Sunday, January 9, 2011

Weekend Links

1--Housing means QE is here to stay, Reuters

Excerpt: A genuinely encouraging run of data and very strong asset markets has encouraged some to argue that the Fed’s policy will prove to have been too much for too long, but housing stands out as the one asset market that has failed to respond encouragingly to the adrenaline of quantitative easing.

The Fed acknowledged this in the minutes of their December monetary policy meeting, listing a litany of factors holding housing back and stating:

“The recovery remained subject to some downside risks, such as the possibility of a more extended period of weak activity and lower prices in the housing sector and potential financial and economic spillovers if the banking and sovereign debt problems in Europe were to worsen.”....

“Borrowers with good pay histories who aresubstantially underwater have shown that they, too, have a reasonable probability of transitioning to default,” mortgage analysts at Amherst Securities, led by Laurie Goodman, wrote in a recent report.

“Yet many bond investors, and a number of housing analysts, are focusing solely on non-performing loans; they ignore re-performing loans and seriously underwater borrowers. The market is underestimating the housing problem and potential losses to bondholders if further policy actions are not taken,” they said.

2--Bernanke: 'Self-Sustaining Recovery' May Finally Be Taking Hold, Huffington Post

Excerpt: (Reuters) - The economy may be finally hitting its stride, even if growth remains too weak to put a real dent in the nation's jobless rate, Federal Reserve Chairman Ben Bernanke said on Friday.

Offering no real clues on the future direction of monetary policy, Bernanke sounded cautiously more upbeat, citing improvements in consumer spending and a drop in jobless claims as hopeful signs that a fragile recovery was perking up.

"We have seen increased evidence that a self-sustaining recovery in consumer and business spending may be taking hold," the central bank chief said in his first testimony to Congress since the Fed launched a controversial plan to buy an additional $600 billion in government bonds.

His remarks were made public just an hour after the Labor Department reported the economy generated a disappointing 103,000 additional jobs in December. The jobless rate dropped to 9.4 percent from 9.8 percent, but the decline was partly due to a troubling rise in the number of people exiting the workforce.

3--Housing Bust: The New Declining Cities, Calculated Risk

Excerpt: From Alejandro Lazo at the LA Times: Housing bust creates new kind of declining city

"Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly," said James R. Follain, senior fellow at the Rockefeller Institute of Government ...

Potential candidates for long-term decline named by the study are the areas hit hardest by the drop in home prices in recent years. They include several inland California metropolitan areas that grew rapidly during the boom, including Stockton, Modesto, Fresno, Riverside and San Bernardino. Las Vegas and Miami also made the list.

A traditional city in decline is one that has suffered a sustained population drop, leaving behind empty houses, apartment buildings, offices and storefronts. Cleveland and Detroit, for instance, suffered from the erosion of manufacturing and the loss of residents, who left in search of jobs.

Instead of eroding a particular industry, however, the housing bust left a glut of homes because of overbuilding and the foreclosure crisis. Follain argues that the future of these cities is threatened in similar ways to that of Rust Belt cities.

4--Recovery Act Kept 4.5 Million People Out of Poverty in 2009, Helping Keep Poverty Flat, CBPP via Economist's View

Excerpt: Our analysis of data that the Census Bureau released this week shows that the 2009 American Recovery and Reinvestment Act was one of the single most effective pieces of antipoverty legislation in decades. In 2009, the Recovery Act’s temporary expansion of the safety net kept 4.5 million people out of poverty.

...On Tuesday, the Census Bureau released several new poverty figures for 2009 that rely on alternative, broader poverty measures — ones that include tax credits and non-cash benefits. Under almost all of these alternative measures, the safety net as a whole, including the Recovery Act expansions, prevented any rise in poverty in 2009, despite the deep recession and very high unemployment. ... We examined the Census data to see how much of that poverty-reducing impact came from the Recovery Act expansions. We found that they kept more than 4.5 million people out of poverty in 2009 (see graph)....

5---The Texas Omen, Paul Krugman, New York Times via Economist's View

Excerpt: These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.

Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.

And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere....

What about the budget? The truth is that the Texas state government has relied for years on smoke and mirrors to create the illusion of sound finances... When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse. ... Now the next budget must be passed — and Texas may have a $25 billion hole to fill. Now what?

6--How the Great Recession created ghost towns, John Prior, Housingwire

Excerpt: In Detroit, bulldozers crumple vacant homes left behind during foreclosure by the thousands. Las Vegas developments sit abandoned, and the rapid growth of Stockton, Calif., has screeched to a halt in the wake of the Great Recession.

As some markets such as San Diego and Washington, D.C., lead the recovery out of the housing crisis, others are becoming ghost towns. A study from James Follain of the Research Institute for Housing America showed in some markets such as Cleveland and Stockton, a recovery could be many years out as populations are moving out faster than the homes they vacate can either be resold or even destroyed.

"Such decreases in population and employment trigger declines in the demand for housing, and because people are more mobile than houses, it takes many years for supply and demand to become balanced again and for house prices to return to prior levels," Follain wrote....

"The fundamental problem facing today’s new breed of declining cities and their neighborhoods seems very similar to a problem in many parts of government seeking to manage our economic recovery," Follain concluded. "That is, investment and lending are seriously hampered by great uncertainty, which in itself hinders the speed of recovery to the 'new normal.'"

7--Jobless Rate May Not Return to 5% Until 2020s, Wall Street Journal

Excerpt: The U.S. labor market’s performance in December — a gain of 103,000 payroll jobs — was slightly better than the average monthly increase throughout 2010 of roughly 94,000 jobs a month. But that pace was barely enough to keep pace with long-run growth in the labor force.

The economy lost almost 8.4 million jobs from December 2007 to December 2009. It added 1.1 million jobs in 2010. At December’s pace, just replacing the rest of those lost jobs would take 70 more months — roughly six years, taking us to November 2016. That would be almost nine years from the start of the recession for U.S. payrolls to return to where they peaked before the downturn.

But the economy also needs to add 100,000 to 125,000 jobs a month just to keep pace with growth in the labor force. That means the gap created since the recession started was closer to 12 million jobs (leaving 11 million after the gains in 2010). The U.S. unemployment rate is unlikely to move much lower if job gains continue only at December’s pace. Even employment gains close to October’s pace (210,000 jobs) would take us into the next decade before seeing the unemployment rate back near 5%.

8--Illnesses linked to BP Oil Disaster: Widespread Sickness due to Toxic Chemicals , Dahr Jamail, Global Research

Excerpt: Dr. Soto classifies two types of symptom groups: acute exposure that includes skin and respiratory problems; and a second, larger group of people with no symptoms, but who still have toxicity. He believes the pathways of exposure occur through air, skin, and contaminated seafood.

One of the more extreme cases he treated was a woman who developed acute respiratory problems after a visit to the beach.

"This is a young woman in good health, with good nutritional intake, no health issues, hates to take any medication, and ate only organic foods," he explained, "But shortly after going to the beach, where she was likely exposed to toxins, she developed respiratory illness and developed cancer within weeks. I think this was due to direct exposure to chemicals in the dispersants and VOCs."

According to the US Government, BP's oil disaster released at least 4.9 million barrels of oil into the Gulf of Mexico. BP has used at least 1.9 million gallons of toxic dispersants, that are banned in at least 19 countries, to sink the oil.

Many of the chemicals present in the oil and dispersants are known to cause headaches, nausea, vomiting, kidney damage, altered renal functions, irritation of the digestive tract, lung damage, burning pain in the nose and throat, coughing, pulmonary edema, cancer, lack of muscle coordination, dizziness, confusion, irritation of the skin, eyes, nose, and throat, difficulty breathing, delayed reaction time, memory difficulties, stomach discomfort, liver and kidney damage, unconsciousness, tiredness/lethargy, irritation of the upper respiratory tract, and hematological disorders.

9-- Electromagnetic Frequency Mind Control Weapons, Stephen Lendman blog

Excerpt: Directed energy weapons include lasers, high power microwave, and millimeter wave ones among others. A relevant December 2007 Department of Defense (DOD) report called them a "transformational game changer in military operations, able to augment and improve operational capabilities in many areas," for both lethal and non-lethal purposes....

Among other applications, EMF weapons/devices are used for harassment, surveillance and mind control. Agencies like the Pentagon, CIA and NSA use them to monitor people, manipulate their minds, harm, and at times kill them. The Navy Times called them the "most feared and controversial weapon(s) of (the) modern age."...

Bush I declared the 1990s "The Decade of the Brain," an effort "to enhance public awareness of the benefits to be derived from brain research," keeping its dark side hidden.

The Pentagon's DARPA (Defense Advanced Research Projects Agency) conducted research and development in "augmented cognition," what universities call "cognitive science." It's the interdisciplinary study of how information is represented and transformed in the brain. The Pentagon's purpose was for military applications, including manipulating the emotions and behavior of adversaries.

Used globally, it's applicable individually, for crowd control, or larger groups, using millimeter waves, pulsed energy projectiles, and high power magnetic weapons, subjects unaware of what's hitting them.

The NSA's Signals Intelligence (SIGINT) involves decoding EMF waves to tap into computers wirelessly and track people. Using EMF Brain Stimulation to monitor individuals, organizations and nations, it complements the CIA/Defense Intelligence Agency's (DIA) Human Intelligence (HUMINT), and National Geospatial-Intelligence Agency's Imagery Intelligence (IMINT). NSA's DOMINT can track millions of people simultaneously. It can also inflict harm, control subjects psychologically and kill.

In conflict zones like Iraq and Afghanistan, "Project Sheriff" is used to give "troops working in urban terrain more options" against combatants and noncombatants alike. Humvees and armored personnel carriers have been retrofitted with non-lethal weapons, including microwave-like pain rays (an Active Denial System) and a Long Range Acoustic Device emitting earsplitting sounds....

Most people know nothing about directed energy weapons, manipulating, incapacitating and killing many thousands who have no idea what hit them. America has been a longtime global offender, developing and using them for decades to surveille, harass, intimidate, manipulate, torture, and kill. They can also read minds and turn people into zombies. Why? To achieve total unchallengeable control.

So-called "non-lethal weapons" can be as harmful as killer ones. Ongoing research, in fact, is chilling. Waging war on human minds and bodies, it's morally, ethically, and legally indefensible. Continuing, however, atrocity technologies are produced, mostly without public knowledge or that governments like America use them against their own people and others. For ill, of course, not good. Dr. Mengele lives.

10--U.S. Payrolls Miss Forecast, Showing Labor Market Recovery May Take Years, Bloomberg

Excerpt: Employers in the U.S. added fewer jobs than forecast in December, confirming Federal Reserve Chairman Ben S. Bernanke’s view that it could take “four to five more years” for the labor market to completely mend.

Payrolls increased 103,000, less than the median projection of 150,000 in a Bloomberg News survey, Labor Department figures showed yesterday in Washington. The jobless rate fell to 9.4 percent, partly reflecting a shrinking workforce as discouraged Americans stopped looking for work.

Faster job growth is needed to keep consumers spending and ensure a self-sustaining recovery in the world’s largest economy. Bernanke, in Senate testimony after the report, said it may take five years for the labor market to “normalize fully,” indicating the Fed won’t depart from its strategy of pumping $600 billion into the financial system.

“We are seeing a moderate labor market improvement; it’s not especially rapid,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York, which forecast a 100,000 increase in payrolls. “As GDP growth accelerates in 2011, we are likely to see the labor market pick up steam as well,” he said, although “it will be a very long time before the Fed changes course.”

For all of 2010, about 1.1 million jobs were created, the most since 2006, with 1.35 million private payrolls added. The jobless rate averaged 9.6 percent, the highest since 1983 and up from 9.3 percent a year earlier....Consumer spending, which accounts for about 70 percent of the economy, has picked up. Holiday purchases rose 5.5 percent, the best performance since 2005, said MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms.

11--Banks Lose Pivotal Massachusetts Foreclosure Case, Bloomberg

Excerpt: US Bancorp and Wells Fargo & Co. lost a foreclosure case in Massachusetts’s highest court that will guide lower courts in that state and may influence others in the clash between bank practices and state real estate law. The ruling drove down bank stocks.

The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts.

“We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” Justice Ralph D. Gants wrote....

Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether hundreds of thousands of foreclosures were properly documented as the housing market collapsed. The probe came after JPMorgan Chase & Co. and Ally Financial Inc. said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze U.S. foreclosures....

In March 2009, Massachusetts Land Court Judge Keith C. Long voided the foreclosures, finding that the mortgage transfers were done months after the house sales. In October of that year, Long declined the banks’ request to reverse that ruling after they argued that the documents that bundled together the mortgages had transferred those instruments to them.

Today’s court decision held out the possibility of securitization documents properly transferring mortgages.

Such documents, along with “a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to be proof that the assignment was made by a party that itself held the mortgage,” Gants wrote. “However, there must be proof that the assignment was made by a party that itself held the mortgage.”

The case is U.S. Bank v. Ibanez, 10694, Supreme Judicial Court of Massachusetts (Boston).

12--Total Consumer Credit Increases Minimally, Revolving Credit Posts 27th Consecutive Monthly Decline, zero hedge

Excerpt: That total consumer credit increased modestly and in line with expectations in November, exclusively on the back of non-revolving credit, used for such purchases as cars financed and sold by recently IPOed makers of shitty cars, and student loans, the most recent entrant in the $1 trillion + never to be repaid market, is not surprising: after all, GM had to finance its dealers to hoard its channel stuffed inventory of 500k+ cars as discussed previously. What is even less surprising, is that the credit that does matter, the revolving variety, used for credit card purchases of everyday items which are increasing in price every single day courtesy of the Fed's monetary policy, declined once again, more specifically the 27th consecutive time. In other words, in November revolving credit decreased by $4.2 billion, which non-revolving credit increased by $1.3, a drop of $5.7 billion from October's revised $7 billion which surged on the back of $12.4 billion in non-revolving credit.

The chart below shows that consumer continue to deleverage in items they can afford to deleverage in. For everything else, they simply stop paying...

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