December 22nd, 2009
- The number of homes in foreclosure topped one million for the first quarter ever, as delinquencies rose even among prime borrowers and nearly half of all holders of modified mortgages, whose monthly payments had been lowered, defaulted again. The depressing figures, released on Monday by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, restate the difficulty facing the real-estate market going forward, as continuously high unemployment makes regular mortgage payment difficult for millions of homeowners.
- The Federal Bureau of Investigation is probing a computer-security breach targeting Citigroup Inc. that resulted in a theft of tens of millions of dollars by computer hackers who appear linked to a Russian cyber gang, according to government officials.
- Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of 2009. GDP was revised down from the advance estimated of 3.5% to the preliminary estimate of 2.8%, and now to 2.2%. You have to wonder how the government could be off by 1.3%. Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change. What this means is that Cash for Clunkers was an even larger factor than previously understood. As it stands, by a basic calculation without motor vehicle output, third quarter GDP would have been only 0.75%.
Tags: Economic News, economic recovery
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December 21st, 2009
- Regulators on Friday shut down two big California banks, as well as banks in Alabama, Florida, Georgia, Michigan and Illinois, bringing to 140 the number of U.S. banks brought down this year by the weak economy and mounting loan defaults. The 140 bank failures are the most in a year since 1992 at the height of the savings-and-loan crisis. They have cost the government-backed deposit insurance fund — which has fallen into the red — more than $30 billion so far this year. The failures compare with 25 last year and three in 2007.
- The gap between yields on Treasuries and so-called TIPS due in 10 years, a measure of the outlook for consumer prices, closed above 2.25 percentage points four days last week, the longest stretch since August 2008. That’s the low end of the range in the five years before Lehman Brothers Holdings Inc. collapsed, and shows traders expect inflation, not deflation in coming months, said Jay Moskowitz, head of TIPS trading at CRT Capital Group LLC in Stamford, Connecticut.
- The economy is still flat at best. The Commerce Department reported seasonally adjusted November retail sales up 1.3% from October. However, if you apply the average seasonal adjustments that were used during the years 2006 and 2007, which account for a normal spike in November sales due to the holiday shopping season, retail sales were actually down 1.3% in November.
- Former Federal Reserve Chairman Alan Greenspan said in prepared testimony the threat to U.S. fiscal stability is larger than ever. Averting a situation where the U.S. struggles to finance unprecedented budget deficits “is more urgent than at any time in our history,” he said in testimony Thursday before the Senate Committee on Homeland Security and Governmental Affairs.
- Zhu Min, Deputy Governor of the Chinese Central Bank, issued comments at an economic forum in Beijing yesterday in which he stated that the U.S. dollar is set up to go lower and that foreign buyers will become a lot more reluctant to buy more U.S. Treasury bonds: “When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken.”
Tags: Economic News, economic recovery, global economic recovery
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November 18th, 2009
- Gold continues to climb a wall of worry with many analysts bearish and much of the public remaining on the sidelines due to misplaced fears that gold is another asset bubble. These fears are understandable given investors’ painful experience of the bursting of the real estate and equity bubbles, but the fears are misplaced and come about due to a fundamental lack of knowledge of the still very strong supply and demand factors driving the gold (and silver) market.
- The dollar is due a short term rally but any bounce is likely to be short term in nature as the Federal Reserve remains in a ‘catch 22’ needing to raise interest rates to contain inflation in the medium and long term, and protect the dollar, but realizing that an increase in interest rates will likely snuff out the tentative economic recovery.
- The government says consumer prices edged up slightly faster than expected in October, driven higher by another increase in energy prices and the biggest increase in new car prices in 28 years.
Tags: economic recovery, Gold News, Gold price
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November 13th, 2009
• The Treasury is confident Congress will raise the U.S. debt limit by year-end, and not allow a showdown similar to one that shuttered parts of the government in 1995. Sources say the White House is looking for a $1-1.5T increase beyond its current $12.1T limit. The request is higher than a proposed increase already passed in the House, but would get the government through the November 2010 midterm congressional elections without needing another increase. Geithner has repeatedly stressed the need to bring deficits down to sustainable levels, but in the short-term he’s more worried about the need to keep up spending until unemployment recedes.
• The FDIC’s board approved Thursday $45B of bank premium prepayments that it needs after its deposit insurance fund slipped into a deficit at the end of Q3. The prepayments – which equate to three years of dues – will satisfy the fund’s “need for liquidity without imposing undue burden on the industry,” FDIC Chairman Sheila Bair said. A surge in failures – 120 so far this year – has pushed the industry-supported fund into a deficit for the first time since 1991.
Tags: Economic News, economic recovery, economy, FDIC
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October 13th, 2009
• Sources say CIT Group is seeing little interest from bondholders for its debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely. If necessary, CIT is thought to favor a prepackaged bankruptcy, but sources say it may not find enough debtholder approval for that either, forcing it into a “prenegotiated bankruptcy,” which typically has less creditor support. This would result in one of the largest bankruptcies in US history.
• President Barack Obama’s effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets. As threats of a financial meltdown fade, the currency is falling victim to an unprecedented budget deficit, near-zero interest rates and slow growth. The dollar is down 10 percent against six trading partners’ legal tender in Treasury Secretary Timothy Geithner’s first eight-and-a-half months.
Tags: CIT, economic recovery
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September 11th, 2009
Peter Ferrara, known for wanting to privatize Social Security, explains in today’s Wall Street Journal:
U.S. economic recovery and a permanent reduction in unemployment will only come from private, job-creating investment. Nothing in the Obama economic recovery program, or in the Bush 2008 program, helps with that.
Producing long-term economic growth will require a fundamental change in economic policies—lower, not higher, tax rates; reliable, low-cost energy supplies, not higher energy costs through cap and trade; and not unreliable alternative energy surviving only on costly taxpayer subsidies.
Unfortunately, Mr. Obama seems to be wedded to his political talking points, and his ideological blinders seem to be permanently affixed. So don’t expect any policy changes. Expect an eventual return to 1970s-style economic results instead.
All the administrations have done is slow down the our economic decline.
Tags: alternative energy, economic recovery, Peter Ferrara, tax rates, unemployment
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