Trần Hoàng Blog

  • Bài viết mới

  • Thư viện

  • Chuyên mục

  • Tháng Sáu 2011
    C H B T N S B
     1234
    567891011
    12131415161718
    19202122232425
    2627282930  
  • Bài viết mới

Archive for Tháng Sáu 28th, 2011

Kinh tế thế giới sẽ còn ở tình trạng yếu kém như thế này trong ít nhất 2-3 năm nữa.

Posted by hoangtran204 trên 28/06/2011

Trong khi Trung Quốc đang gặp vấn nạn nợ không đòi được. Các ngân hàng Trung Quốc cho các công ty và người trong nước vay và họ không thể trả lại được vì làm ăn thất bại, xây đường sá và nhà hàng loạt và đến nay có 60 triệu nhà để trống, bán không ai mua, hạn hán thất mùa kéo dài hơn 8 tháng qua, công nhân thất nghiệp nổi dậy chống lại chính quyền khắp nơi…

Kinh tế Mỹ cũng đang nửa sống, nửa chết. Muốn biết kinh tế Mỹ hiện nay ra sao, ta chỉ cần nhìn chỉ số chứng khoán của các công ty đại diện cho nền kinh tế của  Mỹ, số nhà bán được từng tháng tăng giảm ra sao, và tỉ lệ phần trăm thất nghiệp của dân chúng hiện nay.

Chỉ số chứng khoáng Dow Jones của  Mỹ chỉ nằm quanh quẩn ở mức 12000 (giao động trong khoảng 11 500- 12 400 trong suốt 12 tháng qua). Trước khi khủng hoảng tài chánh, chỉ số chứng khoán là 14 500. Lúc bị khủng hoảng kinh tế, chỉ số chứng khoáng (vào tháng 2-2009) chỉ còn 7 500.

Thất nghiêp của  Mỹ cũng nằm quanh quân ở mức trên 9% trong thời gian suốt 3 năm qua.

Hai chỉ số nói trên cho thấy kinh tế của  Mỹ còn rất yếu kém. Và sẽ còn tiếp tục tình trạng nầy cho đến năm 2013 hoặc 2014.

Trong 2 năm qua, chính phủ Obama đã làm gì để kích thích kinh tế? Chính phủ cho các ngân hàng (cổ phần) vay tiền  ở mức lãi suất gần như  0% để các ngân hàng khỏi phá sản (vì suốt 10 năm trước đây, các ngân hàng đã cho nhiều công ty, nhiều  người vay mượn tiền (xây nhà, mua nhà) rồi sau đó khoảng năm 2008 cho dến nay, các ngân hàng không đòi tiền lại được, và ôm hết các nhà không ai ở).

Chính phủ cho ngân hàng mượn tiền và kỳ vọng các ngân hàng  sẽ cho người dân vay mượn để mua nhà, mua xe, làm ăn. Nhưng thực tế ngân hàng lúc nầy không muốn cho ai mượn một cách dễ dàng, họ cứu xét hồ sơ mượn tiền rất kỹ, kết quả là mua 1 căn nhà mất gần 2-4 tháng, thay vì là 1-2 tháng như hồi trước 2007. Số nhà bán được hàng tháng gần như rất thấp và ngân hàng đang ôm giữ hàng chục triệu căn nhà để trống không ai mua.

Các ngân hàng cũng không dễ dàng cho các doanh nghiệp nhỏ mượn tiền để làm ăn, vì thế số người thát nghiệp vẫn duy trì ở mức trên 9%.

Chính phủ  Mỹ đã làm từ cuối năm 2008 đến nay là:  Tung tiền ra 2 đợt (gọi lại quantitative easing QE 1 và QE 2) cho các ngân hàng mượn tiền, hoặc chính phủ mua lại một phần các công ty đang bị mang nợ để không cho các công ty nầy bị phá sản.

Chính phủ chi tiền vào các công tác sửa chữa nâng cấp cầu đường, cắt giảm các chi phí không cần thiết, giảm bớt công nhân viên biên chế, không tuyển người mới vào làm thế cho người về hưu, mà những người hiện đang làm việc phải cáng đáng việc ấy, giảm bớt cảnh sát, và các chương trình y tế quá rộng lượng, hao tốn…

Tuy kinh tế có lên trong 2 năm qua, nhưng không đủ mạnh. Các công ty không thuê mướn người vì không nhận được hợp đồng mua hàng. Thậm chí, nhiều năm qua, các công ty phải cho công nhân làm 1/2 ngày để lây lất chờ đợi hợp đồng mới. Và nếu tình trạng kinh tế suy yếu tiếp tục như thế nầy trong 16 tháng sắp tới, chắc chắn dân chúng  Mỹ sẽ bầu cho một ứng cử viên của đảng CỘng Hòa lên làm  tổng thống; hay nói cách khác, TT Obama sẽ bị thất cử vào ngày bầu cử TT 06-11- 2012.

@Một số dữ kiện cần biết:

*Mỗi ngày Mỹ tiêu thụ 20 triệu thùng dầu và Trung Quốc tiêu thụ 8 triệu thùng dầu. Nhật và Đức mỗi nước tiêu thu dầu bằng 2,5 đến 3,5 triệu thùng dầu mỗi ngày.

*Việt Nam bán dầu thô năm 2011 sẽ thu được 30 tỉ. (Theo báo cáo của Petro Vietnam cho biết, 6 tháng đầu năm nay, Petro VN bán được gần 15 tỉ đô la dầu thô và 8 triệu mét khối ga). Tuy là nước sản suất dầu thô, nhưng dân chúng  VN phải mua xăng với giá cao còn hơn giá xăng ở Mỹ. Đây là một quốc gia duy nhất mà chính phủ không chia sẽ tài nguyên khoáng sản của đất nước cho nhân dân được hưởng. Trái lại, các quốc gia suất cảng dầu  luôn luôn bán xăng cho dân chúng của họ với giá rất rẻ: 50 cents- 1 đô la Mỹ cho 1 gallon xăng ( tương đương 4 lít). Chính phủ các nước ấy cho rằng tài nguyên khoáng sản của đất nước phải chia cho dân chúng hưởng, phần dư còn lại thì mới bán cho nước ngoài với giá cao hơn.

Kinh tế Mỹ còn chưa lên

Ngày hôm qua giá dầu thô trên thế giới đã giảm, nhưng đó không phải là một tin mừng. Giá dầu hạ thấp một phần vì có 60 triệu thùng dầu được lấy từ các kho dự trữ quốc tế được đưa ra thị trường.

Nhưng 60 triệu thùng dầu không đủ làm cho giá tụt xuống mất 4.4%. Nguyên nhân chính yếu và ảnh hưởng lâu dài là những nhà buôn dầu tiên đoán kinh tế thế giới sẽ giảm tốc độ tăng trưởng, do đó sẽ bớt sử dụng dầu; đặc biệt là hai nền kinh tế dùng nhiều năng lượng nhất là Mỹ và Trung Quốc.

Một ngày trước, Thứ Tư, 22 tháng 6, chủ tịch Hệ Thống Dự Trữ Liên Bang Hoa Kỳ (tức Ngân Hàng Trung Ương Mỹ) báo tin chấm dứt chương trình Q2 kích thích kinh tế bằng tiền tệ; mặc dù ông cũng tiên đoán nỗi khó khăn kinh tế sẽ còn tiếp tục ít nhất qua năm 2012.

Trong ba tháng qua, rất nhiều tin đáng lo, cả số tiêu thụ và các nhà sản xuất công nghiệp đều không gia tăng hoạt động như mọi người trông đợi.

Hai triệu chứng xấu nhất là số nhà cửa mới xây bán được vẫn tiếp tục xuống và tỷ lệ người thất nghiệp vẫn nhấp nhỉnh ở mức 9%. Tại Trung Quốc, chính quyền cố kìm hãm khối lượng tiền tệ để giảm nhiệt độ lạm phát đã lên trên 5%; các ngân hàng bớt đổ tiền ra cho các xí nghiệp vay trong lúc việc xuất cảng cũng trì trệ; cả hai hiện tượng đó khiến cho trong tháng 6 số sản xuất công nghiệp không gia tăng được, một dấu hiệu rất đáng lo cho một nước còn đang phát triển với tình trạng lúc nào cũng có vài trăm triệu công nhân đi tìm việc.

Những tin tức kinh tế từ khu vực Âu Châu cũng không lạc quan, các nhà lãnh đạo đang báo trước sẽ giảm bớt chi tiêu và tăng lãi suất, đặc biệt là Hy Lạp phải tăng thuế để được cho vay thêm nợ. Trận động đất và sóng thần ở Nhật khiến cho sức sản xuất tê liệt cũng là một sức kéo kinh tế thế giới cùng xuống; tất cả cho thấy rất đáng lo ngại. Riêng tại Mỹ, đã có báo động về một hiện tượng kinh tế “Xuống Hai Lần,” theo hình chữ W có thể xẩy ra như những năm 1936, 37.

Kinh tế Mỹ thực sự suy thoái từ cuối năm 2007 khi tổng số sản xuất giảm chứ không tăng; nhưng đến tháng 6 năm 2009 đã chính thức chấm dứt; nghĩa là bắt đầu tăng lên. Nhưng đó chỉ các số thống kê; khi tổng số sản xuất trong nước tăng lên được 1% hay 2% thì coi như cơn suy thoái đã hết rồi. Nhưng trên thực tế, người dân không đọc các con số đó mà chỉ quan tâm đến công việc làm. Cho nên khi thấy trong tháng 5 cả nước Mỹ chỉ tăng thêm được 54,000 công việc làm mới (đáng lẽ phải tăng thêm 200 ngàn), con số này thấp hơn cả 2 tháng trước; đồng thời số người nộp đơn xin trợ cấp bảo hiểm thất nghiệp lần đầu đã tăng lên; thì ai cũng lo lắng. Hệ Thống Dự Trữ Liên Bang đã hạ thấp dự đoán tỷ lệ tăng trưởng cho cả năm 2011, kinh tế Mỹ sẽ chỉ tăng với nhịp độ từ 2.7 đến 2.9% chứ không phải trên 3% như tiên đoán lạc quan trước đây; và tỷ lệ thất nghiệp vào cuối năm nay sẽ vẫn giữ mức 8.9%.

Trong một chu kỳ kinh tế bình thường, một năm sau khi chấm dứt suy thoái thì kinh tế Mỹ đã phải tăng lên với tốc độ 3% trở lên để lấy lại cái đà đã mất. Theo kinh nghiệm, lúc suy thoái xuống càng sâu thì khi lên đà gia tăng càng mạnh. Nhưng điều này đã không xẩy ra trong chu kỳ này. Mặc dù kinh tế Mỹ đã xuống rất nặng nề trong năm 2008, nhưng cho đến nay vẫn chưa có đà lên đủ mạnh. Lý do chính là cuộc suy thoái vừa qua do một cuộc khủng hoảng tín dụng gây nên; không như những cuộc suy thoái phần lớn do chênh lệch cung cầu gây nên.

Phần lớn các vụ suy thoái kinh tế khởi sự khi số cung tăng lên quá so với số cầu, vì các nhà sản xuất hoạt động mạnh hơn trong khi giới tiêu thụ không tăng nhu cầu cùng một tốc độ. Cơn suy thoái bắt đầu khi một số nhà sản xuất phải ngưng hoạt động, gây ra cảnh thất nghiệp khiến giới tiêu thụ càng giảm số cầu xuống nữa. Suy thoái là một hiện tượng tự nhiên để bắt buộc nền kinh tế phải tự điều chỉnh.

Nhưng khi một cơn suy thoái lại do thị trường tín dụng gây ra thì tốc độ điều chỉnh rất chậm chạp. Hệ thống ngân hàng gây nên cơn khủng hoảng vì cho vay bừa bãi không đúng tiêu chuẩn đưa tới cảnh nhiều người vỡ nợ vì sau đó không đủ sức trả tiền lãi và vốn. Các ngân hàng đã tung tiền vào thị trường, và trong một thời gian gánh chịu hậu quả. Hiện tượng này đã diễn ra trong năm 2007, 2008 ở nước Mỹ; chính phủ Gorges W. Bush đã phải dùng 700 tỷ tạm cứu các ngân hàng lớn trên đà phá sản. Nhưng sau đó, hoạt động của cả hệ thống các ngân hàng rơi vào cảnh trì trệ. Những luật lệ mới đặt ra với mục đích buộc các ngân hàng phải làm ăn cẩn trọng hơn để tránh những cuộc khủng hoảng tương lai; nhưng vì thế mà chính các ngân hàng càng trở nên càng dè dặt hơn, không dám cho vay như trước nữa. Cùng trong thời gian này, hệ thống ngân hàng ở nước láng giềng Canada vẫn không bị khủng hoảng, chỉ vì họ theo những quy tắc bảo thủ và dè dặt khi cho vay nợ; nhờ thế cơn suy thoái ở Mỹ lần này không ảnh hưởng tới Canada như thường xẩy ra trong quá khứ.

Khi số tiền đổ vào nền kinh tế Mỹ bị ngưng trệ, không lưu hoạt và năng động nữa, thì cả nền sản xuất và hoạt động tiêu thụ cũng trì trệ. Trong những chu kỳ kinh tế bình thường, guồng máy sản xuất tự điều chỉnh nhanh hơn. Còn tốc độ tự điều chỉnh của hệ thống ngân hàng chậm hơn. Chúng ta có thể hiểu là việc thanh toán những kho hàng hóa ế không bán được tương đối dễ dàng hơn việc thanh toán những món nợ không đòi được! Năm 2000, tổng số nợ của dân chúng Mỹ lớn bằng 100% tổng số lợi tức kiếm được của họ trong năm đó; đến năm 2005, tỷ số Nợ trên Lợi tức tăng lên thành 120% và qua năm 2007 vượt lên gần 140%! Cho tới nay, tổng số nợ của dân Mỹ đã giảm xuống nhưng mới xuống tới tỷ số 120% như năm 2005!

Khi tổng số nợ của dân chúng giảm bớt, chính quyền liên bang và Ngân Hàng Trung Ương đã phải đứng ra đóng vai con nợ để thay thế, miễn sao cho đồng tiền tiếp tục lưu thông. Chính phủ Obama đã đưa vào nền kinh tế Mỹ khoảng 1,200 tỷ đô la với các chương trình kích thích kinh tế; Hệ Thống Dự Trữ Liên Bang đã in thêm tiền để bơm vào hệ thống tài chánh tổng cộng 2,300 tỷ đô la, hiện đang chấm dứt chương trình gọi là Q2, mua 600 tỷ công trái từ các ngân hàng trong nửa đầu năm 2011.

Nhưng các nỗ lực “kích thích” của chính quyền Obama và Ngân Hàng Trung Ương Mỹ (độc lập với chính phủ) hiện vẫn chưa thúc đẩy được cho nền kinh tế chạy với một tốc độ nhanh hơn để thoát khỏi cảnh trì trệ. Nhiều người cho rằng đáng lẽ chính phủ Obama phải gia tăng chi tiêu để kích thích kinh tế ngay từ năm ngoái, thay vì giới hạn ở con số 700 tỷ. Tổng số người đang làm việc ở Mỹ đã giảm xuống rất nhanh trong những năm từ 2007 đến 2009; và cho tới nay vẫn chưa tăng lên được trên mức thấp nhất đó. Muốn giảm bớt tỷ lệ thất nghiệp thì phải thêm một chương trình kích thích kinh tế nữa! Nhiều người cũng chỉ trích ông Ben Bernanke, chủ tịch Hệ Thống Dự Trữ Liên Bang, không mạnh dạn tiếp tục với một chương trình Q3 để thúc đẩy tiền tệ lưu hoạt hơn.

Tuy nhiên, trong đời sống kinh tế người ta luôn luôn phải lựa chọn, và phải lựa chọn trong khi không biết chắc chắn hậu quả của các chính sách mà mình theo đuổi.

Trong lúc chính quyền Mỹ có thể gia tăng số chi để kích thích kinh tế thì thế nào cũng phải đồng thời tăng số khiếm hụt ngân sách, tăng số nợ của quốc gia, cả hai sẽ khiến cho mức độ tín nhiệm của thế giới vào nền kinh tế Mỹ giảm bớt. Khi Ngân Hàng Trung Ương Mỹ in thêm tiền đẩy qua cho ngân hàng thì họ cũng biết một hậu quả có thể làm cho giá cả gia tăng, lạm phát sẽ khó tránh được. Khi lạm phát tăng, thí dụ từ 2% lên 4%, tức là toàn thể dân chúng bị “tăng thuế” thêm 2% một cách gián tiếp! Những người quyết định về kinh tế luôn luôn phải lựa chọn, giữa các giải pháp với các hậu quả đối nghịch với nhau. Hiện nay ông Bernanke không đồng ý với một chương trình Q3 nhưng cũng chưa hoàn toàn gạt bỏ đề nghị này.

Ðiều đáng lo là chương trình 700 tỷ kích thích kinh tế của Tổng Thống Barack Obama sẽ chấm dứt vào cuối năm nay và cả hành pháp và các nhà lập pháp Mỹ hiện vẫn chưa thỏa hiệp được về những việc cần làm tiếp. Ðảng Cộng Hòa kêu gọi phải chú ý giảm bớt khiếm hụt ngân sách; đảng Dân Chủ quan tâm đến nạn thất nghiệp hơn. Phó Tổng Thống Joe Biden đang họp bàn với sáu nghị sĩ thuộc cả hai đảng để quyết định việc nâng cao mức trần của tổng số nợ quốc gia lên trên con số 14,300 tỷ đô la. Cuộc mặc cả này là một cơ hội để hai đảng thỏa hiệp. Các đại biểu Quốc Hội cũng như ông tổng thống đều biết rằng sang năm 2012 cử tri sẽ đánh giá họ qua tình hình kinh tế, một thước đo khách quan và giản dị nhất, khi quyết định có bỏ phiếu cho họ nữa hay không.

Trong khi chờ đợi, người ta có thể thấy vài niềm hy vọng. Kinh tế thế giới sẽ không xuống nữa mà có thể vươn lên, khi giá dầu lửa giảm xuống; đồng thời nền kinh tế Nhật Bản sẽ hồi phục lại sau những ảnh hưởng nhất thời của cuộc động đất và sóng thần. Khi giá xăng dầu xuống thì người dân Mỹ thấy có thêm tiền tiêu thụ vào những sản phẩm và dịch vụ khác, thay vì đem tiền nộp cho các quốc gia sản xuất dầu lửa! Khi người tiêu thụ chịu chi tiền ra, tự nhiên các nhà sản xuất sẽ chạy theo, họ sẽ tuyển dụng công nhân, và tỷ lệ thất nghiệp sẽ thấp xuống. Bao giờ sẽ thấy cảnh đó? Theo ông Ben Bernanke nhìn, thì ít nhất chúng ta phải đợi tới nửa cuối năm 2012!

Nguồn: nguoi-viet.com

Huge, Ongoing Wall Street Subsidy Allows Banks to Coin Money Every Day at Savers’ Expense

Posted May 13, 2010 08:27am EDT by Henry Blodget in Investing, Recession, Banking

Related: xlf, ^dji, ^gspc, gs, jpm, bac, c

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs, JP Morgan, Bank of America, and Citigroup made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That’s how traders justify their gargantuan bonuses–their jobs are so risky that they deserve to be paid millions for protecting their firms’ precious capital. (Of course, the only thing that happens if traders fail to protect capital is that taxpayers bail out the bank and the traders are paid huge “retention” bonuses to prevent them from leaving to trade somewhere else, but that’s a different story).

But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.

Why?

Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets.  Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.

Why is the US government still lending banks money at near-zero interest rates? Ostensibly, for the same reason that the government bailed out the banks in the first place: So the banks will lend money to small businesses, big businesses, and other participants in the “real economy.”

But the banks aren’t lending money to the real economy: Private sector lending has fallen off a cliff.

And one reason private sector lending has fallen off a cliff is that lending money to the private sector is risky. Lending money to the government, meanwhile, is nearly risk-free. So the banks are just lending money back to the government (by scarfing up US Treasuries), collecting a nearly risk-free 3% spread, and then leveraging up this bet 10-15 times.

THAT’s how the big banks made money 63 days in a row. Importantly, doing this required no special genius: If you had the good fortune of working at a big bank, you would be making money every day, too.  And then you’d get to take half of that money home as a bonus!

No wonder everyone wants to work on Wall Street.

The government’s zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.

——


As I’ve noted for years, the government has been guaranteeing that the big banks make money at taxpayer expense by loaning money at very low interest rates, and then letting the banks loan the money back to the government at much higher interest rates.

For example, as I pointed out in January:

Bloomberg notes:

“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.”

The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.

The gap between short-term interest rates, such as what banks may pay to borrow in interbank markets or on savings accounts, and longer-term rates, known as the yield curve, has been at record levels. The difference between yields on 2- and 10-year Treasuries yesterday touched 2.71 percentage points, near the all-time high of 2.94 percentage points set Feb. 18.

Harry Blodget explains:

The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.

For the 63 straight trading days in Q1, in other words, Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) made money trading for their own accounts.

Trading, of course, is supposed to be a risky business: You win some, you lose some. That’s how traders justify their gargantuan bonuses–their jobs are so risky that they deserve to be paid millions for protecting their firms’ precious capital. (Of course, the only thing that happens if traders fail to protect that capital is that taxpayers bail out the bank and the traders are paid huge “retention” bonuses to prevent them from leaving to trade somewhere else, but that’s a different story).

But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.

Why?

Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.

***

The government’s zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.

Paul Abrams chimes in:

To get a clear picture of what is going on here, ignore the intermediate steps (borrowing money from the fed, investing in Treasuries), as they are riskless, and it immediately becomes clear that this is merely a direct payment from the Fed to the banking executives…for nothing. No nifty new tech product has been created. No illness has been treated. No teacher has figured out how to get a third-grader to understand fractions. No singer’s voice has entertained a packed stadium. No batter has hit a walk-off double. No “risk”has even been “managed”, the current mantra for what big banks do that is so goddamned important that it is doing “god’s work”.

Nor has any credit been extended to allow the real value-producers to meet payroll, to reserve a stadium, to purchase capital equipment, to hire employees. Nothing.

Congress should put an immediate halt to this practice. Banks should have to show that the money they are borrowing from the Fed is to provide credit to businesses, or consumers, or homeowners. Not a penny should be allowed to be used to purchase Treasuries. Otherwise, the Fed window should be slammed shut on their manicured fingers.

And, stiff criminal penalties should be enacted for those banks that mislead the Fed about the destination of the money they are borrowing. Bernie Madoff needs company.

As Shahien Nasiripour reports, the Congressional Research Service has just confirmed what we’ve been saying:

A newly-released study from the Congressional Research Service bolsters claims that the nation’s largest banks profited off the Federal Reserve’s financial crisis-era programs by borrowing cash for next to nothing, then lending it back to the federal government at substantially higher rates.

The report reinforces long-held beliefs that the banking system in essence engaged in taxpayer-financed arbitrage: They got money for free, then lent it back to Uncle Sam while collecting juicy returns. Left out of the equation are the millions of everyday borrowers, like households and small businesses, who were unable to secure loans needed to tide them over until the crisis ended.

The Fed released records under pressure in December and March that showed the extent of its largesse. The CRS study shows for the first time how some of the most sophisticated financial firms could have taken the Fed’s money and flipped easy profits simply by lending it back to another arm of the government.

***

In all, more than $3 trillion was lent to financial institutions from the Fed, and terms were generous. Junk-rated securities were pledged as collateral for taxpayer-backed loans. The Fed did not provide conditions for how the money was to be used.

***

“Why wasn’t the Fed providing these same sweetheart deals to the American people?” asked Warren Gunnels, senior policy adviser to [Senator] Sanders. “The Fed was practicing socialism for the rich, powerful and the connected, while the federal government was promoting rugged individualism to everyone else.”

At the time, Fed officials said its bailout programs were necessary to restart the flow of credit. If money couldn’t flow to lenders, households and businesses would be next. Even more layoffs and foreclosures could have ensued, officials argued.

Lending, however, decreased, according to Fed and Federal Deposit Insurance Corporation data.

***

Sanders said the spread between firms’ borrowing rates and their lending rates to Uncle Sam amounted to “free money.” For Bank of America during the third quarter of 2009, the spread was nearly 3 percent.

No wonder Bill Gross, Nouriel Roubini, Laurence Kotlikoff, Steve Keen, Michel Chossudovsky, the Wall Street Journal and Bernie Madoff all say that the U.S. economy is a giant Ponzi scheme.

As I noted last year:

The governments of the world have spent trillions trying to paper over the fraud and prop up the big, insolvent banks, instead of forcing them to restructure and forcing bondholders and shareholders to take a haircut.

A study of 124 banking crises by the International Monetary Fund found that propping up banks which are only pretending to be solvent drives up the costs to the country:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

***

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

The American banks and government have certainly pretended that all of the big banks are solvent. As ABC wrote in October 2009:

The Treasury Department and the Federal Reserve lied to the American public last fall when they said that the first nine banks to receive government bailout funds were healthy, [the special inspector general for the Troubled Asset Relief Program] states in a new report released today.

Similarly, the stress tests were a complete and utter sham.

The government has given the giant banks huge amounts in loans and guarantees based upon their false representations about their financial health. The Fed has larded up its balance sheet with toxic assets from the banks.

***

Throwing trillions at the giant banks – who are mainly using the money to gamble – is not stimulus. It helps the executives of the big banks and their shareholders and bondholders, but not the broader economy.

Indeed, attempting to prop up big, insolvent banks is preventing stimulus from getting out into the economy.

Indeed, the big banks are still insolvent. Moody’s – a mere 3 years too late – just put Bank of America, Citi and Wells Fargo on a downgrade watch. And see this.

The country has been plundered to throw money at the big banks to allow their CEOs to rake in bonuses by playing an extend-and-pretend game (pretending they are solvent). This has driven us from the “wealth of nations” to the “debt of nations”.

As I wrote in 2009:

If the power to create credit were taken away from the Federal Reserve system and its private banks and given back to the [people] (as the Constitution envisioned), then American taxpayers would save hundreds of billions or trillions of dollars in unnecessary interest charges in paying off the national debt, as the government would not have to pay interest to finance its debt (sovereign nations such as the U.S. and England have the power to create credit and money; see this, this, this, and this).

———————–

Is the Chinese Economy Sputtering for the Same Reasons as  the  American Economy

It was tempting to believe that China was different.

With its command and control economy with some of the trappings of free market capitalism, trillions in reserves, and abundant natural resources, many thought that China would “decouple” from the Western world’s problems and sail into a prosperous future.

However, despite its long history, exotic names and seemingly strong position, China cannot avoid the rules of economics which have applied to all countries throughout history.

Corruption and Phony Bookkeeping

Corruption and the failure to follow the rule of law is one of the main factors which has dragged down the American economy.

The fact that – according to the Chinese central bank – Chinese officials stole $120 billion and fled the country does not auger well for China.

Scandals among various Chinese companies are not helping, either.

And then there are the made up statistics. As Warren Hatch of Catalpa Capital Advisors notes:

As Li Keqiang, the vice premier and heir-apparent to Wen Jiabao, laconically remarked to the US ambassador a few years ago, most of the statistics in China are “for reference only.”

And Charles Hugh Smith argues:

Despite their many differences, the economies of China and the U.S. share a number of key traits: both are corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda and operate with two sets of rules: one for the Elites, and another for the masses.

Despite their many differences, the economies of China and the U.S. share a number of key traits: both are corrupt, rigged, crony-Capitalist, rely on phony statistics and propaganda and operate with two sets of rules: one for the Elites, and another for the masses.

Can We Trust You?

The credit crisis hit in 2008 largely because American banks lost trust in one another. Specifically, top economists say that each bank had so much bad debt on its books (in the form of mortgage backed securities and derivatives which worth the paper they were written on) which made them essentially insolvent that they assumed that all of the other banks must be in a similar situation … so they stopped lending to each other.

This drove the price which banks charged each other for loans (libor) skyrocket, and the whole credit market froze up.

The same thing is now happening in China. As ZeroHedge reports, Chinese interbank lending is freezing up and “shibor” – the prize which Chinese banks charge each other for loans – is skyrocketing.

Bloomberg notes:

China’s money-market rate climbed to the highest level in more than three years as a worsening cash crunch prompted the central bank to suspend a bill sale.

The seven-day repurchase rate, which measures interbank funding availability, has more than doubled since June 14, when the People’s Bank of China ordered lenders to set aside more money as reserves for a sixth time this year. The central bank suspended a sale of bills tomorrow, according to a statement on its website today.

“Banks have to hoard cash to meet the regulator’s capital or loan-to-deposit requirements by the end of every quarter,” said Liu Junyu, a bond analyst at China Merchants Bank Co., the nation’s sixth-largest lender. “So we won’t see the shortage easing.”

(Admittedly, there may have been temporary factors leading to the rise in shibor, which might be smoothed out in the future. But the point is that China is not immune from credit squeezes.)

Less Bang for the Buck

Each dollar of debt incurred by the American government creates less and less benefit. For example, Jim Welsh points out:

Since 1966, each dollar of additional debt has given the economy less of a boost. In 1966, $1 dollar of debt boosted GDP by $.93. But by 2007, $1 dollar of debt lifted GDP by less than $.20.

Karl Denninger notes:

What is this chart? Why, the history of our idiocy. It’s quite simple; this is the multiple that each dollar of debt (anywhere in the economy) has returned in GDP looked at on a quarter-on-quarter basis, net of the debt increase itself. That is, if the multiple is “1” then for each dollar of debt added to the economy there was one dollar of output in the form of GDP added as well during the same period of time. If it’s “0” then the debt itself produced no additional output, but did fund itself. If it’s negative, well, into the black hole you go. Since this is a quarterly number it’s quite noisy but there’s no mistaking what it tells you.

If you pay attention you’ll note that since 1980 this has never been positive – not even for one quarter – and it was only rarely positive before that time!

Similarly, Martin Wolf of notes:

Dwight Perkins of Harvard argued at the China Development Forum that the “incremental capital output ratio” – the amount of capital needed for an extra unit of GDP – rose from 3.7 to one in the 1990s to 4.25 to one in the 2000s. This also suggests that returns have been falling at the margin.

***

The thesis advanced by Prof Pettis is that a forced investment strategy will normally end with such a bump. The question is when. In China, it might be earlier in the growth process than in Japan because investment is so high. Much of the investment now undertaken would be unprofitable without the artificial support provided, he argues. One indicator, he suggests, is rapid growth of credit. George Magnus of UBS also noted in the FT of May 3 2011 that the credit-intensity of Chinese growth has increased sharply. This, too, is reminiscent of Japan as late as the 1980s, when the attempt to sustain growth in investment-led domestic demand led to a ruinous credit expansion.

As growth slows, the demand for investment is sure to shrink. At growth of 7 per cent, the needed rate of investment could fall by up to 15 per cent of GDP. But the attempt to shift income to households could force a yet bigger decline. From being an growth engine, investment could become a source of stagnation.

And if you think that bailouts as an attempt at stimulus are solely a Western game, think again.

China is bailing out local governments, giving cash for clunkers, and trying just about every possible type of bailout.

Consumer Spending Declines

Consumer frugality is obviously slowing the American economy. But the Chinese consumers are picking up the slack, right?

Actually, Bloomberg reports that consumer spending is down:

At the Haiyang Zhuangshi Co. hardware store in Beijing, sales of paint and aluminum window frames are slowing, one sign of a diminished role for consumer spending in China that’s foiling government objectives.

***

Hu’s loss underlines the dilemma for Premier Wen Jiabao: his campaign to control inflation is undermining attempts to make consumers a bigger driver of the world’s second-largest economy. Failure to lessen dependence on exports and investment spending leaves the nation more vulnerable to swings in external demand and subject to asset booms and busts.

Government data this week showed retail sales growth slowed to 16.9 percent in May, less than the average of the past five years and a figure that’s inflated by soaring prices for food. By contrast, spending on fixed assets such as factories and property climbed 26 percent, excluding rural households, in the first five months, the fastest pace in almost a year.

Analysts at Capital Economics, a London-based research group, estimate that private consumption may have fallen to 34 percent of gross domestic product last year, the lowest level since China began opening its economy to market mechanisms more than three decades ago. Just 10 years ago, the share was 46 percent, Capital Economics calculates.

“Just at a time when the government in China and a lot of people elsewhere are hoping to see Chinese consumers step up to the plate, actually they’ve been staying away from shops,” said Mark Williams, an economist in London with Capital Economics and a former adviser on China to the U.K. Treasury. “The trend over the past couple of years has been relentlessly downward.”

All Bubbles Eventually Burst

I noted in July 2009:

One of the top experts on China’s economy – Michael Pettis – has a[n] essay arguing that China is blowing a giant credit bubble to avoid the global downturn.

Pettis documents reports and statistics from modern China, of course. But he ends with a must-read comparison to ancient Rome:

Let me post here a portion of Chapter 15 from Will Durant’s History of Roman Civilization and of Christianity from their beginnings to AD 325

The famous “panic” of A.D. 33 illustrates the development and complex interdependence of banks and commerce in the Empire. Augustus had coined and spent money lavishly, on the theory that its increased circulation, low interest rates, and rising prices would stimulate business. They did; but as the process could not go on forever, a reaction set in as early as 10 B.C., when this flush minting ceased. Tiberius rebounded to the opposite theory that the most economical economy is the best. He severely limited the governmental expenditures, sharply restricted new issues of currency, and hoarded 2,700,000,000 sesterces in the Treasury.

The resulting dearth of circulating medium was made worse by the drain of money eastward in exchange for luxuries. Prices fell, interest rates rose, creditors foreclosed on debtors, debtors sued usurers, and money-lending almost ceased. The Senate tried to check the export of capital by requiring a high percentage of every senator’s fortune to be invested in Italian land; senators thereupon called in loans and foreclosed mortgages to raise cash, and the crisis rose. When the senator Publius Spinther notified the bank of Balbus and Ollius that he must withdraw 30,000,000 sesterces to comply with the new law, the firm announced its bankruptcy.

At the same time the failure of an Alexandrian firm, Seuthes and Son due to their loss of three ships laden with costly spices and the collapse of the great dyeing concern of Malchus at Tyre, led to rumors that the Roman banking house of Maximus and Vibo would be broken by their extensive loans to these firms. When its depositors began a “run” on this bank it shut its doors, and later on that day a larger bank, of the Brothers Pettius, also suspended payment. Almost simultaneously came news that great banking establishments had failed in Lyons, Carthage, Corinth, and Byzantium. One after another the banks of Rome closed. Money could be borrowed only at rates far above the legal limit. Tiberius finally met the crisis by suspending the land-investment act and distributing 100,000,000 sesterces to the banks, to be lent without interest for three years on the security of realty. Private lenders were thereby constrained to lower their interest rates, money came out of hiding, and confidence slowly re-turned.

Except for the exotic names … and the spice-bearing ships, this story has a remarkably contemporary ring to it, as do nearly all historical accounts of financial crisis, by the way. This story is not totally relevant to China today except to the extent that it indicates how difficult it is for banking systems flush with cash to avoid speculative lending, and how the very fact of their speculative lending then creates the conditions that can bring the whole thing crashing down. Hyman Minsky told us all about this kind of thing. There has never been a political or economic system in history that has been able to avoid the consequences of excessive liquidity within the banking system. Even the Romans learned this, and they learned it the hard way, as we always do.

America’s easy credit bubble started in 2001. Rome’s prior to 10 BC. We know the results of both.

Is China now blowing a huge credit bubble which will lead to a giant crash down the line?

Pettis thinks so, and every Austrian economist in the world would agree.

I noted in September of that year:

Lou Jiwei – the chairman of China’s sovereign wealth fund – recently told a forum organized by the Brookings Institution and the Chinese Economists 50 Forum, a Beijing think-tank:

Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that.

While Americans are focused on the bursting of the American housing bubble, the bubble in residential and commercial real estate was global, including China.

Where Did the Surplus Go?

I’ve previously noted :

China’s official daily newspaper – China Daily – writes that China will probably run a trade DEFICIT in March …

It shows that the entire environment everyone assumes we are operating in – China as the giant net exporter with huge trade surpluses – might not continue for much longer. In other words, “Chimerica” is starting to break up.

And those huge Chinese purchase of U.S. treasuries are no longer guaranteed.

Indeed, Warren Hatch of Catalpa Capital Advisors claims:

After hitting record highs in 2009, China’s global trade balance is well below where it used to be and ticked up only modestly in the latest data. However, the headline number can be misleading: the trade surplus with the US continues to hit new highs while China is running massive trade deficits with the rest of the world.

***

When all the math is done, without the US, China is running a trade deficit with the rest of the world (the red line).

***

The renewed strengthening of the yuan against the dollar, however, has lagged the global surge in commodity prices. Because China is paying more for its commodity imports, the deficit with its non-US trade partners continues to grow. China has been buying US Treasuries for many years to finance its trade surplus with the US. China may need to continue doing so for some time to come to offset its trade deficit with the world ex-US and keep its overall trade balance stable.

Debt … In China?

Westerners are also familiar with the debt problems of Western countries like Greece, Spain and the U.S.

But as CNN Money noted in 2009:

On the surface, China presents a fiscal study in contrast with the United States, keeping a remarkably low ceiling on debt even as it spends its way out of the financial crisis.

***The trouble is that excludes local government borrowing, the current surge in loans backstopped by Beijing and bad assets cleared from the banking system but still floating about.

When all are thrown into the pot, analysts estimate that China’s debt may be closer to 60% of GDP, putting it in virtually the same league as the United States, which was at 70% at the end of 2008 before it launched its massive economic stimulus program.

To be sure, Washington is now set on a path of exploding debt that Beijing will largely avoid. [And China is somewhat more shielded from derivatives than the U.S.] The United States budgeted for a federal deficit of 12.9% of GDP this year, whereas China is aiming for just 2.9%. [And to the extent that China practices more public banking than the U.S., it might be able to create more credit without having to pay high interest rates to its private banks in the process.]

But China’s finances are deteriorating more quickly than the government expected, fueling a rise in the stock of both explicit and disguised debt that will constrict its wriggle room.

“It is serious because, one, much of it is hidden and, two, local governments are currently doubling down on their bets,” said Stephen Green, economist at Standard Chartered Bank in Shanghai. “As with all fiscal deficits, it limits space for further stimulus.”…

Above and beyond that are 400 billion yuan in bad loans in banks’ hands and at least 1 trillion yuan in non-performing debt hived off their books and assigned to asset management companies. The buck stops with Beijing on all of these.

The record surge in bank lending this year means that its sum of liabilities is about to swell in size.

MarketWatch noted in May 2010:

China’s economy is teetering on the edge of a major slowdown … according to a noted China strategist.
David Roche, an economic and political analyst who manages the Hong Kong-based hedge fund Independent Strategy, says the world’s third-largest economy is now on the brink, faced with the inevitable reckoning that follows an extended bank-lending binge.

“We’ve got the beginnings of a credit-bubble collapse in China,” said Roche, predicting the economy will likely cool from its stellar double-digit growth rate to a 6% annual expansion as a result.

While that may not sound bad, Roche believes the collateral damage from the cooling will be anything but mild, as the banking sector comes under pressure from cumulative years of bad investment and mispriced capital.

***
As Northwestern University’s Victor Shih points out, the Chinese government will slowly reveal more and more of the true ratio of bad loans to good loans, and raise its figures for local government debt. Shih says that recapitalizing Chinese banks to cover losses for the bad loans will eat up more and more of China’s reserves.

The Telegraph notedlast June:

China’s chief auditor has warned that high levels of local government debt could derail the country’s economy, with some observers suggesting that a number of Chinese provinces are even more fiscally-troubled than Greece.

source

Posted in Kinh Te | Leave a Comment »

Housing in the US 2011

Posted by hoangtran204 trên 28/06/2011

Bank-owned Houses: Curb Appeal Goes Out the Window

By STEVE YODER, The Fiscal Times

June 24, 2011

There’s a new kind of neighbor in town, and they won’t be stopping by for a barbeque anytime soon.

In many communities nationwide, that new neighbor is a bank or other mortgage lender. Since the onset of the housing crisis five years ago, the nation’s lenders have been steadily amassing vast residential real estate empires, by taking back foreclosed homes that don’t sell at auction. The number of homes owned by financial institutions has doubled since 2007 to 872,000, according to real estate data firm RealtyTrac. With 3 million more foreclosures expected in 2011, lenders could end up repossessing several million more in coming years.

So what kind of neighbors do mortgage lenders make? That may depend on where you live: Some legislators and community activists say banks do a better job of maintaining properties in wealthier neighborhoods than they do in middle-income and marginal ones. And four cities — Baltimore, Cleveland, Los Angeles and Memphis — are taking lenders to court in an effort to force them to take better care of their properties. In separate lawsuits, the cities are seeking hundreds of millions in damages from lenders, to cover increased city maintenance costs and reduced property tax revenues.

In the working-class Memphis neighborhood of Burlington, Lynda Whalen is leading a battle against foreclosure blight. After the bank foreclosed on one house and the owners left, it wasn’t long before the front windows had been smashed, and the yard was strewn with debris. Whalen, president of the neighborhood association, and her neighbors boarded up the house; they paid a contractor to clean up the yard. Because the mortgage was federally guaranteed, in mid-May the bank turned the house over to the U.S. Department of Housing and Urban Development (HUD). Maintenance has since improved, according to Whalen. (The bank, which a HUD field service contractor identified as Wells Fargo, did not return a call for comment in time for publication.)

In California cities like Long Beach and Palm Springs where investor Jim Shute buys and sells distressed properties in the $100,000 to $200,000 range, banks’ performance is similar. Big banks tend to do the minimum necessary to avoid being cited for code violations, he says. They usually keep the grass cut and board up broken windows, but they don’t do repairs, plant flowers or make other investments that would improve the sales price. That’s good news for Shute. “It actually does hurt what they can get for it,” he says.

The situation is different in the more affluent enclaves where Las Vegas realtor Ken Lowman works. In high-end Las Vegas markets, such as Southern Highlands, it’s rare to find bank-owned properties that aren’t well taken care of, he says. Banks pay close attention to the condition of these properties because they’ll likely get back the money they put into maintenance and repair — on a $4 million sale, green lawns, clean windows and well-kept pools, have a big impact on the sales price.

In some ways, it makes economic sense for banks to manage the properties they own (often called REO properties, for “real-estate owned”) differently in wealthy versus modest neighborhoods. Because retail buyers tend to look for move-in ready properties, while investors tend to seek fixer-uppers, banks generally invest in maintenance and repairs in the former but not the latter. In Memphis, properties in wealthier neighborhoods are aggressively marketed to retail buyers, says Webb Brewer, one of the lawyers representing the city in its lawsuit. Webb had a researcher look at REO buyers in white, wealthier neighborhoods — 70 percent of them were retail and 30 percent were investors; in lower income, minority neighborhoods, the figures were reversed.

Other data supports the claims that neighborhood demographics influence how well bank-owned homes are maintained. An April report from the National Fair Housing Alliance (NFHA), a national nonprofit that addresses housing discrimination, concluded that maintenance practices were “consistently better” in white  neighborhoods  than in those that were predominantly African-American.  The report analyzed 624 bank-owned properties (also known as “REOs,” for “real estate owned”) in four states.

Mortgage lenders dispute those claims. “All of the homes that we have on our books are treated exactly the same way,” says Philippa Brown, spokesperson for American Home Mortgage Servicing Inc. “They’ve all got to be up to code. Do I think there’s been such a volume of homes that some have fallen through the cracks? Definitely. But in every neighborhood … if they’re brought to our attention we fix them fast because we want to get them sold.”

REOs in marginal and modestly priced communities may end up neglected because lenders often  contract with outside “property preservation” firms, who in turn hire local contractors. Because of the property preservation business is booming as the number of foreclosures grows, many new and inexperienced players are entering the business. Critics say that means the quality of the contractors and subcontractors varies widely. “The problems arose in this industry as the market changed,” says Michael Anz, CEO of property preservation company MGA Services, which has operated since 1999. “There have been so many new players in the industry who don’t understand the business.”

In other cases, banks hire local real-estate brokers to get properties ready to sell. But brokers have to pay for repairs and maintenance out of their own pockets, then get reimbursed, according to Mike Krein, president of the National REO Brokers Association. Some brokers decide to skip repairs, especially for lower-end houses. Krein says there’s often pressure on banks from Fannie Mae and Freddie Mac to spread out contracts to numerous brokers rather than picking the few that specialize in REOs.

But with a glut of foreclosures forcing prices down nationwide, banks simply may not be able to sink money into houses that are losing value, according to Albert J. Sumell, an economist at Youngstown State University who has studied the valuation of foreclosures. He says banks just can’t afford to put thousands of dollars into a property if don’t they expect to get it back.

Some local legislators and community groups are taking steps to change that economic equation.
In Ohio, legislation passed in April 2010 allows some counties to start nonprofit “land banks” that are funded through county-assessed penalties and interest collected on overdue property taxes. Land banks can acquire lenders’ unwanted REOs through donation or purchase; in exchange, the land bank clears the title of liens (fines, back taxes). The county then decides how best to use the property — either rehabilitating and selling it or demolishing it.

And in California, a state foreclosure reform law passed in 2008 allows cities and counties to require banks to register foreclosed properties and levies fines if properties aren’t maintained. An ordinance in Long Beach, for example, allows the city to fine a bank up to $1,000 a day if it doesn’t do basic maintenance like cutting grass and fixing broken windows. Illinois now is considering similar legislation.

In Long Beach, banks have registered 418 properties, and the city hasn’t had to issue a single fine in the two months since the law was enacted. That’s a success, even if the city doesn’t make a dime in fines, according to Rex Richardson, chief of staff to city councilman Steve Neal, who introduced the ordinance. “Good code enforcement should never be a revenue generator,” he says.

Related Links:
Foreclosures: Luxury Homes on the Auction Block (The Fiscal Times)
Investors are Flipping over Low Home Prices (The Fiscal Times)
Housing Double Dip: Why Prices Will Keep Dropping (The Fiscal Times)

————–

Another Blow to Housing: Home Prices at 2002 Levels

By JENNIFER DEPAUL, The Fiscal Times
May 31, 2011

In the latest sign of a weak economy, home prices in March fell to their lowest point since the housing collapse began. Prices are now back to mid-2002 levels as the housing market remains bogged down by an oversupply of inventory and an undersupply of buyers and may not have hit bottom.

Home prices fell 4.2 percent in the first quarter of 2011, the eighth consecutive quarterly drop, according to the Standard & Poor’s/Case-Shiller National Home Price Index, putting the index 5.1 percent below the first quarter of 2010. “This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” David Blitzer, Chairman of the Index Committee at S&P indices said in a statement. “Home prices continue on their downward spiral with no relief in sight.”

Consumer confidence also declined, according to a separate report.

Home prices are now 33 percent below their 2006 peak and have fallen by more than the 31 percent decline that took place during the Great Depression. “The current housing crash will further eclipse the one seen during the Great Depression, if not in duration, certainly in size,” said Paul Dales, economist with Capital Economics. He warned that when home prices fell during the Great Depression, it took   19 years for the market to regain its value.

Even more troubling, the bottom has yet to be reached Dales said. Some experts say that home prices will fall another five to 10 percent this year and may bottom out in 2012 at the earliest. Earlier this month, the National Association of Realtors said the pending home sales index, which tracks contracts signed in April, fell by 11.6 percent from March.

“People don’t want to buy homes if house prices are going to fall further,” said Karen Dynan, economist with Brookings Institution. “There can be a negative self reinforcing cycle—house prices are falling because demand is soft, people expect house prices to fall further so they become more reluctant to buy homes and house prices fall further.” Dynan said she can’t predict when the housing market will hit bottom.

Prices plunged in 19 metro areas tracked by the S&P/Case Shiller Index of 20 metro areas compared with last year. Minneapolis posted a 10 percent decline from a year earlier. Washington, D.C. was the only city to show an annual gain.

Twelve cities hit their lowest levels in nearly four years:  Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa. The 20-city composite posted an annual rate of decline of 3.6 percent, while prices fell 2.9 percent in the 10-city composite.

A record number of foreclosure sales are forcing home prices down. Sales of bank-owned homes and those in some stage of foreclosure accounted for 28 percent of all residential sales in the first quarter of 2011, according to RealtyTrac, the largest online market for foreclosed properties. High unemployment also has cut into home sales.

But not all housing experts are pessimistic. “The housing market is at a turning point as conditions are beginning to look up,” said Mike Zoller, economist with Moody’s Analytics. “Though job creation–one of housing demand’s key drivers–had been proceeding at glacial pace, the rate of growth is picking up. With hours worked rising and corporate profitability surging, hiring will step up further. This will boost confidence and incomes, fostering growth in the housing market.”

Meanwhile, in a separate report Tuesday, the Conference Board reported that consumer confidence fell steeply in May to a six month low and now stands at 60.8 (on a scale of 100), down from 66 in April.

“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects. Inflation concerns, which had eased last month, have picked up once again,” said Lynn Franco, director of the Conference Board Consumer Research Center in a statement.

The reports come days before the Labor Dept.’s May employment report on Friday. Experts predict the number of new jobs will well below April’s surprisingly strong 244,000 increase. The consensus is for May’s numbers to be around 175,000 new jobs created.

Click Here For Housing Market Coverage

Related Links:
Home Prices Still Falling (Wall Street Journal)
S&P/Case Shiller Signals Double Dip in Housing Economic Report (MarketWatch)
Five Questions on Tuesday’s S&P/Case Shiller (Wall Street Journal)

http://www.thefiscaltimes.com/Articles/2011/05/31/Another-Blow-to-Housing-Home-Prices-at-2002-Levels.aspx

Posted in Uncategorized | Leave a Comment »