U.S. Economic/Financial News
U.S. Housing Collapse Accelerates
Here are some of the latest developments:
* JULY FORECLOSURES were 18% higher than July 2005, and 5% up from June. Some 92,000 properties were in some stage of foreclosures, according to RealtyTrac. The worst state for foreclosures is Colorado, for the third consecutive month, with a 55% increase over 2005. But the big six are Texas, Florida, California, Michigan, Ohio, and Illinois; combined, these states have more than half of the national foreclosures.
* EXISTING-HOME SALES, which represent 85% of the housing market, dropped 11.2% in July, compared to a year ago, and down 4.1% from June, as median home prices fell in three of the nation's four regions, the National Association of Realtors reported Aug. 23. The sharpest drop in sales was in the Westdown 18.0% from July 2005, followed by a 12.5%-decline in the Northeast, and a 10.1%-slide in the Midwest. The median sales price of an existing home fell 2.1% in the Northeast; slid 0.6% in the Midwest; and was down 0.3% in the West, compared to a year earlier.
* HOME SALES IN THE GREATER WASHINGTON, D.C. area plummeted by 31% this July as compared to last July, with sales in Loudoun County down by 42%, and in Prince William County, down by a whopping 50%, the Washington Times Friday Home Guide reported Aug. 18. As of July 31, there were 48,737 homes on the market in the D.C. areaalmost 12,000 more than in the last record housing crunch in the area in July 1992while fewer than 8,000 homes were purchased in July.
* NORTHERN VIRGINIA'S UNSOLD-HOME INVENTORY jumped 147% over the past year, while median home prices have fallen 3.9% from July 2005, the Wall Street Journal reported Aug. 23, citing the case of a homeowner in Herndon, who called in an auction firm because she was unable to sell the home even after six months on the market.
* THE DETROIT HOUSING MARKET is swamped with homes that can't be sold, a total of 7,700 homes on sale in July, which was more than the past year's worth of sales. Foreclosures are 40% higher than last year.
* LUXURY-HOME BUILDER TOLL BROTHERS says orders for new homes plunged 48% in its fiscal third quarter, in nothing other than a "hard landing."
'Public-Private Partnerships' Push To Take Over Public Works
A National Public Radio program Aug. 23 featured Indiana Gov. Mitch Daniels (R) crooning the pop song "Major Moves" to celebrate the PPP (public-private partnership) sell-off of a state toll road. The NPR news item focussed on the 2005 Chicago sell-off of its 50-year-old Skyway, and the 2006 sell off of the Indiana Toll Road. A Goldman Sachs spokesman said they have people in active talks for PPP projects in 35 states. The NPR announcer pointed out that these sell-offs "reverse a trend that 'public works' were done for the public." Daniels, the former head of the Federal Office of Management and Budget, said that the private buyers of the long-term lease on the state toll road, will invest billions of their own, because "they can run a road better...."
The White House is backing it and Congress passed tax-free bonding privileges for PPPs. Daniels said, "All over the state" there are "projects people only dreamed of," because "there was no money." Now, with the PPPs, "tens of thousands of people will be put to work" building roads and bridges...." Three local people from Indiana spoke, opposing PPPs. As one man said, "It's our road, why should we sell it off?" Rep. Pat Bauer of South Bend said, "There's a huge philosophical problem" with all this.
Meanwhile, in New York City, Sept. 19-20: "North American PPP 2006: The Infrastructure Finance Conference," will be held at the Waldorf Astoria (a change to a larger venue to accommodate crowds), co-sponsored by Lehman Bros. (see www.euromoneyseminars.com). The promotional uses the classic privatization pitch: "The issue of North American shortfall in infrastructure funding is a serious one. Research estimates that in the U.S. alone, $90 billion is required each year just to maintain current standards.... America has been slower to adapt to concession-based PPP structures than other OECD countries. The time is right for all this to change."
'Tax Farmers, Mercenaries, and Viceroys'
"The Bush Administration seemingly wants to go back to the 16th century," wrote columnist Paul Krugman in a New York Times op-ed Aug. 21 denouncing privatization, and noting that "Bush prefers to govern as if he were King Louis XII."
Krugman starts by calling the Administration's plans to outsource the collection of unpaid back taxes to private debt collectors "an awful idea," modelled on monarchs handing out tax farming grants to corrupt incompetent courtiers.
He then goes after the privatization of the military, citing the catastrophes caused by such guns-for-hire as Blackwater USA and Custer Battles. For example, it was Blackwater that caused the disaster in Fallujah, Iraq, Krugman says, by going around a Marine checkpoint to send four operatives into the city. The White House's flight-forward came in reaction to the mercenaries' deaths.
"Maybe people who have spent their political careers denouncing government as the root of all evil can't grasp the idea of governing well. Or maybe it's cynical politics: privatization provides both an opportunity to evade accountability and a vast source of patronage.
"But the price is enormous. The Administration has thrown away centuries of lessons about how to make government work. No wonder it has failed at everything except fear mongering."
N.Y. Fed To Host Bankers' Meeting To 'Unsnarl' Derivatives
The New York Fed will host a Sept. 27 meeting with Britain's Financial Services Authority, and with 14 leading banks that deal in derivatives (Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley, etc.), the Financial Times reported Aug. 21. The topic will be how to speed up settlements in the "equity derivatives" market and cut the backlog of unconfirmed trades. Equity derivativesbetting on fluctuations in stocksare now said to be the fastest-growing segment of the derivatives market, with volume up 142% over the last year.
Over the past year, there has been a massive effort to clean up the credit derivatives market, and the International Swaps and Derivatives Association claims the backlog in settlements has been cut by 80%.
Lyndon LaRouche ridiculed such a meeting as worthless, insisting that nothing less than an international monetary conference would have any impact. But even the fact of calling such an international conference, would tend to make financiers and speculators more cautious.