

7/1/05 – Interview on CNBC

INTERVIEWER: Ben, there’s been a lot of talk about a housing bubble, particularly, you know [inaudible] from all sorts of places. Can you give us your view as to whether or not there is a housing bubble out there?

BERNANKE: Well, unquestionably, housing prices are up quite a bit; I think it’s important to note that fundamentals are also very strong. We’ve got a growing economy, jobs, incomes. We’ve got very low mortgage rates. We’ve got demographics supporting housing growth. We’ve got restricted supply in some places. So it’s certainly understandable that prices would go up some. I don’t know whether prices are exactly where they should be, but I think it’s fair to say that much of what’s happened is supported by the strength of the economy.

7/1/05 – Interview on CNBC

INTERVIEWER: Tell me, what is the worst-case scenario? We have so many economists coming on our air saying ‘Oh, this is a bubble, and it’s going to burst, and this is going to be a real issue for the economy.’ Some say it could even cause a recession at some point. What is the worst-case scenario if in fact we were to see prices come down substantially across the country?

BERNANKE: Well, I guess I don’t buy your premise. It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.

10/20/05 – Testimony before the Joint Economic Committee, Congress

House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.

Continue reading “Can’t Wait To Read Bernanke’s Memoirs? Here Are All The Timeless Statements By The Former Fed Chairman”

On February 7, 2009 Bernanke Admitted What It Was All About

Tyler Durden's picture

Back on February 7, 2009, one month before the Fed unveiled its massive (for its time) first episode of Quantitative Easing, the Federal Reserve was flailing. And, as revealed today by the latest annual batch of Fed transcript releases, precisely one month before the Fed commenced monetizing tens of billions in government debt and MBS, Bernanke held perhaps the longest conference call in the Fed’s history (the transcript alone is 65 pages) in which he revealed that he was working on something entirely different: an “aggregator bank” concept, which would have been essentially a quasi-nationalization of  the US banks whereby Fed funds is commingled with the bank’s capital in order to avert public attention from the trillions of bad assets on the bank books.

It is during the discussion of this plan, which mysteriously disappeared from the Fed’s plan of action between February 7 and a month later, when America set off on its path from which 7 years later it is still unable to ween itself (and in fact now everyone else is also pursuing QE), that we learn for a fact precisely what most have suspect if not known for a fact, namely that the resulting “bailout” of the US economy by way of QE was nothing more than a way to keep bank shareholders “thrilled.”

From the February 7 transcript:

Continue reading “On February 7, 2009 Bernanke Admitted What It Was All About”

BREAKING BAD (DEBT) – EPISODE THREE

In Part One of this three part article I laid out the groundwork of how the Federal Reserve is responsible for the excessive level of debt in our society and how it has warped the thinking of the American people, while creating a tremendous level of mal-investment. In Part Two I focused on the Federal Reserve/Federal Government scheme to artificially boost the economy through the issuance of subprime debt to create a false auto boom. In this final episode, I’ll address the disastrous student loan debacle and the dreadful global implications of $200 trillion of debt destroying the lives of citizens around the world.

Getting a PhD in Subprime Debt

“When easy money stopped, buyers couldn’t sell. They couldn’t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences. Can someone please explain to me how what is happening in higher education is any different?This bubble is going to burst.” Mark Cuban

 http://www.nationofchange.org/sites/default/files/StudentLoanDebt070313_0.jpeg

Now we get to the subprimiest of subprime debt – student loans. Student loans are not officially classified as subprime debt, but let’s compare borrowers. A subprime borrower has a FICO score of 660 or below, has defaulted on previous obligations, and has limited ability to meet monthly living expenses. A student loan borrower doesn’t have a credit score because they have no credit, have no job with which to pay back the loan, and have no ability other than the loan proceeds to meet their monthly living expenses. And in today’s job environment, they are more likely to land a waiter job at TGI Fridays than a job in their major. These loans are nothing more than deep subprime loans made to young people who have little chance of every paying them off, with hundreds of billions in losses being borne by the ever shrinking number of working taxpaying Americans.

Student loan debt stood at $660 billion when Obama was sworn into office in 2009. The official reported default rate was 7.9%. Obama and his administration took complete control of the student loan market shortly after his inauguration. They have since handed out a staggering $500 billion of new loans (a 76% increase), and the official reported default rate has soared by 43% to 11.3%. Of course, the true default rate is much higher. The level of mal-investment and utter stupidity is astounding, even for the Federal government. Just some basic unequivocal facts can prove my case.

There were 1.67 million Class of 2014 students who took the SAT. Only 42.6% of those students met the minimum threshold of predicted success in college (a B minus average). That amounts to 711,000 high school seniors intellectually capable of succeeding in college. This level has been consistent for years. So over the last five years only 3.5 million high school seniors should have entered college based on their intellectual ability to succeed. Instead, undergraduate college enrollment stands at 19.5 million. Colleges in the U.S. are admitting approximately 4.5 million more students per year than are capable of earning a degree. This waste of time and money can be laid at the feet of the Federal government. Obama and his minions believe everyone deserves a college degree, even if they aren’t intellectually capable of earning it, because it’s only fair. No teenager left behind, without un-payable debt.

Continue reading “BREAKING BAD (DEBT) – EPISODE THREE”

QUOTES OF THE DAY

“The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Ben Bernanke – June 10, 2008

“It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

Ben Bernanke – October 31, 2007

“All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

Ben Bernanke – May 17, 2007

“At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

Ben Bernanke – March 28, 2007

“Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

Ben Bernanke – February 15, 2007

“With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

Ben Bernanke – November 15, 2005

 


BREAKING BAD (DEBT) – EPISODE TWO

‘If you’re committed enough, you can make any story work. I once told a woman I was Kevin Costner, and it worked because I believed it’ Saul Goodman – Breaking Bad

“As calamitous as the sub-prime blowup seems, it is only the beginning. The credit bubble spawned abuses throughout the system. Sub-prime lending just happened to be the most egregious of the lot, and thus the first to have the cockroaches scurrying out in plain view. The housing market will collapse. New-home construction will collapse. Consumer pocketbooks will be pinched. The consumer spending binge will be over. The U.S. economy will enter a recession.”Eric Sprott – 2007

In Part One of this article I provided the background of how our current debt saturated economy got to this point of ludicrousness. The “crazy” bloggers, prophets of doom, and analysts who could do basic math were warning of an impending financial crisis in 2006 and 2007, which would be caused by the issuance of hundreds of billions in subprime slime by the Too Big To Trust Wall Street shysters. Subprime mortgages, auto loans, and credit card lines provided the kindling for the 2008 conflagration.

Under normal circumstances we wouldn’t have seen such irrational, reckless, greedy behavior from Wall Street for another generation. But, Wall Street didn’t have to accept the consequences of their actions. They were bailed out and further enriched by their puppets at the Federal Reserve, the lackey politicians they installed in Washington D.C., and on the backs of honest, hard-working, tax paying Americans. The lesson they learned was they could continue to take excessive, reckless, unregulated risks without concern for losses, downside, or consequences.

In reality, the Fed and government have worked in tandem with Wall Street to create the subprime economic recovery. The scheme has been to revive the bailed out auto industry by artificially boosting sales through dodgy, low interest, extended term debt. With the Feds taking over the entire student loan market, they have doled out hundreds of billions to kids who don’t have the educational skills to succeed in college, in order to keep them out of the unemployment calculation.

That’s why you have a 5.7% unemployment rate when 41% of the working age population (102 million people) is not working. The appearance of economic recovery has been much more important to the ruling class than an actual economic recovery for average Americans, because the .1% have made out like bandits anyway. Who has benefited from the $650 billion of student loan and auto debt disseminated by the oligarchs in the last four years, the borrowers or lenders?

Continue reading “BREAKING BAD (DEBT) – EPISODE TWO”

BREAKING BAD (DEBT) – EPISODE ONE

“At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”Fed chairman, Ben Bernanke, Congressional testimony, March, 2007

“Capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.”James Grant, Grant’s Interest Rate Observer

The Federal Reserve issued their fourth quarter Report on Household Debt and Credit last week to the sounds of silence in the mainstream media. There were minor press releases issued by the “professional” financial journalists regurgitating the Federal Reserve’s storyline. Actual analysis, connecting the dots, describing how the massive issuance of student loan and auto loan debt has produced a fake economic recovery, and how the accelerating default rates in auto loans and student loans will produce the next subprime debt implosion, were nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet. Their job is not to analyze or seek truth. Their job is to keep their government patrons and Wall Street advertisers happy, while keeping the masses sedated, misinformed, and pliable.

Luckily, the government hasn’t gained complete control over the internet yet, so dozens of truth telling blogs have done a phenomenal job zeroing in on the surge in defaults. The data in the report tells a multitude of tales conflicting with the “official story” sold to the public. The austerity storyline, economic recovery storyline, housing recovery storyline, and strong auto market storyline are all revealed to be fraudulent by the data in the report. Total household debt grew by $117 billion in the fourth quarter and $306 billion for the all of 2014. Non-housing debt in the 4th quarter of 2008, just as the last subprime debt created financial implosion began, was $2.71 trillion. After six years of supposed consumer austerity, total non-housing debt stands at a record $3.15 trillion. This is after hundreds of billions of the $2.71 trillion were written off and foisted upon the backs of taxpayers, by the Wall Street banks and their puppets at the Federal Reserve.

The corporate media talking heads cheer every increase in consumer debt as proof of economic recovery. In reality every increase in consumer debt is just another step towards another far worse economic breakdown. And the reason is simple. Real median household income is still below 1989 levels. The average American family hasn’t seen their income go up in 25 years. What they did see was their chains of debt get unbearably heavy. Non-housing consumer debt (credit card, auto, student loan, other) was $800 billion in 1989.

Continue reading “BREAKING BAD (DEBT) – EPISODE ONE”

PIN MEET HOUSING BUBBLE 2.0

Housing bubble 2.0 just met Pin 2.0

The 30 Year U.S. Treasury bond yield hit 2.35% yesterday. That is the lowest rate in U.S. history for the 30 Year Treasury. During the deepest darkest depths of the recession in March 2009, after the stock market had fallen over 50%, the yield was 3.5%. One year ago it was yielding 4.0%. Long term interest rates are not controlled by Yellen. They reflect the economic prospects of the country. When they are rising it means the economy is doing well. When they are plummeting to all time lows, the economy is either in recession or headed into recession. Take your pick. No amount of government data manipulation, feel good propaganda spewed by the captured mainstream media, or Ivy League educated Wall Street economist doublespeak, can change the fact this economy is in the dumper and headed much lower. The Greater Depression is resuming its downward march toward inevitable war.

ust30low

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  • KB HOME PULLED OUT OF `COUPLE’ HOUSTON LAND DEALS, CEO SAYS
  • LENNAR CFO SAYS MARGINS ARE POISED TO NARROW ON LESS PRICING POWER
  • LENNAR GROSS MARGIN DECLINED & SALES INCENTIVES GREW
  • LENNAR CEO SAYS “ACROSS THE BOARD, WE’RE SEEING INTENSIFIED COMPETITION AS BUILDERS GO OUT AND CHASE VOLUME”

KB Home had revenues of $2.4 billion in 2014. They are one of the largest home builders in the country. It’s stock has dropped 30% in the last few days. It’s down 40% from its February 2014 high. It’s down 85% from its 2005 high. It had $9 billion of revenues and delivered 60,000 homes in 2005. Then Pin 1.0 popped the first bubble. Revenues collapsed to $1.3 billion and they lost hundreds of millions from 2007 through 2012.

Lennar had revenues of $7.0 billion in 2014. They are the largest home builder in the country. It’s stock has dropped 9% this week. It had been trading at a seven year high, but is still trading 33% below its 2005 bubble high. It had $14 billion of revenues and delivered 42,000 homes in 2005. Then Pin 1.0 popped their bubble. Revenues imploded to $3 billion and they also lost hundreds of millions from 2007 through 2012.

Their admissions earlier this week are proof Bubble 2.0 has met Pin 2.0. KB Home’s 85% increase in revenue and Lennar’s 130% increase in revenue since 2011 have been nothing but a Federal Reserve/Wall Street/U.S. Treasury engineered scheme to repair the balance sheets of the insolvent Too Big To Trust Wall Street banks. The financial industry oligarchs and their servile lackey puppet politicians decided an easy money, Wall Street created scheme to boost home prices would benefit the .1% and restore some of their fraudulently acquired wealth. It isn’t a coincidence home prices rose in parallel with the Fed’s QE programs. And it isn’t a coincidence the bubble is rapidly deflating now that QE3 is over.

The fraudulent nature of the supposed housing recovery can be deciphered by analyzing a few pertinent data points. 30 year mortgage rates were in the 5% to 6% range during the first bubble. Mortgage rates have been consistently below 4% for the last three years. In a healthy market driven economy, these low rates should have brought in first time home buyers and led to a sustainable long-term recovery.

Instead, the number of homes bought by first time buyers has languished at record low levels. The majority of homes sold in 2011 and 2012 were distressed foreclosures and short sales, and the vast majority of sales in the last two years have been to Federal Reserve financed Wall Street investors, Chinese billionaires and fast buck flippers. New home sales of just above 400,000 five years into an economic recovery are at previous recession lows, despite record low mortgage rates. They languish 65% below 2005 levels, when KB Home and Lennar were minting money. Existing home sales of 5 million are back at 1999 levels and 30% below the 2005 highs. This pitiful result is after $3.5 trillion of QE, extremely low mortgage rates, and tremendous hype from the NAR and the corporate MSM (It’s always the best time to buy).

The falsity of the housing recovery storyline can be seen in the fact that mortgage applications linger at 1995 levels, even though mortgage rates are 400 basis points lower than they were in 1995. A critical thinking individual might ask how home prices could rise by 20% since 2012 even though mortgage purchase applications are 20% lower than they were in 2012 and 65% below 2005 levels. The answer is they couldn’t have risen by 20% without massive monetary manipulation and insider deals between Wall Street banks, Wall Street hedge funds, FNMA, Freddie Mac, The Fed, and the U.S. Treasury.

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You see, average Americans buy houses not as an investment, but as a place to live. They save enough for a down payment by spending less than they earn, and then make monthly payments for 30 years from their rising household income. Of course, that was the old days. Real median household income is exactly where it was in 1995. It is currently below the level of 1989. Average Americans have made no headway in 20 years. The median price of a home in 1995, according to the Census Bureau, was $128,000. The median price of a home today is $281,000. When prices go up 120% and your real income remains stagnant, even record low mortgage rates is just pushing on a string. With real wages continuing to fall, young people saddled with a trillion dollars of student loan debt, the full impact of the Obamacare neutron bomb (kills small business, doctors and jobs, but not insurance conglomerates or government bureaucracy) just detonating, and an economy clearly going into the tank, there is absolutely no possibility of a real housing recovery in the foreseeable future.

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The Too Big To Trust banks have consistently accounted for 35% to 55% of all mortgage originations in the U.S. over the last four years. Wells Fargo is the undisputed leader. All of these banks have reported dreadful financial results this week, with plunging revenues and profits, even with accounting shenanigans like relieving loan loss reserves and marking their balance sheets to fantasy rather than true market values. In the midst of a supposed housing recovery, with mortgage rates at historic lows, the largest mortgage originator in the world, saw their mortgage originations FALL by 12% over last year. They are down 65% from two years ago. JP Morgan and Citigroup also saw their mortgage businesses contracting. These banks have been firing thousands of people in their mortgage divisions. This is surely a sign of a healthy growing housing market. Right?

Essentially, the entire housing recovery storyline has revolved around the Federal Reserve providing free money to Wall Street banks, who then withheld foreclosures from the market, sold them in bulk at inflated prices to Wall Street hedge funds like Blackstone, who then created a nationwide rental business, driving prices higher. FNMA and Freddie Mac did their part by selling their bulk foreclosures to the same connected hedge funds. The average person had no opportunity to bid on foreclosed homes and reap the benefits of lower prices. Blackstone has since created a new derivative, by packaging their rental income streams into an “investment” to sell to muppets. Their rental properties are concentrated in the previous bubble markets of Arizona, California, Florida, and Nevada. What a beautiful business concept. Free money from their Federal Reserve sugar daddy, kicking people out of their homes and then renting their houses back to them, driving prices higher by restricting supply and stopping new household formations, double dipping by creating a new exotic subprime investment opportunity, and then exiting stage left before it all blows sky high again.

Continue reading “PIN MEET HOUSING BUBBLE 2.0”