Monday, December 31, 2012

Today's links

1---Should Japan "reflate"? , Noahpinion

2---2012: the year housing market manipulations paid off, oc housing

It looks like the bottom-callers of 2012 were right. Continued interference in the mortgage market by the federal reserve lowered mortgage interest rates to record low levels. Plus, changes in policy at the major banks held back the tide of foreclosures and greatly restricted the MLS inventory. Demand was up slightly, mostly due to investors as owner-occupants remained absent from the market. First-time homebuyer participation fell to very low levels. The small uptick in demand, fueled by record low interest rates, and the dramatic decline in for-sale inventories caused prices to bottom in 2012. It isn’t how the bottom callers thought it would happen (most predicted a surge in demand), but being right for the wrong reasons is good enough. It certainly beats being wrong for the right reasons like the bears were.

3---Now even top officials in the Kabul government vow to kill Americans, NY Post

The US military seems to be in denial about the breadth and scope of theinternal threats it faces in Afghanistan. While on the one hand it warns that the “major problem confronting the Soviets was the unreliability of the Afghan army,” it nonetheless appears Polyannish about its own prospects for partnering with the Afghan army. “U.S. forces can gain keen insights and lessons from the Soviet 10-year occupation of Afghanistan,” the Army handbook asserts. The same document goes on to claim that “in contrast” to the Soviet experience, “the United States and CF (coalition forces) have achieved great success in training and partnering with our ANSF (Afghan National Security Forces) counterparts.”

4---Did an invisible run on banks kill the economy?, Boston Globe

The problem behind the financial crisis was not what we think, says Gary Gorton. ...

Gorton is a scholar of financial crashes, and he doesn’t see the most recent meltdown or the one that kicked off the Great Depression as anomalies. Instead, he views the seven crash-free decades between the two as a rare period in which bank regulations were adequate to prevent catastrophic bank runs. And because no new rules have emerged to address the new kind of run that triggered the recent crisis, he says, we could be in for a repeat every few years.

5---Monti to lead coalition in Italian election, wsws

This will continue in 2013, even without new cuts. Istat writes: “Private consumption is expected to fall, reflecting a decline in households’ purchasing power and rising unemployment. In 2013, GDP growth is expected to decrease by 0.5 percent. Exports will be the main support of GDP growth… The contribution of domestic demand to output growth is estimated to be negative.”

Despite the disastrous economic impact of Monti’s policies, he retains the support of finance capital. He has re-directed massive quantities of cash to Italy’s creditors, and his savage cuts have cut labor costs sufficiently to boost Italy’s competitiveness and export revenues. Since Monti replaced Berlusconi as premier last year, the banks have signaled their approval by lowering the interest rate they charge on Italian state borrowing from 7.56 percent to 4.48 percent.

Monti’s comment that the “right-left axis” no longer applies to Italian politics reflects the sharp rightward turn of the entire Italian political establishment and points to the crisis of leadership in the working class. A former advisor to the Wall Street bank Goldman Sachs, Monti has a support base extending from the PD, which emerged from the Stalinist Italian Communist Party after the collapse of the USSR, to far-right “post-fascist” politician Gianfranco Fini. No party speaks for the deep opposition to EU austerity policies in the working class.

6---Dismal holiday sales belie talk of US “recovery”, wsws

US retail sales over the holiday shopping period grew at the slowest pace since the depths of the 2008 recession, according to a report released Tuesday by MasterCard Inc.’s SpendingPulse unit.

SpendingPulse tracks all retail sales in the form of credit card payments, cash and checks, excluding only restaurants and sales of autos, groceries and gasoline. It reported that over the eight-week period from October 28 through December 24, retail sales rose only 0.7 percent from the year before.

Amid a frenzied campaign in the media to spur consumer spending and various ploys by retailers, including beginning “Black Friday” super sales on Thanksgiving Day instead of the early morning hours of the following day, most retail analysts had predicted holiday sales would rise 3 to 4 percent. The general presentation was that a steadily improving economy would encourage consumers to spend more freely this season than in the past. But according to the MasterCard unit, sales grew by less than half the 2 percent rise in 2011.

Another firm that tracks retail sales, Customer Growth Partners, said 2012 looked to be the worst holiday shopping season since 2009. The firm’s president, Craig Johnson, said sales rose roughly 2.8 percent as compared to a 5.8 percent spurt in 2011. Customer Growth Partners bases its estimates on government data, information from retailers, and other sources.

7---A history of home values, NYT graph

8---The disappearing housing inventory – US housing inventory down over 50 percent from 2008. 5 million Americans not paying their mortgage or are in the foreclosure process., Dr Housing Bubble

Supply and demand. A basic fundamental point of any course in introductory economics. With housing most people go with what they see. Distressed inventory is a silent issue because you really do not know how deep problems are in a certain area unlike a home that is listed for sale with a big red sign in the front lawn. Yet we know that over 10,000,000+ Americans are currently underwater on their mortgages and another 5,000,000+ have stopped paying their mortgage or are currently in the foreclosure process. What people see however, is prices going up, available inventory going down, and their ability to buy more house expand courtesy of mortgage rates. Today I want to focus on the inventory side of the equation because it has fallen dramatically in the last few years and is causing bidding wars in certain metro areas....

This chart probably would surprise most that overall existing home sales are back to levels last seen in 2006 or at a similar rate to what we had in 1999. The population is much larger since that time and back in 1999 the 30 year fixed mortgage rate was closer to 8 percent. What we are really seeing more than anything is the lack of supply on the market plus massively artificial interest rates. Is this healthy? The bulk of people only see two things when they look at the housing market:
-1. What is my monthly payment
-2. What homes are available for sale
The mania that is unfolding right now has nothing to do with underlying solid economic fundamentals.

9---Oliver Stone: ‘US has become an Orwellian state’, RT

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