U.S. Economic/Financial News
This Winter, It's Food or Fuel for Many
Sept. 5 (EIRNS)The latest estimate for the expected price per gallon of home heating oil this Winter is $4.35, up from $3.31 last year, according to the U.S. Energy Information Agency. Even last year's heating bills were already impossible to pay for millions among the 10 million homes heated by fuel oil across the United States, most in New England. There, emergency legislative and local meetings have been taking place for stop-gap action to deal with the crisis.
On average, a wood-frame Northeastern home last year required at least $3,000 a year to heat, but now faces a bill of $7,000. Homeowners are anguishing over signing an annual contract to lock in a price; pro-rate monthly payments; or wing it, and buy "as needed," gambling on the price. Many, last year, resorted to loans, credit cards, equity lines, etc, and exhausted those. Now, it's "food or fuel."
All the governors of New England recently asked the Federal government to set aside $1 billion for the Winter for aid to states to defray fuel expenses for low-income households.
In Connecticut, where heating oil is at around $4 a gallon right now, up from $3.40 or so a year ago, Rep. Chris Murphy (D) announced yesterday that he has sent a letter to President Bush asking him to release emergency funds from the Federal LIHEAPLow Income Home Energy Assistance Program. Murphy intends to get other members of Congress to sign his letter. He is pushing for a tripling of LIHEAP funds nationally, for $9 billion to cover the increase in prices. The current year, FY2008, LIHEAP had $2.57 billion to spend; for FY 2009, Bush asked Congress to cut this down by $500 million to only $2 billion! Bush is currently sitting on $100 million unallocated funds.
However, even if fully $9 billion were thrown into the hyperinflationary maelstrom for this Winter, the problem would not go away. What is required is action to stop the gaming and speculation associated with heating oil, and other forms of vital petroleum fuels. All the familiar swindles are continuing in the world of both "paper" and real barrels, where commodities are transferred, hoarded by major players, and bet upon. The latest reports are that the cartel of U.S. refinery owners is operating below 90% capacity, so as to raise their profit margins even higher.
"Things have become unhinged from the fundamentals of supply and demand," is the description this week by Eric DeGessero, vice president of the New Jersey Fuel Merchants Association (smaller, independent heating oil suppliers, much of whose customer base cannot pay).
Oct. 1 is the official start-date for the 2008-09 heating season, and householder applications for state and Federal aid are up at least 20% across the board.
U.S. Subprime Housing Crisis Continues
Sept. 2 (EIRNS)A Fitch report on the U.S. subprime mortgage crisis was covered under the headline in the Financial Times today: "Foreclosure fears grow as $96 billion of risky loans come home to roost." In the next two years, more homeowners will pass the five-year limit for borrowing on relatively lenient terms. The stringent terms mean a 63% increase of payments, or $1,053/month on average. In these Adjustable Rate Mortgages (ARM), borrowers are allowed to choose a low minimum monthly payment that often falls short of the interest due on the loan. The difference between the minimum and the full payment is added to the mortgage balance.
This ability to borrow more before having to start repayment is known as "negative amortization." After the five-year mark, the loan terms are "recast" to ensure the full repayment of the loan. Late repayments and defaults on such mortgages are already running as high as 24% in some areas, Fitch said. Of the total outstanding ARM loans$200 billionalmost half are expected to be recast in the next two years, 29 billion until end of 2009, and 67 billion until end of 2010. Of those who took these loans, more than 80% are people with "limited proof of income," i.e., they should not have been allowed to take those loans.
Post-Katrina: No Reserves of Electricity Spare Parts
Sept. 6 (EIRNS)Hundreds of thousands of electricity users are still without power this weekend in Louisiana, Arkansas, and elsewhere on the Gulf Coast, after Hurricane Gustav hit on Sept. 1. Tropical Storm Hanna cut off thousands more in a wide swath across the U.S. East Coast. Multi-state crews have been mustered to work overtime to restore power as fast as possible. These events throw a spotlight on a larger, national problem of lack of infrastructure.
Not only storm-response, but even routine maintenance anywhere in the United States is hampered by the fact that there is no longer any in-depth capacity to supply even the basic components essential for repair and replacement for electrical distribution systems.
For example, transformers: One Virginia engineer reports that, after Hurricane Katrina in September 2005, the restoration of the electrical grid on the Gulf Coast "sucked in" all the transformers and related spare equipment nationwide. The deficit was never made up. He said, "Since then, when we have some local transformer breakdown just from aging or accident, there is no guarantee we can get hold of a timely replacement. You might be lucky; you might not." In addition, to his knowledge, all transformers are now imported into the U.S.; none are domestically produced.
The September storms and power outages illustrate exactly the kinds of manufactured elements which are urgently needed for infrastructure maintenance as well as improvements in the United States. Mobilizing to produce what's required to meet all these needs is part of the mission announced by LaRouche PAC, for a Federal drive to tool-up to restore the agro-industrial capacity in the United States.
As of the peak of power outages following Hurricane Gustav, 1.1 million users were affected, mostly in Louisiana, Arkansas, and Texas. By midday today, 500,000 of these remained without power. In New Orleans, 40% of Jefferson Parish remained in the dark as of Sept. 5. For the hardest-hit coastal parishes such as Lafourche and Terrebonne, restoring electricity may take two weeks at least.
In the Eastern states, 44,000 people (out of 111,000 affected) remained without power this afternoon in North Carolina and Virginia, and several thousands more in the Delmarva (Delaware-Maryland-Virginia) Peninsula.