Economic Info for the Month of July

All is well....

Man...economic news isn't good:

• Yesterday, the news came out that existing home sales dropped 27% for the month of July.  In order to stabilize the residential markets, jobs have to return and prices have to stabilize. The Obama administration has gotten in the way of both processes. Thanks to ill-advised taxpayer-subsidized interventions, prices have remained unrealistically high, and no one wants to buy until they pay the right amount for the value of their investment. And until we quit penalizing capital and introducing massive ambiguities into regulatory regimes and expanding them, jobs won’t get created and new buyers won’t materialize anyway.
• Today, the Commerce Department noted that new home sales dropped 12% for the month of July; down 37% from last year. Expect more deflation in housing markets this year as sales dive to new lows
• Although the Commerce Department predicted a 3% growth, durable goods orders rose, but only slightly thanks to transportation industry by 0.3%.  Meanwhile the rest of the industry dropped 3.8% last month.  In other words, absent artificial stimulation, we had no growth at all in Q2. Depending on the final revision, due on Friday, we could be anywhere from -0.3% to -3.4% excluding Porkulus in Q2. Recovery Summer, my ass.
• Thanks to last year's Cash for Clunkers, used car prices have JUMPED 10% overall due to a lower supply in inventory.  As predicted last year, the people most hurt by the price increases are those who can least afford them. The used-car market usually attracts people who need transportation on a budget, who cannot afford to buy new. By destroying a quarter’s worth of trade-ins in three weeks and permanently taking them off the market, the Obama administration has forced an artificial inflation by supply restriction. Moreover, they did so by subsidizing new-car sales that would have occurred anyway, eating up three billion dollars in taxpayer money. In other words, the White House spent $3 billion to make used cars more expensive for working-class families. Nice work.

Keep in mind that our entire economic recovery has been in the hands of a Democratic Administration and Congress with little to no experience in running a business in the private sector.  In the examples above, each have been directly affected by the laws passed since 2009 under their watch.  Businesses are sitting on 2 Trillion just to collect interest instead of spending to hire and expand because of the policies passed by the current party in power. Nobody knows what's to come of the new legislations that have been passed. I mean this with the utmost respect.....Wake the fuck up people.

Very Positive step towards Housing Reform by the Obama Team: Cut Out the Community Organizers

The Washington Post reports today that community organizers find themselves on the outside without a seat at the table where the new policies will develop for housing reform — and that they’re not keeping quiet about the betrayal:

Affordable-housing advocates raised concerns Thursday that the Obama administration is excluding consumer and community groups from playing prominent roles in a government-sponsored conference next week that will kick off efforts to overhaul national housing policy.

After the administration announced the 12 panelists for Tuesday’s conference, the nonprofit National Community Reinvestment Coalition said consumer and community groups had been “muscled out” by financial companies, economists and academics without a sense of how housing policy plays out in communities.
“Apparently being a community organizer qualifies you to be president, but it’s not good enough to be part of HUD and Treasury’s think tank on housing,” said NCRC chief executive John Taylor, whose group works with hundreds of community organizations to promote access to financial services for low- and middle-income people.

Inflating housing bubbles by forcing or incentivizing overreliance on subprime loans clearly hasn’t worked out well for most communities; we now have a foreclosure crisis, thanks to people overextending themselves on overvalued homes. The government interventions of the past twelve years have created crisis and instability, and it doesn’t take a community organizer to see that.

Cutting out the community organizers could mean one of two outcomes. Either Obama is serious about recalibrating HUD’s mission towards low-income rentals and away from distorting lending markets to push ownership where the economics simply don’t support it, or this process is just a beard to continue the status quo by claiming that the White House did its due diligence in checking out all of the possibilities.

A Little on the Economy and Jobless Claims

Great video about the number of jobs lost under the Pelosi-Reid Congress since 2007:



By the way:

• Initial jobless claims today jumped to their highest level in almost 6 months.
• The Department of Housing and Urban Development have begun issuing emergency $50,000 loans at zero interest to unemployed homeowners in an attempt to stall foreclosures, using $1 billion of Porkulus funds for the effort and $2 billion from the same source for indirect aid through state governments.
• foreclosure seizures have increased by 6% over last year
• Home foreclosures are spreading in areas that didn't have problems before, like in the Northwest and Midwest
• The US bailout of financial institutions, and in particular AIG, wound up rescuing foreign firms, according to a new report from the Congressional Oversight Panel.
• That $26.1 Billion Jobs package for public servants?  There's already waste and abuse, reported a day after its passage.  States that don't need the money are recieving it.

But this is the "Recovery Summer"!!

Obama looking to end CRA? Hell is about to freeze over

For most of a decade, the US government manipulated lending markets and pressured banks to get mortgages for lower-income families under both the Clinton and Bush administrations, and with Democratic and Republican Congresses. Now, the Washington Post reports that the Obama administration wants to end the social engineering that created the housing bubble and subsequent collapse as its next target for reform:

Responding to the collapse in home prices and the huge number of foreclosures, the Obama administration is pursuing an overhaul of government policy that could diverge from the emphasis on homeownership embraced by former administrations.

“In previous eras, we haven’t seen people question whether homeownership was the right decision. It was just assumed that’s where you want to go,” said Raphael Bostic, a senior official in the Department of Housing and Urban Development. “You’re not going to hear us say that.”
Bostic, who has published leading scholarship on homeownership, added that owning a home has a lot of value, but “what we’ve seen in the last four years is that there really is an underside to homeownership.”
The administration’s narrower view of who should own a home and what the government should to do to support them could have major implications for the economy as well as borrowers. Broadly, the administration may wind down some government backing for home loans, but increase the focus on affordable rentals.
The shift in approach could mean higher down payments and interest rates on loans, more barriers to lower-income people buying houses, and fewer homeowners overall, government officials said. But it could also pave the way for a more stable housing market, one with fewer taxpayer dollars on the line and less of a risk that homeowners will not be able to pay their mortgages. And it could spell changes throughout the financial markets, as investors choose new places to put their money if the government withdraws some incentives for investing in the U.S. mortgage market.

Let’s hope Obama commits to this reform. If he does, it will easily be the most significant economic reform of his tenure, and would represent a significant retreat from the government interventions and social engineering that have ruined the American economy, and could set the stage for even further constraints on federal power. That would show actual leadership and strength.