[getsmart-l] [News thats NOT 'Missing' Anymore] US Housing Bubble Bloodbath - The Property Crash Continues

[23skidoo]

As the U.S. housing market continues to implode this message now leaks out despite most mainstream media versions of the 'Missing News' being soo tight lipped about this one. This dire warning of something bad to come with major global ramifications comes from Mike Whitney who has put his facts together well and presents a real thorough heads up for all of us who might be paying attention to the signs of the coming disaster in the financial markets.

And..Its kinda hard to pay attention I know..with all the hide n' seek tactics of the disinformation sources blooming with baloney info-tainment stories which in actuality serve as distractions set to keep people from realizing the horror upon them like films shown during wartime.

What some analysts are suggesting as your best action on your to do list to avoid the pain fast approaching? And while I don't agree with them here they are all two of them..
1.Clearly pay off as much debt as you possibly can., And 
2.buy gold. 
Paying particular attention to number two here, however should raise your concern significantly since gold's recent rally back in the stock markets to over $600, and then suddenly to more than $640 an ounce!!, is telling us - in no uncertain terms - that a financial crisis of major proportions is about to strike. This one is gonna be a real home run that'll hurt everyone. Of course the wealthier you are the further you'll fall. So most of us, at least shouldn't have too much more suffering to endure than we already do.

The U.S. dollar has been telling us the same thing like a barometer on a sagging ship nearing a storm. Namely that the "full faith and credit" of the U.S. Government is plunging - that all is not well in the land of the American Dream. 

Just look at how the American dollar has been falling against many of the world's other currencies. The U.S. dollar used to be worth more than six British pounds; now, it's worth about half of a pound while a U.S. greenback used to be worth three Swiss francs; today, the two are almost equal. I guess it actually pays to be neutral all the time and make really fine chocolate and dependable watches to time their money by and then that banking thang they do. 

The U.S. currency has already lost nearly 30% against the euro, which is barely six years old!!!,and the dollar is at a nine-year low against the Thai baht, and thats a country that just recently experienced a military coup! 

My humble suggestion? for what its worth is, always be careful, and good to your neighbours...

While buying gold would be a good investment given the jump in value, its unfortunately also very heavy and you CAN'T RUN VERY WELL WITH IT!! 

It never worked in 1519 for the world famous explorer Hernando Cortez's men fleeing the Aztecs!, and those 'explorers' and/or 'pirates' depending on your disposition ..were likely more physically fit than any of us could ever amount to ;)

We're all in this together EH...

Film at 11:00

steven
***
http://www.marketoracle.net/Article294.html

US Housing Bubble Bloodbath - The Property Crash Continues 


By Mike Whitney 
Feb 02, 2007 


"The crash of the housing bubble will not be pretty. Millions of people 
stand to lose their homes and life savings. However, it was inevitable.  The 
bubble created a fantasy world that could not continue. At the peak of the 
bubble, 160,000 people a week were buying a home, most at bubble inflated 
prices. The longer the bubble persists, the larger the group of people who 
paid way too much for their home. While it is not good that so many dreams 
had to be ruined, the number will be even larger if the bubble deflates 
slowly. So I make no apologies about hoping for the hasty demise of the 
bubble." -Dean Baker, "Slow Motion Train Wreck" The American Prospect, Aug 
2, 2006 


"No question about it, the housing downturn is here now, and it's big." 
-Jim Hamilton "New Home Sales continue to Fall", Econbrowser Aug 25, 2006 


I wonder if Alan Greenspan takes a copy of the business page along with 
him on the chair-lift at the Aspen, so he can read about the plummeting 
housing market before swooshing down the well-groomed bunny-slopes at 
his favorite ski resort. After all, no one played a larger role in 
inflating (what the "Economist" called) the "biggest equity bubble in 
history" than the retired Fed-master. His low interest-rate bonanza 
triggered a stampede of speculation in the real estate market sending 
prices through the stratosphere and setting the stage for the biggest 
economic bust in American history. 


The whole catastrophe was cooked up Sir Alan and his coterie of 
brandy-drooling elites at the Federal Reserve. 


Thanks, guys. 


Greenspan has undoubtedly taken note of the sudden spike in foreclosures 
which have set off alarm bells from Wall Street to the American 
heartland. The effects of his "cheap money" policies are finally sending 
tremors through America's fragile economic landscape. In September, 2006 
the US Foreclosure Market Report released a statement that over 112,000 
homes had entered some stage of foreclosure "a 63% increase from 
September 2005!?! September was the second straight month in which more 
than 110,000 new foreclosure filings were reported nationwide, evidence 
that the spike in August was not just a one-month anomaly." 


No, it is not a "one-month anomaly" and it is bound to get considerably 
worse as $1 trillion of ARMs (Adjustable Rate Mortgages) reset in 2007. 
The rising foreclosure numbers are the result of rising monthly payments 
on the new-fangled loans which have low introductory interest rates, but 
can unexpectedly double after a two or three year period. 


Imagine mortgage payments that suddenly jump from $1,300 per month to 
more than $2,000 on a $129,000 house. That's what many people will be 
facing in 2007 when their loans reset and they are suddenly forced out 
of their homes and onto the streets. 


The housing bubble is actually an extension of the stock market bubble; 
Greenspan's earlier swindle which cost American investors $7 trillion in 
retirement and life-savings. Both equity balloons can be attributed to 
the shabby and exploitative monetary policies of the Federal Reserve. By 
expanding credit and money supply via low interest rates, the Fed has 
kept the economy whirring along creating the impression of prosperity 
when it's all just smoke and mirrors. America's opulence is built on a 
mountain of debt that's piled a mile high. Regrettably, that mountain is 
about to cascade-down on the American people sometime in 2007-2008. 
There'll be no escaping the fallout from the $4.5 trillion dollars of 
new mortgage debt that's built up in the last 7 years. By the end of 
2007 we should be able to identify many of the painful trends that 
accompany a deep recession; prices of homes will steeply decline, GDP 
will fall, and Greenspan's mighty Temple of Debt will crash to earth. 


Don't believe me? 


The New York Times reported last week that "about 2.2 million borrowers 
that took out sub-prime loans from 1998 to 2006 are likely to lose their 
homes". That translates into about 10 million people! But that, of 
course, is just the beginning of the bloodbath. The real fun begins when 
the whole, ugly ball-o-corruption starts to unwind and we get an 
insider's-view of a system that is rotten to the marrow. The housing 
industry is saturated with fraud; the banks, the mortgage lenders, the 
Fed and the homeowners themselves have all played a major role in this 
sordid confidence game. 


Consider this, for example: 


In 2006 the Mortgage Brokers Association for Responsible Lending (MBARL) 
said that "Liar's Loans" (those based on what you TELL the bank you are 
earning, rather than what you are REALLY earning) "shot up to an 
estimated 62% of mortgage originations.A recent sampling of 100 stated 
income loans by an auditing firm in Virginia (based on IRS records) 
found that 90% of the income statements were exaggerated by 5% or more, 
WHILE ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 
50%"!?! (Dan Dorfman New York Sun) 


Are you kidding me? A majority of loan applicants are grossly 
exaggerating their income and the banks are handing out hundreds of 
thousands of dollars WITHOUT EVEN CROSS-CHECKING IRS STATEMENTS? 


It's mind-boggling! 


The question is, how many of these "liars" will be unable to meet their 
mortgage obligations when the bill comes due in 2007-2008? And, how will 
their (myriad) defaults affect housing prices for everyone else? 


Another indication of hanky-panky appeared in the back-pages of the New 
York Times last week under the appropriate title "A Phantom Rebound in 
the Housing Market" by Daniel Gross. The article points out that while 
the Commerce Dept was celebrating the latest rise in new home sales (in 
Nov) the reality was quite different. In fact, the government is 
overstating sales "by up to 20%". The Commerce Dept failed to subtract 
the thousands of people who signed contracts but "simply walked away 
from their deposits when they realized they couldn't flip the houses for 
a quick profit." 


Ooops! So the government is falsifying the figures to make things look 
better than they really are? 


You bet. And, most of the high-end home builders like Toll Bros are 
reporting cancellations in the neighborhood of 37%! 


The Times adds that, "Mr. Zandi of Economy.com estimates that the 
differential is even greater. 'Given the rise in cancellation rates, it 
suggests that between 150,000 and 200,000 home sales are being counted 
that actually did not occur.'" 


"Did not occur"! So, the government is beefing up their stats with an 
extra 200,000 homes a month!?! 


Gadzooks! 


Okay, so the homeowners are lying on their loans, and the government is 
lying about the sales (and inventory) figures; is that it? 
No. In an earlier article (The Fed's role in the Housing Crash of '07) 
we already covered how the banks are loaning out as much money as 
possible through all kinds of "untested" Mickey Mouse mortgages so that 
unqualified borrowers can get-on-board the housing gold rush. These are 
the ARMs; the "no-down payment, "interest-only" loans which Business 
Week magazine called "the riskiest and most complicated home loan 
product ever created". Many of these ARMs are timed to explode sometime 
in the next 2 years and the aftershocks from the defaults are expected 
to be felt throughout the economy. 


Of course, the banks never would have exposed themselves to such 
extraordinary risk if they weren't able to bundle-up these dubious loans 
and ship them off to Wall Street. Fund managers have been more than 
eager to take this "collateralized debt" and use it in the booming hedge 
fund industry. No one really knows what will happen to the stock market 
when foreclosures begin to skyrocket and the banks and hedge funds are 
unable to recoup their losses. But a major "correction" (meltdown) is 
certainly not out of the question. 


Once again, all of these problems originated at the Federal Reserve 
where interest rate manipulation and the loosey-goosey approach to money 
supply have created the potential for an economic firestorm. 


Bubble, bubble; toil and trouble 


So, what can we expect when interest rates tighten up and the market 
begins to slump. 


Well, first off, according to the Wall Street Journal, lenders will get 
"more cautious in initiating new loans and have been setting aside more 
reserves for potential loan losses." The banks are battening down the 
hatches and preparing for the worst. This just confirms that the real 
hurricane hasn't even touched down yet and that America's over-leveraged 
consumers should try to straighten out their financial affairs as 
swiftly as possible. (Get out of debt, pronto!) 


A USB study indicates that a "high percentage of borrowers with 
delinquent, defaulted and foreclosed loans have second mortgages. These 
borrowers are so overburdened by the added debt that THEY HAVE TROUBLE 
MAKING THE PAYMENTS ON THEIR FIRST MORTGAGES. This is an ominous 
development since 34% of all mortgages in 2006 were second mortgages." 


In other words, it's not simply people in the sub-prime market who are 
feeling the pinch. Millions of Americans either have loans that will 
reset at significantly higher monthly rates (which they won't be able to 
pay) or they are completely maxxed-out financially after draining every 
last farthing out of their home equity. In fact,falling prices have 
decreased the amount of money that homeowners are able to take out of 
their home equity. (Equity withdrawals decreased by 70% in the last year 
alone!) That means that there is $525 billion less fueling the overall 
economy (GDP). As housing prices steadily decline, we can expect that 
America's growth will shrink accordingly. 


The American consumer is hobbled by debt and has no way to increase his 
revenueas long aswagesremain stagnant. Additionally, US households are 
now showing negative savings. (minus .2%) When the home equity "punch 
bowl" dries up, it'll be hard times for the average over-leveraged 
American consumer. He'll have nothing left for his buying sprees but the 
plastic in his wallet. (Credit card debt is soaring) 


It'll be tough on the banks and Wall Street, too. After all, over 50% of 
all mortgages since 2003 have been these shaky, non-conventional loans 
which have ignored the standard criteria for loaning money (20% down 
payment, fixed interest rate, sufficient collateral and earnings) Now 
they'll have to "pay the piper" and accept the dismal aftereffects of 
their profligate lending. 


The banks should have spotted this disaster a mile away. Instead, they 
decided to improvise on mortgages so they could keep the money flowing 
and maximize profits. Now, there's not a life boat big enough on Planet 
Earth to bail us out. 
Glub, glub. 


Once again, we need to remind ourselves that the housing boom was not 
created by market forces, but by cheap money pumped into the system (via 
the "creative financing" rip-off) by our friends at the Federal Reserve. 
They are responsible for this whole bloody boondoggle. 


When the Fed cut short-term interest rates from 6.5% to 1% in 2001, they 
knew that they were simply leaping from one equity-bubble to another. In 
the next 5 years, total mortgage debt increased by a whopping 82% and 
total real estate value nearly doubled to $21 trillion dollars. 


These are huge numbers and, of course, the Fed knew exactly where the 
money was going, just as they knew what the outcome would be in the long 
term. The effects of low interest rates and increases to the money 
supply are like the immutable laws of science. In this case, they act 
like gravity pulling the whole battered US economy into a bottomless 
black hole. It was entirely predictable. 
So, what happens now? 


What can we expect from the architects of this colossal rip-off in the 
next year or two? 


Well, the Fed, the US Treasury and the Bush administration--the real 
axis of evil--would like to forestall the inevitable 
recession-depression until they carry out their forthcoming attack on 
Iran. That's why Bush is sending another carrier group to the Gulf as 
well as a squadron of F-16s to Turkey. (It also explains why the US 
forces seized 5 Iranian hostages in Irbil, Iraq yesterday) The US is 
clamping down on transactions with Iran's main banks ("unilateral 
sanctions") and has coerced the Saudis into "discounting their top-line 
sweet crude by $1.75 to US customers" (Jim Willie "Golden Jackass.com") 
to put additional pressure on Iranian oil exports. As Willie says, "This 
is the real story behind the falling (Gas) prices, not the silly (East 
Coast) weather". 


Uncle Sam is gearing up for another Middle East dust-up in Iran and the 
lower gas prices are (temporarily) averting a US recession. 


The longer term prospects, however, are not so rosy. The "sunny Jim" 
reports in the media about a "soft landing" will have no affect on the 
impending housing collapse or on America's downward economic spiral; the 
numbers are simply too enormous. By spring 2007, the Fed will have to 
lower rates to stop the hemorrhaging and to avoid a full-blown 
depression. When that happens, the last wobbly bit of scaffolding that's 
propping up the greenback willbekicked-out and the dollar will slip into 
oblivion. 


As long as the Fed keeps rates fixed, the pressure on housing will 
continue to intensify; pushing prices lower and inventories higher. GDP 
and home equity will continue to shrivel. 


It's all bleak, bleak, bleak. 


I'll leave you with a final comment from Michael Hudson's "The New Road 
to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse" 
(Harpers May 2006) Hudson, who may well be the foremost authority on the 
housing bubble says: 


"Although home ownership may be a wise choice for many people, this 
particular real estate bubble has been carefully engineered to lure 
homebuyers into circumstances detrimental to their own best interests. 
The bait is easy money. The trap is a modern equivalent to peonage; a 
lifetime spent working to pay off debt on an asset of rapidly dwindling 
value. Most everyone involved in the real estate bubble thus far has 
made at least a few dollars. But that is about to change. The bubble 
will burst, and when it does, the people who thought they'd be living 
the easy life of a landlord will soon find that what they really signed 
up for was the hard servitude of debt serfdom.America holds record 
mortgage debt in a declining housing market. 


Even that might first seem okay-we can just whether the storm in our 
nice new houses. And in fact things will be okay for homeowners who 
bought long ago and have seen the price of their homes double and then 
double again. But for more recent homeowners, who bought at the top and 
now face decades of payments on houses that soon will be worth less than 
they paid for them, serious trouble is brewing. And they are not an 
insignificant bunch. The problem for recent homeowners is not just that 
prices are falling; it's that prices are falling even as the buyer's 
total mortgage remains the same or even increases. Eventually, the price 
of the house will fall below what the homeowners owe, a state that 
economists call negative equity. They can't sell-the declining market 
price won't cover what they owe the bank-but they still have to make 
those (often growing) monthly payments. Their only "choice" is to cut 
back spending in other areas or lose the house-and everything they paid 
for in it-in foreclosure. Free markets are based on choice. But more and 
more homeowners are discovering that what they got for their money is 
fewer and fewer choices. A real estate boom that began with the promise 
of "economic freedom" will almost certainly end with a growing number of 
workers locked into a lifetime of debt servitude that absorbs every 
spare penny." 


It can't be stated more succinctly than that. 


Thanks, Michael Hudson, for your insightful analysis, but it may be too 
late. 

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