U.S. Economic/Financial News
The Collapse Accelerates after Group of 20 Summit
Nov. 20 (EIRNS)After the farcical Nov. 15 summit of the G-20, the collapse of the world financial system has accelerated. Here are some of the leading indicators of the carnage:
* Federal Reserve Bank of Philadelphia's general economic index fell to -39.3 in November from -37.5 in October, the fastest pace since October 1990.
* The index of leading U.S. economic indicators fell in October for the third time in four months. The Conference Board's gauge dropped 0.8% after rising 0.1% in September.
* U.S. initial jobless claims rose last week to the highest level since 1992. They increased by 27,000 to 542,000 in the week ended Nov. 15, from 515,000 the prior week. The number of people staying on benefit rolls the prior week rose to 4.012 million, the most since December 1982.
* Crude oil fell below $50 a barrel in New York. Oil has dropped nearly $100 from its July record. On July 11 the price was $147.27 per barrel.
* The stocks of JP Morgan Chase stock fell 18% and the company announced 10,000 layoffs of its investment banking staff; Citigroup stocks fell as much as 26%. The Wall Street Journal online reported that Citigroup is considering selling off pieces of the bank or even the whole company.
* Goldman Sachs dropped below $53 for the first time since it went public almost a decade ago in May 1999. Goldman has lost more than 75 percent of its market value this year.
* GMAC has applied for status as a bank holding company to gain access to the Treasury's bailout fund.
* GM stock value fell to $1.70 earlier in the day, which is its lowest since the 1930s (!), and Ford tumbled to a 28-year low, before rebounding on speculation of a bailout.
* Hedge Fund assets reportedly shrank 9% to $1.56 trillion last month after investors withdrew cash and stock markets declined. Investors pulled $40 billion from hedge funds in October, according to Hedge Fund Research, Inc., while market losses cut hedge fund values by $116 billion. Investors withdrew $22 billion from funds of funds, which pool money to invest in hedge funds.
Home Foreclosures Forecast To Approach 5 Million
Nov. 19 (EIRNS)Sheila Bair, chairwoman of the Federal Deposit Insurance Corp. (FDIC), told a House committee Nov. 18 that home foreclosures in the United States would more than double in 2009, over this year. Blair said that on top of the 1.2 million Americans whose homes will be repossessed by the end of 2008, the number will jump to 4-5 million during 2009-10, unless Federal action is taken to prevent its. Bair said that the $300 billion Federal mortgage bailout authorized in July legislation was likely to help only about 100,000 homeowners, at most, escape foreclosure; and House Financial Services Committee chairman Rep. Barney Frank (D-Mass.) made clear that the Treasury Department's foreclosure prevention program isn't working at all.
Five million foreclosures represents 10% of all mortgaged homes in the country, and is comparable to farm and home foreclosure rates during the early-1930s plunge into the Depression. Job loss among homeowners' families is now rivalling the plunge in the market values of homes, as the cause. Only one year ago, the Center for Responsible Lending was forecasting 2 million foreclosures over the coming four years, considered drastic then, but nowhere near the home loss that FDIC now officially foresees, "unless action is taken."
In signs of depression collapse, U.S. housing starts in October were the lowest on record (since 1959), at 791,000 annual rate. Home building permits taken out in October were the lowest ever recorded, since 1950, and down 13% from September. November U.S. auto sales appear to be heading for 750,000-800,000an extreme bottom leveland annual sales for 13-13.5 million, far below the long-known "red line" of 14.5-15 million at which at least one of the Detroit Three is forced into bankruptcy. $2/gallon gas is making no difference.
Hedge Funds Hit With Record Withdrawals
Nov. 21 (EIRNS)Net withdrawals from hedge funds in October are estimated to have hit $62.7 billion (estimate from data firm Eurekahedge), which is higher than any time since record-keeping for tracking these speculative money pools started in 1990. Still bigger waves of redemptions are in line for the end of the year, as many funds allow only quarterly withdrawals, and have long notice periods which have been activated. Many funds are in a frenzy of stock selloff, preparing for redemption. Others have shut down and/or frozen their assets, or otherwise are setting new limits on withdrawals.