Homebuyers aren't feeling the confidence yet

Low mortgage rates, bargain prices aren't enough

In many ways, 2011 has been a great year for buying a house. The trick has been convincing buyers that it's really true.
With the year winding down, it's clear that months of continued instability in the residential real estate market -- and the job market and stock market as well -- have instilled a lingering sense of uncertainty among potential buyers, despite mortgage rates that are lower than ever, and prices that are a relative bargain compared with a few years ago.
Partly, the caution among buyers is grounded in reality -- with prices continuing to fall, as they did in October across much of the state, there remains a risk that a purchase could quickly lose value, especially with so many "distressed sales" still hitting the market.
But some of the so-called "soft spots" in the Delaware market also exist because of misconceptions, industry insiders say.
Chief among them is the exaggerated belief, fostered by the media, that banks simply aren't lending, said Ann Riley, president of Gilpin Mortgage Company. While lending standards have tightened, and satisfying lenders' paperwork requirements has become quite an ordeal, attractive loan programs such as FHA mortgages and state first-time buyers assistance remain.
"There's a lot of other things out there that people tend not to talk about," Riley said. "I think the negativity is starting to feed on itself. ... I certainly think there are people who are on the sidelines because they worry they can't get financing, so they don't even ask."
At the same time, it's also clear that qualifying for a traditional mortgage requires far more effort than it did during the boom years, real estate insiders say. That's as it should be, industry veterans believe, but it also has complicated the market's recovery.
"They want to make sure everything is perfect," said Judy Dean, a RE/MAX realtor and immediate past president of the Sussex County Association of Realtors. "That's what I think is frustrating to a lot of people."
As a result of these and other factors, home sales were relatively flat compared with 2010, pushing hopes of a broader recovery into next year. Sales prices, while showing signs of more stability and rationality, also continue to slip.

That's largely because of the lower values realized in sales of foreclosed and other "distressed" properties, Realtors say. In Kent County, for example, 14.2 percent of deeds filed in 2008 were either the result of sheriff's sales or a bank-owned property. In 2009, that rose to 22.2 percent, climbing to 30 percent in 2010. So far this year, it's 42.2 percent, said Cynthia Witt, a statistical analyst and co-owner of Woodburn Realty in Dover.
Nationally, distressed sales, which include foreclosures and short sales in which the lender agrees to a transaction for less than the balance on the mortgage, accounted for 28 percent of the total in October. At the same time, sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers.
"I think there's a lot more optimism than last year, but there's still a lot of distressed properties on the market," Dean said.
Last year at this time in Kent, the average sales price was $200,830. This year, it's $194,275, Witt said.
Where there is strength in the market, it tends to be focused in lower- and higher-priced properties, she said.
"What's slow is the mid-priced homes, because people are buying new homes over existing homes" to get amenities such as walk-in closets and bountiful bathrooms, Witt said.
Among observers, there's a sense that the real estate market -- like the economy -- will take longer to recover than people had hoped.
"The housing market is stabilizing, but it has a long road to a full recovery," said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto. "There are still a lot of depressed properties in the pipeline that will hit the market, and demand likely needs to strengthen above a 5 million annual rate to absorb the overhang of unsold homes and alleviate the downward pressure on prices."
Nationally, the backlog of unsold homes would take at least eight months to clear. In the meantime, Europe remains mired in a debt crisis, the United States can't agree on how to fix its reliance on deficit spending, and equities markets remain nervous over the whole predicament.
"There is very little consumer confidence, and that's not helping, either," Riley said. "People don't want to go out and make a purchase when they don't feel good about the economy."
Ultimately, the real estate market's recovery will rely on the country resolving its political strife as well as its economic challenges, Witt believes.
"How can a young teacher buy a house if education money is going to get cut next year? There's just no certainty there," she said. "I think that uncertainty is at the heart of things now."

That's largely because of the lower values realized in sales of foreclosed and other "distressed" properties, Realtors say. In Kent County, for example, 14.2 percent of deeds filed in 2008 were either the result of sheriff's sales or a bank-owned property. In 2009, that rose to 22.2 percent, climbing to 30 percent in 2010. So far this year, it's 42.2 percent, said Cynthia Witt, a statistical analyst and co-owner of Woodburn Realty in Dover.

Nationally, distressed sales, which include foreclosures and short sales in which the lender agrees to a transaction for less than the balance on the mortgage, accounted for 28 percent of the total in October. At the same time, sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers.
"I think there's a lot more optimism than last year, but there's still a lot of distressed properties on the market," Dean said.
Last year at this time in Kent, the average sales price was $200,830. This year, it's $194,275, Witt said.
Where there is strength in the market, it tends to be focused in lower- and higher-priced properties, she said.
"What's slow is the mid-priced homes, because people are buying new homes over existing homes" to get amenities such as walk-in closets and bountiful bathrooms, Witt said.
Among observers, there's a sense that the real estate market -- like the economy -- will take longer to recover than people had hoped.
"The housing market is stabilizing, but it has a long road to a full recovery," said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto. "There are still a lot of depressed properties in the pipeline that will hit the market, and demand likely needs to strengthen above a 5 million annual rate to absorb the overhang of unsold homes and alleviate the downward pressure on prices."
Nationally, the backlog of unsold homes would take at least eight months to clear. In the meantime, Europe remains mired in a debt crisis, the United States can't agree on how to fix its reliance on deficit spending, and equities markets remain nervous over the whole predicament.
"There is very little consumer confidence, and that's not helping, either," Riley said. "People don't want to go out and make a purchase when they don't feel good about the economy."
Ultimately, the real estate market's recovery will rely on the country resolving its political strife as well as its economic challenges, Witt believes.
"How can a young teacher buy a house if education money is going to get cut next year? There's just no certainty there," she said. "I think that uncertainty is at the heart of things now.

Click Here to View Article

The Total US Debt To GDP Ratio Is Now Worse Than In The Great Depression

Today most Americans are completely obsessed with the silliest of things. They wonder how Lindsay Lohan is going to fare in jail and they agonize over who LeBron James is going to play basketball for. But when it comes to the things that really matter, most Americans are completely clueless. For example, while most Americans would agree that we are experiencing difficult economic times right now, most of them would also argue that our economic system is in fundamentally good shape and that things will get back to “normal” at some point. Those of us who are trying to warn America of the impending economic nightmare are dismissed as “doom and gloomers” and “conspiracy theorists”. But of course, as with so many things, the passage of time will tell who was right and who was wrong. Below there is a chart that I want all of you to burn into your memory. It is a chart of total U.S. debt as a percentage of GDP from 1870 until 2009. This chart clearly and succinctly communicates the horror of the debt bubble that we are currently dealing with. When this debt bubble pops, it is going to make the Great Depression look like a Sunday picnic.

As you can see from the chart below, the total of all debt (government, business and consumer) is now somewhere in the neighborhood of 360 percent of GDP. Never before has the United States faced a debt bubble of this magnitude….


Most of us were not alive during the Great Depression, but those who were remember how incredibly painful it was for America to deleverage and bring the economic system back into some type of balance.

So if our current debt bubble is far worse, what kind of economic horror is ahead for us?

But the truth is that we are facing some circumstances that even the folks back during the Great Depression did not have to deal with….

1 – Back in the 1930s, tens of millions of Americans lived on farms or knew how to grow their own food. Today the vast majority of Americans are totally dependent on the system for even their most basic needs.

2 – A vast horde of Baby Boomers is expecting to retire, and the “Social Security trust fund” has nothing but 2.5 trillion dollars of government IOUs in it. According to an official U.S. government report, rapidly growing interest costs on the U.S. national debt together with spending on major entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every dollar of federal revenue by the year 2019. This is a financial tsunami the likes of which Americans back in the 1930s could never have even dreamed of.

3 – American workers never had to compete for jobs with workers on the other side of the world back in the 1930s. But today, millions upon millions of our jobs have been “outsourced” to China, India and a vast array of third world nations where desperate workers are more than happy to slave away for big global corporations for less than a dollar an hour. How in the world are American workers supposed to compete with that?

4 – Back in the 1930s, there was nothing like the gigantic derivatives bubble that hangs over us today. The total value of all derivatives worldwide is estimated to be somewhere between 600 trillion and 1.5 quadrillion dollars. The danger that we face from derivatives is so great that Warren Buffet has called them “financial weapons of mass destruction”. When this bubble pops there won’t be enough money in the entire world to fix it.

5 – During the Great Depression, the United States economy was relatively self-contained. But today we truly do live in a global economy. Unfortunately that means that a severe economic crisis in one part of the world is going to affect us as well. Right now, the United States is far from alone in dealing with a massive debt crisis. Greece, Spain, Italy, Hungary, Portugal and a number of other European nations are in real danger of actually defaulting on their debts. Japan (the third biggest economy in the world) is on the verge of complete and total economic collapse. So what happens to the U.S. economy when the dominoes start to fall?

The truth is that by almost any measure, we are in worse economic condition than we were right before the beginning of the Great Depression. We have been living way beyond our means and the debts we have been piling up are clearly not anywhere close to sustainable.

Did you think that we could just continue to run deficits equal to 10 percent of GDP forever?

Of course not.

The U.S. economy is being driven off a cliff, but America’s ”ruling class” has insisted all along that they know better than we do.

But the truth is that in the final analysis it is not us that they care about.

What they do actually care about is getting more money and more power for themselves and for other members of the ruling class. Today, 10,000 people make 30% of the total income in the United States each year.

That leaves 70% of the pie for the remaining 99.99% of us to divide up.

The reality is that however you want to slice it, the U.S. economic system is broken. However, considering the fact that America’s ruling class has a stranglehold on both major political parties, we are not likely to see any fundamental changes any time soon.

That is very unfortunate, because time is running out on the U.S. economy.

CLICK HERE TO VIEW ARTICLE

China vice premier sees chronic global recession

BEIJING (Reuters) - A long-term global recession is certain to happen and China must focus on domestic problems, Chinese Vice Premier Wang Qishan has said.
"The one thing that we can be certain of, among all the uncertainties, is that the global economic recession caused by the international financial crisis will be chronic," Wang was quoted by the official Xinhua news agency as saying at the weekend.
Wang's comments were the most bearish forecast ever by a top Chinese decision-maker about the world economy, and Beijing's worry about a worsening global environment could translate into an impetus for pro-growth policies at home.
China launched a massive fiscal stimulus package with a price tag of 4 trillion yuan ($650 billion) in late 2008 to avert a big impact from the global financial turmoil.
According to Xinhua, Wang did not speak this time about any major policy change but reiterated that banks should be more flexible lending to the agricultural sector and small firms.
"As for our country, which relies highly on external demands, we must see the situation clearly and get our own business done," Xinhua quoted Wang as saying, referring to exports.
China's central bank, which sometimes has to report to Wang, who is in charge of China's financial sector, said last week that it is ready to fine-tune monetary policy if needed.
At a meeting of local government officials and financial executives in the central province of Hubei on Saturday, Wang said local financial institutions such as city commercial banks and credit cooperatives should not seek to expand their business beyond their regions.
Wang also urged banks to pay close attention to the international financial situation. Xinhua did not give further details.

Click Here to View Article

Millions in bottle recycling fees are missing

Shortfall could be passed to buyers

Delaware's tax agency is hunting down millions of dollars in unpaid bottle fees earmarked for recycling amid concerns that forecasters might have overestimated the revenue to lawmakers last year.
The missing money could mean higher costs for consumers and slower growth in recycling as officials scale back startup assistance to recycling businesses and programs that support household and commercial recycling.
Division of Revenue Director Patrick T. Carter said retailers have sent in only about $2.8 million of the $4.5 million expected from a 4-cent fee on smaller carbonated bottles through September.
At that rate, collections would fall about $2.2 million, or 40 percent, short of the expected annual pace, and $8.8 million below the total forecast used when the General Assembly approved a landmark recycling law in April 2010. The same bill ended a failed 5-cent bottle deposit program widely ignored by consumers and never tapped for public purposes.
"We've actually hired a seasonal auditor who is going out on the road. He has a list of noncompliant retailers and he's visiting them to find out what they're doing," Carter told the Recycling Public Advisory Council during a meeting in Lewes.
Legislation signed last year requires all trash haulers serving single-family homes to provide curbside recycling pickups as part of their regular service. All multifamily homes must have recycling services by Jan. 1, 2013, with commercial sites covered by 2014.
The 4-cent fee, slated to end the year that commercial pickups begin, was intended to provide grants and low-interest loans to government and nonprofit groups and businesses involved with recycling. Eligible purposes range from purchases of equipment and pickup bins to programs such as composting that divert waste from landfills and educational services.
Only about 1,000 of the 3,700 retailers believed to sell the bottles covered by the fee have sent in monthly payments, Carter said.
Calls to more than a dozen small food retailers around the state on Thursday turned up a mix of views about the change, with few willing to speak publicly.

CLICK HERE TO VIEW ARTICLE

Department Of Labor: Farm Work No Good For Teens

The Federal government doesn’t want young children to get involved in farming.


The Department of Labor (DOL) wants to implement new rules that would ban certain farm work for children under the age of 16.The Department, according to NPR, says that children who work on farms are six times more likely to be killed or injured than those who do not. The DOL issued the first new child labor regulations in 40 years, which propose barring children under the age of 16 from performing tasks such as driving tractors, handling pesticides and branding cattle.The regulations reportedly exempt family-owned farms, but only if they have not grown to the point of becoming incorporated.The department also proposed preventing anyone under age 18 from working at stockyards, livestock auctions and commercial feed lots or grain elevators.“So kids of individuals who are involved in a family corporation would no longer be able to help mom and dad on the ranch, on the farm. They wouldn’t be able to work with animals. They wouldn’t be able to work on hay wagons stacking bales six feet tall,” said Jordan Dux, national affairs coordinator with the Nebraska Farm Bureau. “There are lots of things that kids, typical farm practices, that … would be outlawed by the Department of Labor.”Critics of the regulations see them as a direct assault on an American lifestyle and on getting young people interested in farming in the United States. Public outcry has caused the DOL to extend a forum for public comment on the regulations that was scheduled to end Nov. 1.

Will anyone rescue Europe from its economic crisis?

Amid Europe’s economic turmoil, a question nags: Where is the IMF?

Created in 1945 — and reflecting the breakdown of global cooperation in the Great Depression — the International Monetary Fund was intended to prevent a few countries’ problems from dragging down the world economy. Countries that got in trouble would borrow temporarily from the IMF. Under IMF supervision, they would adjust their economies gradually so that they wouldn’t destabilize the entire system. Well, that’s exactly the danger now posed by Europe.

It’s tempting to think that new governments in Rome and Athens will resolve Europe’s deepening economic crisis. Perhaps they will, but the odds against this are long: more like 20 to 1 than 2 to 1. Already, high interest rates have barred Greece, Portugal and Ireland from borrowing in private markets. In 2012, Italy has to refinance 360 billion euros (nearly $500 billion at current rates) of maturing debt. If it can’t, it will default or require a huge rescue that, for the moment, seems beyond any European or global entity.

The fallout could be tumultuous. A default would probably cause mass failures among Italian banks, which hold 164 billion euros (more than $220 billion) of Italian government debt. Depositors might stage a run. French banks, with 53 billion euros of Italian debt (nearly $72 billion), would also be imperiled. If Italy defaulted, bond buyers might abandon France and Spain. Already, financial markets have raised interest rates on Italian, Spanish and French debt.

Facing these grim possibilities, the IMF has been mostly missing in action. It has provided some funds for Greece, Portugal and Ireland. But more is needed, as economist Arvind Subramanian of the Peterson Institute makes clear in an open letter to IMF Managing Director Christine Lagarde. What the IMF should do is organize a huge rescue fund — at least $1 trillion to $2 trillion, says Subramanian — to backstop Europe in case more countries lose access to private credit markets.

Countries could tap it in return for agreeing to IMF conditions to overhaul their economies. This way, the IMF might fulfill its basic mission. It couldn’t avert a European recession, which may have already started. But it could preempt a chaotic implosion of credit, confidence and spending that would threaten the wider world economy.

Three realities define Europe’s situation.

First, the crisis is as much political and social as it is economic. The “European model” of generous social benefits and secure jobs is besieged. Welfare states have become too costly for many countries’ economies to support. Benefits must be curtailed. The austerity being imposed or recommended inflicts direct hardship and assaults beliefs and expectations that have been nurtured for decades.

Second, Europe can no longer rescue itself. There are too many potentially needy debtors and too few credible lenders. The main rescue mechanism — the European Financial Stability Facility (EFSF) — has already committed about 250 billion euros of its 440 billion euros to Greece, Ireland and Portugal, reports the Institute of International Finance, an industry group (and the source of most data cited here). Even an expanded EFSF probably couldn’t handle Italy and certainly not Spain and France. The European Central Bank — Europe’s Federal Reserve — could buy unlimited amounts of government bonds. But it has so far disdained this role, fearing the inflationary consequences.

Finally, the IMF (whose European department head resigned Wednesday) is in no position to rescue Europe. At last count, it had about $400 billion in available funds. This wouldn’t cover Italy’s refinancing needs for a year. So the IMF needs more money.

Getting it would be a chore, notes Subramanian. The Europeans don’t want to admit that they need help. The United States, he says, is resistant because its own high debts would prevent it from contributing, thereby diminishing its power. China fears being hoodwinked into throwing good money after bad; but without China, contributions from other countries (Brazil, India, Saudi Arabia) would be meaningless. Against these obstacles, he says, Lagarde could argue that, absent IMF help, a financial meltdown might cause a new global slump.

When created, the IMF was a political institution dedicated to stabilizing the world economy. Does it still work? “A tectonic shift has occurred in the global economy,” Subramanian writes. Traditional creditors (rich countries) and traditional debtors (poor countries) have switched places. Meanwhile, the social contracts written by most advanced nations, including the United States, will be rewritten by either design or events. Economic stability depends on managing political change.

Can China, Brazil, India and some major oil exporters deploy their financial power for the collective good — including the health of their export markets? Can Europe modify its welfare systems without being paralyzed by civil strife and feuds among nations? Or are we on a collision course with some future crisis whose advancing outlines we can dimly perceive but seem powerless to stop?

CLICK HERE TO VIEW ARTICLE

To Increase Jobs, Increase Economic Freedom

Is the United States exceptional? Of course we are! Two hundred years ago we were one of the poorest countries in the world. We accounted for less than 1% of the world's total GDP. Today our GDP is 23% of the world's total and more than twice as large as the No. 2 country's, China.
America became the wealthiest country because for most of our history we have followed the basic principles of economic freedom: property rights, freedom to trade internationally, minimal governmental regulation of business, sound money, relatively low taxes, the rule of law, entrepreneurship, freedom to fail, and voluntary exchange.
The success of economic freedom in increasing human prosperity, extending our life spans and improving the quality of our lives in countless ways is the most extraordinary global story of the past 200 years. Gross domestic product per capita has increased by a factor of 1,000% across the world and almost 2,000% in the U.S. during these last two centuries. In 1800, 85% of everyone alive lived on less than $1 per day (in 2000 dollars). Today only 17% do. If current long-term trend lines of economic growth continue, we will see abject poverty almost completely eradicated in the 21st century. Business is not a zero-sum game struggling over a fixed pie. Instead it grows and makes the total pie larger, creating value for all of its major stakeholders—customers, employees, suppliers, investors and communities.
So why is our economy barely growing and unemployment stuck at over 9%? I believe the answer is very simple: Economic freedom is declining in the U.S. In 2000, the U.S. was ranked third in the world behind only Hong Kong and Singapore in the Index of Economic Freedom, published annually by this newspaper and the Heritage Foundation. In 2011, we fell to ninth behind such countries as Australia, New Zealand, Canada and Ireland.
The reforms we need to make are extensive. I want to make a few suggestions that, as an independent, I hope will stimulate thinking and constructive discussion among concerned Americans no matter what their politics are.
Most importantly, we need to radically cut the size and cost of government. One hundred years ago the total cost of government at all levels in the U.S.—local, state and federal—was only 8% of our GDP. In 2010, it was 40%. Government is gobbling up trillions of dollars from our economy to feed itself through high taxes and unprecedented deficit spending—money that could instead be used by individuals to improve their lives and by entrepreneurs to create jobs. Government debt is growing at such a rapid rate that the Congressional Budget Office projects that in the next 70 years public money spent on interest annually will grow to almost 41.4% of GDP ($27.2 trillion) from 1.4% of GDP ($204 billion) in 2010. Today interest on our debt represents about a third of the cost of Social Security; in only 20 years it is estimated that it will exceed the cost of that program. Only if we focus on cutting costs in the four most expensive government programs—Defense, Social Security, Medicare and Medicaid, which together with interest account for about two-thirds of the overall budget—can we make a significant positive impact.
Our defense budget now accounts for 43% of all military spending in the entire world—more than the next 14 largest defense budgets combined. It is time for us to scale back our military commitments and reduce our spending to something more in line with our percentage of the world GDP, or 23%. Doing this would save more than $300 billion every year.
Social Security and Medicare need serious reforms to be sustainable over the long term. The demographic crisis for these entitlement programs has now arrived as 10,000 baby boomers are projected to retire every day for the next 19 years. Retirement ages need to be steadily raised to reflect our increased longevity. These programs should also be means-tested. Countries such as Chile and Singapore successfully privatized their retirement programs, making them sustainable. We should move in a similar direction by giving everyone the option to voluntarily opt out of the governmental system into private alternatives, phasing this in over time to help keep the current system solvent.
In addition, tax reform is essential to jobs and prosperity. Most tax deductions and loopholes should be eliminated, combined with significant tax rate reductions. A top tax rate of 15% to 20% with no deductions would be fairer, greatly stimulate economic growth and job creation, and would reduce deficits by increasing total taxes paid to the federal government.
Why would taxes collected go up if rates go down? Two reasons—first, tax shelters such as the mortgage interest deduction used primarily by more affluent taxpayers would be eliminated; and secondly, the taxable base would increase considerably as entrepreneurs create new businesses and new jobs, and as people earn more money. Many Eastern European countries implemented low flat tax rates in the past decade, including Russia in 2001 (13%) and Ukraine in 2004 (15%), and experienced strong economic growth and increased tax revenues.
Corporate taxes also need to be reformed. According to the Organization for Economic Cooperation and Development, the U.S.'s combined state and federal corporate tax rate of 39.2% became the highest in the world after Japan cut its rates this April. A reduction to 26% would equal the average corporate tax rate in the 15 largest industrialized countries. That would help our companies to use their capital more productively to grow and create jobs in the U.S
Government regulations definitely need to be reformed. According to the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, nearly twice as much as all individual income taxes collected last year. While some regulations create important safeguards for public health and the environment, far too many simply protect existing business interests and discourage entrepreneurship. Specifically, many government regulations in education, health care and energy prevent entrepreneurship and innovation from revolutionizing and re-energizing these very important parts of our economy.
A simple reform that would make a monumental difference would be to require all federal regulations to have a sunset provision. All regulations should automatically expire after 10 years unless a mandatory cost-benefit analysis has been completed that proves the regulations have created significantly more societal benefit than harm. Currently thousands of new regulations are added each year and virtually none ever disappear.
According to a recent poll, more than two-thirds of Americans now believe that America is in "decline." While we are certainly going through difficult times our decline is not inevitable—it can and must be reversed. The U.S. is still an extraordinary country by almost any measure. If we once again embrace the principles of individual and economic freedom that made us both prosperous and exceptional, we can help lead the world towards a better future for all.

Click Here To View Article

Must Democracy Be Sacrificed to Save Europe?

The European debt crisis has played havoc on the continent’s politicians. This year alone four countries have seen their governments fall—Ireland, Portugal, Greece, and Italy—the last two “without a shove from voters,” reported Bloomberg News yesterday in a story about European technocrats. Spain is expected to join their ranks on Sunday when pre-election polls show the governing Socialist party is likely to be defeated by the center-right People’s Party under Mariano Rajoy.
While the Irish, Portuguese, and (probable) Spanish government transitions were driven by the will of the people, the Greek and Italian situations had a decidedly more back-room quality. In both cases, the sitting prime ministers—George Papandreou and Silvio Berlusconi, respectively—lost the support of their allies or coalitions and were forced to resign. Both were replaced by appointed temporary prime ministers, Lucas Papademos and Mario Monti, respectively.
The acting leaders have, in turn, hand-picked cabinets filled with insiders. Greece’s new government includes many holdovers from the Papandreou regime, while Monti’s team is made up of civil servants, academics, and business leaders—and not a single elected member of the Italian parliament. These select groups face the daunting task of pushing through unpopular reforms and reducing debt levels to stem the bond-market death spirals that felled their predecessors.
Of course, appointed governments aren’t very democratic, but that’s partly the point. “They’re there not just because they’re technocrats, but because it was easier to ask independent personalities to construct political consensus,” European Commission President Jose Barroso said Nov. 14 in Paris, as quoted by Bloomberg News. “The level of hostility between different political forces is enormous.”
In other words, installing non-elected governments may have been the only way to force action on the crises facing Greece and Italy. Government by a technocratic elite isn’t uncommon in Europe: As Bloomberg’s Greg Viscusi writes in the article cited above: “The appointment of prime ministers in Athens and Rome to push through unpopular austerity measures echoes efforts in the past five decades by European leaders to control policy-making when democratic means fall short.”
Viscusi goes on to note:
Progress toward building—and now saving—the 27-nation union has rested largely with the ruling elites. Decisions are taken at meetings of ministers from national governments, and the commission, its executive arm, is appointed by those governments.
Does this speak poorly of democracy in Europe? Yes and no. Both Papademos and Monti have vowed to hand off to elected governments within a few months: in Greece’s case, as soon as February, 2012, and sometime next spring in Italy. So these aren’t exactly open-ended mandates or coups d’état. What’s more, actions taken by the Papademos and Monti administrations still must be approved by the elected parliaments of Greece and Italy. Yet it’s a measure of the state of Greek and Italian politics that to effect change, leadership had to be removed to the hands of technocrats.
Britain’s right-leaning Spectator had this to say about Italy in a blog post today:
The political parties are opting for a technocratic government because they dare not instigate the reforms they know are required. They want to rule, but not govern—and a technocratic interlude allows them to do that. Cowardice? Yes. An indictment of Italy’s politics. Yes. Undemocratic? No.
It’s interesting to consider Italy’s situation as the deadline approaches for the “Supercommittee” of U.S. legislators to devise a budget compromise or see automatic spending cuts kick in. It may be that the polarized—and paralyzed—politics of the U.S. aren’t a whole lot different. There’s no chance the U.S. government would be replaced by a caretaker administration that forced compromise, but leaving budget decisions to statute doesn’t exactly represent the highest ideals of people power.

CLICK HERE TO VIEW ARTICLE

U.S. Tourism's 'Lost Decade' Cost Some 500,000 Jobs

The travel industry today became the latest to slam federal rules and bureaucracy, charging that tough visa rules for potential tourists have robbed the nation of $600 billion and hundreds of thousands of jobs.

Two grim facts: More Chinese now visit France than the United States, in part because it's hard to get a U.S. visitors visa. And while the U.S. used to be the destination for 17 percent of the world's tourists in 2000, that's dropped to 12.4 percent and shows no sign of changing.

"Even as world travel grew by more than 60 million travelers between 2000 and 2010, the U.S. share of the market remained essentially flat. During this 'lost decade,' our economy squandered an opportunity to gain $606 billion in total spending from 78 million additional visitors—enough to support 467,000 more jobs annually," said a new report out this afternoon from the U.S. Travel Association.

"We know that we are not getting our share," said USTA spokesman Robert Bobo.

The key issue: The U.S. is slow to issue visas, especially since 9/11, and visitors from distant nations are going elsewhere. Among the key problems are the post-9/11 requirement that visa applicants be interviewed before traveling and a lack of visa offices. In China, for example, 20 cities with 20 million or more citizens have no U.S. visa office.

To reverse the slide, travel officials today unveiled a broad plan to speed the issuance of visas, potentially leading to the creation of 1.3 million new jobs and additional economic output of over $850 billion.

The key suggestions on the plan dubbed "Ready for Takeoff" include:

— A presidential directive to boost tourism from countries like China, Brazil, and India.

— Have the State Department do more to promote travel to the United States.

— Hire 440 new consular offices and put them in China, Brazil, and India over the next five years.

— Allow existing visa holders, including many business travelers and student and exchange visitors, to renew visas in the United States instead of returning to their home countries to do so.

— Utilize demand management tools and techniques to analyze and predict periods of high user demand and lower wait times.

The industry, however, gives credit to the Obama administration for realizing the problems and working to boost foreign travel to the United States. Just this week, for example, the agency charged with pushing travel to the United States, the Corporation for Travel Promotion, renamed itself "Brand USA" and plans to launch an advertising and marketing campaign in the spring of 2012 to push the U.S. as a business and vacation hot spot.

Click Here to View Article

RealtyTrac: Foreclosure Homes Account for 31 Percent of All U.S. Sales in Q2 2011

RealtyTrac reports: Foreclosure Homes Account for 31 Percent of All U.S. Sales in Q2 2011

The U.S. Foreclosure Sales Report™ showed that sales of homes that were in some stage of foreclosure or bank owned accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, down from nearly 36 percent of all sales in the first quarter but up from 24 percent of all sales in the second quarter of 2010.

“With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term,” said James Saccacio chief executive officer of RealtyTrac. “Maybe less evident, however, is the good news in this report for distressed homeowners looking to sell, and even lenders saddled with large portfolios of delinquent loans.”

Saccacio said that financial institutions are starting to see short sales as a quicker and cheaper way of getting bad loans off their books.

“What we’re seeing in our new foreclosure sales report is the continued willingness of lenders to offer higher discounts on pre-foreclosures (short sales) as to avoid the high cost of going to REO,” added Saccacio. “This is a market driven solution as opposed to a government solution.”

Another trend that is emerging in the foreclosure landscape is that the time to sell a pre-foreclosure is getting shorter.

“The jump in pre-foreclosure sales volume coupled with bigger discounts on pre-foreclosures and a shorter average time to sell pre-foreclosures all point to a housing market that is starting to focus on more efficiently clearing distressed inventory through more streamlined short sales — at least in some areas,” Saccacio continued. “This gives distressed homeowners who do not qualify for loan modification or refinancing — or who are not interested in those options and want to sell — a better chance of completing a short sale to avoid foreclosure. Streamlined short sales also give lenders the opportunity to more pre-emptively purge non-performing loans from their portfolios and avoid the long, costly and increasingly messy process of foreclosure and the subsequent sale of an REO — which may end up selling for a lower price than it would have as a pre-foreclosure short sale and in the meantime further stresses already overloaded REO departments.”

Despite the increase in share of total sales from a year ago, sales of real estate in some stage of foreclosure (NOD, LIS, NTS, NFS) or bank-owned (REO) decreased from a year ago in terms of raw numbers. Third parties purchased a total of 265,087 homes in foreclosure or bank owned nationwide in the second quarter, up 6 percent from a revised first quarter total but still down 11 percent from the second quarter of 2010.

The following graph shows the average discount of short sales vs. REO sales in six markets.

This graph shows the average days it takes to sell a short sale vs. an REO sale.

Nearly 29% of mortgaged homes underwater, report finds

A whopping 28.6 percent of homeowners with mortgages owe more on their loans than their homes could sell for, according to quarterly data released Tuesday by Zillow, a real estate website. That's up from 26.8 percent in the second quarter. Home values declined only 0.2 percent from the second quarter but were down 4.4 percent year over year.
The rising percentage of homes with "negative equity" or "underwater" status is due largely to how long the foreclosure sale process takes rather than home value fluctuations, said Zillow chief economist Stan Humphries. Prior to the "robo-signing" scandal around foreclosures that came to light in 2010, the negative equity rate hovered in the 21 to 23 percent range, but has been in the 26 to 28 range since due to added delays in foreclosure sales. While the rate of foreclosures is dropping, the time required for foreclosures to sell has lengthened.
"We're in uncharted waters," Humphries said in an interview. "More than one in four homes underwater and about 9 percent unemployment is a recipe for more foreclosures."
Homes with underwater status are often considered risks for future foreclosure, since owners could have trouble refinancing or selling and may opt for a foreclosure via "strategic default" if they feel they will never regain their lost equity.
Humphries estimates that home values will bottom out in 2012 at the earliest and said the foreclosure market will remain "robust" for the next two to four years.
In several cities, more than half of all homes with mortgages are underwater, including Phoenix (66.2 percent), Atlanta (58.7 percent), Riverside, Calif. (51.4 percent), Tampa (56.5 percent) and Sacramento (50.9 percent). Other big metro areas with a high percentage of underwater homes include Miami-Fort Lauderdale (46.7 percent), Chicago (46.2 pecent), Cleveland (41.5 percent) and Denver (38.5 percent).
The seemingly endless housing industry recession has caused a radical shift in opinion around home ownership.
A new survey found that only 52 percent of Americans still consider home ownership the American dream, while 48 percent consider it more of a nightmare.
The survey, by Columbus, Ohio-based Home Value Insurance Co., found that one-third of respondents thought buying a home was a risky investment and 18 percent said they were "not sure" they'd advise a younger person to buy one. About 85 percent said they consider now a bad time to sell but a good time to buy, while 23 percent of owners said they were likely to sell within five years.
The American dream is one that dies hard. A survey down earlier this fall by Trulia, a real estate portal, found that 70 percent of respondents still consider home ownership the American Dream, while 21 percent disagreed.

Click Here to View Article w/Video

The Widening Gap:

COMMENT: It appears that Delaware has a major problem with the funding of our healthcare plan for state employees.

The Great Recession’s Impact on State Pension and
Retiree Health Care Costs

In the midst of the Great Recession and
severe investment declines, the gap
between the promises states made for
employees’ retirement benefits and the
money they set aside to pay for them
grew to at least $1.26 trillion in fiscal
year 2009, resulting in a 26 percent
increase in one year.
State pension plans represented slightly
more than half of this shortfall, with $2.28
trillion stowed away to cover $2.94 trillion
in long-term liabilities—leaving about a
$660 billion gap, according to an analysis
by the Pew Center on the States. Retiree
health care and other benefits accounted
for the remaining $607 billion, with assets
totaling $31 billion to pay for $638 billion
in liabilities. Pension funding shortfalls
surpassed funding gaps for retiree health
care and other benefits for the first time
since states began reporting liabilities for
the latter in fiscal year 2006.1
Precipitous revenue declines in fiscal
year 2009 severely depleted state coffers
and constrained their ability to pay
their annual retirement bills. States’
own actuaries recommended that they
contribute nearly $117 billion to build up
enough assets to fully fund their promises
over the long term, but they contributed
only $73 billion—or 62 percent of the
total annual bill. This 2009 payment
represents a five percentage point decline
from the previous fiscal year’s contribution,
when they set aside just under $72 billion
toward a $108 billion requirement.

CLICK HERE TO CONTINUE READING THIS ARTICLE

Eurozone crisis: What it means for East and West

In October 1911, China rose up in revolution. Four months later the last emperor had fallen and European moneymen were flocking to Beijing, eager to finance the bankrupt new republic.
In October 2011, another European moneyman headed for Beijing. But Klaus Regling, head of the European Financial Stability Facility, did not go there to lend to China. He was there to borrow, asking China to save Europe from economic disaster.
In just one century, China has gone from financial basketcase to the world's banker, and Europe has made the same trip in the other direction. It is one of the biggest turnarounds in history. How did it happen? And, more to the point, what does it mean?
The turnaround is part of a much longer story.
Continue reading the main story
“Start Quote
The average Briton or American earns 10 times as much as the average Chinese. But China is catching up”End Quote Ian Morris
It begins around 1600, when China was the richest nation on earth and Europeans, anxious to trade with China, were building new kinds of ships. For millennia, the Atlantic Ocean had been a barrier cutting Europe off from the rest of the world, but Europe's new ships effectively shrank the ocean, turning it into a commercial highway. By 1700, the resources of the Americas were feeding a European take-off.
By 1800, Europe's wealth had caught up with China's, but the processes of change kept working. By 1900, steamships had shrunk the Atlantic even more, while railroads and the telegraph had eaten up the vastness of America's plains. As this happened, the US began pushing Europe off the top of the economic ladder.
By 2000, container ships, jetplanes and the internet had shrunk the world even more, and the Pacific too became a trade highway. This propelled East Asia into the global economy and first Japan, then the Asian Tigers and now China scrambled up the ladder after America and Europe.
They still have a long way to go. The average Briton or American earns 10 times as much as the average Chinese. But China is catching up.
So why would China lend to Europe in 2011? Probably for the same reasons that Europe lent to China in 1911 - to keep its markets stable. The EU is China's biggest trade partner and Beijing needs Europeans to be able to buy its goods.
Continue reading the main story
Rise of the East
China's GDP grew 10.3% in 2010
US's GDP rose 3.0% in same period
China overtook Japan in 2011 as the world's second largest economy
In graphics: Rising Asia
But when Europeans lent to China in 1911, they got themselves more than just a stable market. They also got increasing control over China's economy, and through that, over its policies. All the way back to ancient Rome, in fact, rising powers have relied as much on finance as on force of arms to bring rivals to heel.
Does this mean that Europe is committing suicide by sending Klaus Regling to Beijing? Once again, we can learn a lot by looking back 100 years.
In 2011, we are used to reading in the newspapers that China is a crass, corrupt, economic giant, manipulating its currency and rigging the markets to catch up with the West. Back in 1911, though, British newspapers levelled exactly the same charges against the USA. And they were right. Within 50 years, the US had conquered the world's markets and the European empires were gone.
A disaster for Europe - or was it? In 2011 the average European lives 30 years longer than the average in 1911 and earns five times as much. Europe is far freer than it was in 1911 and has not had a major war in 66 years. All things considered, losing its number one spot and becoming dependent on American capital was a good deal for 20th Century Europe.
'Sloth and indolence'
Will dependency on Chinese capital in the 21st Century be equally good?
No one knows, but the signs are not promising. Just last week, Jin Liqun, the supervising chairman of China's sovereign wealth fund, told an al-Jazeera interviewer that Beijing should only lend to Europe if the EU turns itself upside down.
"If you look at the troubles which happened in European countries," said Jin. "This is purely because of the accumulated troubles of the worn out welfare society… The labour laws induce sloth, indolence, rather than hard working." Europe might find Chinese economic hegemony much harder to live with than an American one.
Will Shanghai be the world's economic powerhouse in the future?
So what should Europe do? Looking at history again suggests an answer.
A hundred and fifty years ago, around 1861, China and Japan both collapsed as Western gunships and financiers pushed into East Asia. Nothing Japan or China could have done would have stopped the rise of Western wealth and power. How they reacted to that rise, however, made all the difference between triumph and tragedy.
China's rulers borrowed heavily from overseas, squandered the capital, and fell into dependency. Japan's rulers bought time, raised huge amounts of local capital and financed an indigenous industrial revolution. By 1911, Japan was a great power and China was the sick man of Asia.
A century and a half later, the EU faces the same choices. Nothing it can do will stop the rise of the Eastern wealth and power - in 100 years, Asia will be the world's economic powerhouse - but how it reacts matters very much indeed.
Europe should choose the Japanese path. It will take trillions of euros to contain the crisis and the pain will be immense. But the alternative, of mortgaging Europe's future with Chinese loans, might prove worse.

CLICK HERE TO VIEW ARTICLE

Looks like Delaware is getting a little more freedom! What a refreshing change it is.

COMMENT: We at the Positive Growth Alliance would like to thank the Governor and the legislators who supported this initiative.

As documented by the Caesar Rodney Institute using U.S. Department of Justice data on convictions of state and local public officials, corruption is a growing problem in Delaware. The historical and research evidence is clear that corruption undermines economic growth. The Governor through an executive order and the legislature through a recent bill have taken a huge step forward to reducing government corruption in the First State.

The simplest and most effective way to reduce public corruption is to provide ready access to government documents and records to citizens. Sunshine is a wonderful disinfectant.

The actions by the Governor and the legislature are straightforward. From this point forward, requests made by citizens under the 1977 Freedom of Information Act (FOIA) will be significantly streamlined. In addition to a standard FOIA form being adopted, a FOIA coordinator is designated for each executive branch, FOIA requests can now be made in person or by mail, fax or email, and copying fees on FOIA requests are capped at $0.10 per page.

Citizens with concerns over salary abuse, vendor favoritism or excessive travel expenditures can now be readily addressed. This sends a huge message to citizens, businesses, investors, and the many honest public employees that Delaware government is serious about battling favoritism, cronyism and back room deals.

And, it will save the Caesar Rodney Institute money. Since it was launched, CRI’s government transparency website, Delaware Spends, has drawn far more traffic than any other part of the overall website. Maintaining the site has cost CRI about $15,000 a year. CRI has also had to retain legal counsel to fight FOIA requests through the government maze. Most recently, CRI spent over $6,000 to force the City of Dover to make its solar park contract public.

Thanks to the Governor and the legislature, those days are over!

This will, over the long-term, be a significant factor in returning robust economic growth to Delaware.


Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

In Europe, new fears of German might

COMMENT: There's a warning here for those wise enough to see it.


BERLIN — For decades, Germany’s role in Europe has been to supply the cash, not the leadership. With fresh memories of war, the continent was cautious about German domination — and so were the Germans themselves.
But the economic crisis has shaken Europe’s postwar model, and Germany increasingly calls the shots. As countries struggle to pay their debts, only Chancellor Angela Merkel has enough money to haul them out of trouble. And the price Merkel is demanding — more control over how they run their economies — is setting off alarm bells in capitals across the continent.
In Athens, protesters dressed up as Nazis routinely prowl the streets, an allusion to the old model of an assertive Germany. In Poland, accusations that Germany has imperial ambitions became a campaign issue in the recent presidential election.
And although German leaders have sought in recent weeks to soothe others’ fears in advance of high-level meetings in Brussels on Sunday and in coming days, the tone has sometimes sounded pugilistic.
“The question of who could accept a German model has been settled by the market,” said a spokesman for German Finance Minister Wolfgang Schaeuble. “We are really only talking about the details and the extent of the measures, not about their nature.”
At $3 trillion in 2010, Germany’s economy is now half again as large as those of its nearest rivals, Britain and France. Its banks are far less exposed to Greek debt than those in France, insulating it from the effects of a possible Greek default. It has thus far committed $290 billion to a European bailout fund for Greece, Portugal, Ireland and anyone else who needs it — significantly more than any other nation in Europe.
Misgivings about a larger German role in Europe have been apparent inside the country, as well, with Merkel facing tough debates about the extent to which the country should commit its money to helping others. And the rest of Europe remains cautious about taking German medicine, needing the help but worried about the side effects.
“That’s the predicament of leadership,” said Joschka Fischer, a former foreign minister who has urged Merkel to do more to support the euro. “When Germany acts, there is the fear that Germany will dominate. If Germany doesn’t act, it’s the fear that Germany will withdraw from Europe.”
Drawn into the euro zone
For nearly a half-century after World War II, West Germany operated out of the limelight, content to be an industrial power while leaving the politics to France, which didn’t have the same legacy of using force to get its way. If West Germany wanted something to happen on the continent, it whispered to its Gallic neighbor and let the proposal be presented jointly. Even the location of the rump state’s capital, in sleepy Bonn near the border with Belgium, symbolized a European orientation.
But when the Berlin Wall fell in 1989, Germany, long split between rival Eastern and Western blocs, announced plans to reunite, raising fears that a powerful nation at the heart of Europe would once again tower over its weaker neighbors. As a condition of French consent to the reunification, French President Francois Mitterrand demanded a steep price: that Germany give up its cherished stable currency, the deutsche mark, and bind itself to a common currency, and by extension to the broader tapestry of Europe.
That worked for years. But time and circumstance are conspiring to put Germany in the driver’s seat. Continental powers including France and Italy have faded in influence, while inside Germany the long caution about being assertive has mostly worn out. The German flag, long regarded with suspicion even inside Germany as a symbol of nationalistic pride, now flutters more and more across the country.
Pushed toward leadership
Until now, Germany has occupied a middle ground — critics would say it has shirked leadership — in addressing the economic problems that have gripped Europe for the past two years. Amid crises in Greece, Ireland and Portugal, Germany has resisted picking up the bill, and it has not articulated a clear vision for how to avoid the problems in the future.
In the long run, though, experts say Merkel has little leeway to turn away from Europe, even though that course might be popular with some German voters. Germany makes its money by manufacturing high-quality products and industrial machinery that it then sells outside its borders, so its success depends on those around it. A recession in the rest of Europe would quickly hit it, too.
At the highest levels of the chancellery, there is a sense that now is the time for grand plans, and Merkel this month called for far-reaching changes intended to impose greater economic policy coordination among the 17 countries that share the euro. A change could take years to take effect, but a first step could come at the G-20 meeting of world leaders Nov. 3.
Germany “has been in a constant reactive role,” said Fredrik Erixon, head of the European Center for International Political Economy, a Brussels think tank. Now, though, it “is at a place where it can largely dictate what it wants to see in other countries, and they have to go along with it.”
If embraced by Merkel’s fellow European leaders, the proposal probably will push the euro zone in a more German direction, a model that enforces low inflation, small deficits and strict curbs on borrowing. France appears likely to go along with this approach, at a time when its own dicey finances weaken its ability to push back.
Still, many economists — including those at the International Monetary Fund — question whether the German model is really the best way to dig out of a recession, given the country’s outsize reliance on exports. And the sense of a fait accompli is raising hackles around Europe. Slovakia recently held up a plan to bolster the bailout fund before it approved it under heavy pressure from Germany. Even longtime allies such as Austria are resisting.
“I can absolutely not accept” that Germany and France make decisions, then present them to the rest of the euro zone, Austrian Foreign Minister Michael Spindelegger told Austrian television last week. “There’s no economic board or diktat. We have a euro zone with 17 countries.”
In Germany, the dissension is raising eyebrows.
“Everybody is calling for leadership,” said the country’s deputy foreign minister, Werner Hoyer, “but no one wants to be led.”

CLICK HERE TO VIEW THIS ARTICLE

The single currency is close to collapse

Yet again, Europe stands on the brink of abject disaster, apparently unable to resolve its differences. A monetary union that was meant to bring former enemies together, binding them to each other via irreversible economic integration, is succeeding only in tearing them apart. It is a crisis that this newspaper has consistently warned of since the single currency’s creation; it gives no pleasure to see our predictions come true.
With a meltdown in the sovereign debt markets fast metastasising into an all-embracing economic and political calamity, the Continent’s position has rarely seemed quite so imperilled since the days of the Second World War. Most worrying is that the Franco-German partnership which lies at the heart of the European project is fracturing as never before, with deep divisions over almost every aspect of the grand rescue plan.
It has already been conceded that this weekend’s meeting of EU leaders in Brussels – billed as the summit to end all summits – will be unable to agree anything of importance. Few have any confidence that a separate meeting on Wednesday will do much better. Whatever is agreed is almost guaranteed to fall short of expectations. Solutions that might have worked if enacted at an earlier stage are being rendered progressively obsolete by fast-deteriorating economic conditions and debt dynamics. Even Germany now seems to be slipping back into recession.
No longer is it possible to rely on the post-war assumption that, while Europe’s leaders may quarrel and disagree, they will always – in extremis – find a way through. Continental solidarity is being tested to its very limits, and the differences could be intractable.
The detail of the disputes over bank bail-outs and the scale of the European rescue fund is tortuous and convoluted. But the underlying problem is simple enough. Europe’s political elites know that for the euro to survive in its present form, it must move – with speed – towards full fiscal and political integration. Yet national leaders, and the voters they answer to, are as yet unwilling to accept the loss of sovereignty, and indeed the shared liabilities, that such a revolution demands.
Germany, for example, has yet to accept that it must take on a share of the responsibility for the peripheral nations’ debts; it must also enable them to regain competitiveness by engaging in unprecedented economic stimulus in Germany itself, thereby surrendering some of its own competitiveness and accepting higher inflation. Brought up on the strict monetary disciplines of the Bundesbank, most Germans find such potentially reckless policies anathema.
By the same token, France is struggling to deliver the structural, pensions and labour market reform that would put it on a par with Germany. Politically, the French and many others find it virtually impossible to accept the loss of fiscal sovereignty that the Germans would demand in return for bailing out their neighbours. Predicting how these standoffs might play out remains close to impossible. The only guarantee is that, whatever Nicolas Sarkozy and Angela Merkel manage to cobble together next Wednesday, it is most unlikely to solve the underlying problem.
In front of our eyes, one of the biggest financial and economic storms of the modern age is brewing. It may need to break with full force before workable solutions are contemplated. That could involve cutting Greece and others loose, and establishing a more tightly knit, fiscally solvent eurozone. Or it could mean splitting it in two, with France allying itself with the Mediterranean south so as to limit the scale of the devaluation, its inflationary consequences for the south, and the loss to the creditor nations of the north. To many, this would seem like the end of the European dream. But that dream was always doomed by the imbalances that the single currency enshrined. The question now is how best to minimise the damage, so that the single currency does not take the world economy down with it – and reconstitute the euro as an entity based on economic reality, not ideological folly.

CLICK HERE TO VIEW ARTICLE

EU bank failures will crash Wall Street — again

COMMENT: We don't agree with the comments praising the "Occupy Wall Street" crowd. They are anarchists who want to destroy American democracy.

On the other hand, the insights regarding actual criminals on Wall Street and in Washington are excellent. These people should be in jail. Instead, our taxpayer money is being used to make sure that those who created the problem keep their billions.

For the entire story on the cause of the financial crisis, read Reckless Endangerment, which can be obtained at www.amazon.com.


When? A string of European bank collapses is dead ahead. And like the Arab Spring, they will trigger an economic disaster for American banks.

Yes, coming soon says Martin Weiss in his “7 Major Advance Warnings,” which is “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.” His new Weiss Ratings warnings are the “most important” in a 40-year career. The stress on Wall Street banks will force them back to Congress for more bailouts.
Warning eight: No new bailouts. That will push the economy into a deep recession.
Then what? New Glass-Steagall? Not enough. Tax the rich? Not enough. Perp walks? Not enough. Presidential commission? Useless promises. Occupy Wall Street will fail without a fundamental constitutional change. No compromise. Or Wall Street wins, again. We go back to the same free market, deregulated, too-greedy to-fail, conservative Reaganomics policies that have been destroying democracy for a generation.
All this was so obvious, so predictable. America is at a crossroads. Occupy Wall Street buildup has emerged as America’s last great hope to restore democracy. Last week when USA Today called the Occupiers a “ragtag assortment of college kids, labor unionists, conspiracy theorists and others” hinting they’re a flash-in-the-pan “devoid of remedies,” I smiled, reminded of that famous painting of George Washington crossing the Delaware on Christmas 1776, leading what historians also called a “ragtag” Continental Army, surprising the British, and winning the Battle of Trenton.
America’s collective conscience wants true democracy restored
Yes, USA Today sees a “ragtag” army: No mission, no goals, no organization, no agenda, no leaders, and no staying power. Wrong. Look deeper: The Occupiers are the voice of America’s collective conscience demanding a return to our 1776 roots, to a “government of the people, by the people, for the people.”
Our collective inner voice knows America’s moral compass is broken. We’ve become a government “of, by and for” special interests, the wealthiest 1%, Wall Street insiders, CEOs and Forbes-400 billionaires. It happened fast: In one generation the Super Rich grabbed “absolute power,” killing the middle class American dream.
Wall Street banks are already dismissing the Occupiers … planning bigger bonuses this year… lifting limits on their license to gamble Main Street deposits in the $600 trillion global derivatives casino … they already spend hundreds of millions lobbying every year … they’re convinced they can defeat the Occupiers with campaign donations in the back rooms of Congress … writing off the fight as another business expense … ultimately expecting the Occupiers will vanish into the cold winter months.
One citizen. One dollar. One vote. Anything less is failure
Warning: Don’t be fooled. Occupy Wall Street knows exactly want it wants. The tea party, GOP’s proxy, isn’t fooled. They feel threatened, counter-attacking, worried their role will be lost in the 2012 elections, fearful they’ll lose sway over Republicans, so they’ve got a smear campaign against Occupy Wall Street. Won’t work:
Amid all the noise surrounding Occupy Wall Street we hear their “one simple demand.” Missed by most outsiders, that demand echoes down through American history, first heard in 1776 in the Declaration of Independence. Earlier the Occupiers voiced their one simple demand:
“We demand that integrity be restored to our elections. One citizen. One dollar. One vote. Only citizens should make campaign contributions. Campaign contributions by citizens should not exceed $1 to any political candidate or party. Help us reclaim democracy.”
Yes, one simple demand: “Stop the monied corruption at the heart of our democracy.” That one simple demand echoed over and over. And no compromise when dealing with so fundamental a principle of democracy. Compromises the last generation surrendered America to Wall Street and the Super Rich. Compromise this principle again, and we all lose, destroy America. No compromise. Period.
Phase 2: EU bank collapse gives Occupiers new political power
The Occupiers Revolution enters a new phase soon: First Arab Spring rippled into American Fall. Next, EU bank collapses will ripple through Wall Street. For a long time we’ve been warning the 2008 meltdown never ran its course, foiled by mega-bailouts … bankers never shared the sacrifice … fought all reforms … are back to business-as-usual … learned no lessons … now even more delusional, expecting bigger bonuses … trapped in denial for three years … cannot see what’s ahead … a perfect setup for a bigger crash.
That’s why my eye locked on Martin Weiss’ “7 Major Advance Warnings.” Weiss has been a champion of the little guy for 40 years, author of “The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.” Weiss Ratings of domestic and foreign debt markets downgraded U.S. debt before the S&P.
Both of us were warning well in advance of the 2008 crash. It was so predictable: Weiss warned of “failure of Bear Stearns Lehman, Washington Mutual, near-failure of Citigroup and the demise of Fannie Mae years before it collapsed.”
So listen closely to his “7 Major Advance Warnings,” which are “the most important in the 40-year history of my company.” Many will dismiss them, distracted by today’s campaign noise. Others will dismiss them as “over there,” problems for Europeans. Weiss warns: EU banks problems are “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.”
So listen and discount what Wall Street is selling you. Protect your portfolio. Here are edited highlights:
1. Greece will default very soon ...
”Banks must bite the bullet and take some big hits in their Greek loans. … Whether banks accept this ‘solution’ voluntarily or not, it will mean Greece is in default.”
2. The contagion of fear will spread …
Global investors know “if one major Western government can default, so can others.” They will refuse to lend “to highly indebted governments” or “demand outrageously high yields.”
3. European megabanks will collapse …
Some of the “largest banks will collapse under the weight of defaulting sovereign debts and … mass withdrawals … Spain … French banks” … the impact will ripple across “J.P. Morgan Chase, Bank of America and Citigroup … All three are in danger.”
4. EU governments suffer new credit rating downgrades ...
”France and Germany, will scramble to rescue their failing banks.” But “bank bailouts are seriously flawed” as “governments gut their own fiscal balance … suffer big downgrades,” or pay “far higher interest rates.”
5. Spain and Italy next to face default on their massive debts ...
With “$3.4 trillion in debt, or about 10 times more than Greece” they too risk default.
6. Global debt markets will suffer a critical meltdown ...
Anticipating “default by a country as large as Spain or Italy, nearly all debt markets in the world will freeze.” Withdrawals, panic “not only crush the borrowing power of the PIIGS” but threaten meltdowns in “France, Germany, Japan, the U.K. and the U.S.”
7. Vicious cycle: sovereign defaults, bank failures, global depression ...
Government defaults trigger more bank failures, “cut off the flow of credit to businesses and households, sink the global economy into a depression, and perpetuate the vicious cycle.”
Warning to investors: No bank bailouts, power to Occupation
History inevitably repeats itself: Arab Spring triggered Wall Street Fall. Next, the raging European monetary collapse will ripple through America’s banking system, completing the 2008 meltdown that never ended because Wall Street fought all reforms.
But now, a bigger meltdown as history repeats a dangerous cycle like the 1929 Crash and Great Depression.
History will also deal a fatal blow to Wall Street. Weiss adds a key warning: No bank bailouts. America’s banking system is bankrupt, structurally and morally. Washington is broken. And thanks to the Occupiers Revolution the masses will never accept new bank bailouts. Never. They’ll toss politicians and overthrow government first.
No new bailouts will be the stake in the heart of Wall Street, ending the “greed is good” power of America’s “bloodsucking vampire squid,” handing the Occupiers new political power in Washington.
Weiss’s worst-case scenario highlights everything we’ve both been warning investors about for a long time. The 2008 meltdown never ended, lessons never learned. But now the end game is accelerating.
Listen closely: Weiss final warning to all investors: “Get all or most of your money out of danger immediately … above all, stay safe!” Prepare for the coming bank collapse. And discover how this historic scenario will empower the Occupiers message to get money out of elections: “One citizen. One dollar. One vote.”
Compromise on that principle and Wall Street wins, again.

CLICK HERE TO VIEW ARTICLE

Attention, Protestors: You're probably part of the 1 Percent

About a year ago, The Wall Street Journal ran an article describing the plight of Americans struggling to rebuild after bankruptcy. The article highlighted Linda Frakes, who filed for bankruptcy after accumulating more than $300,000 in credit card debt."Ms. Frakes is now unemployed, living on $330 a week of unemployment benefits and odd jobs," the Journal wrote. Frakes "struggled to rent a home and buy a car after bankruptcy. A used-car dealer ultimately gave her financing on a Jaguar."No one's hardship should be belittled. Becoming unemployed or losing a home aren't just financial problems. They're social and emotional problems that strike at people's sense of being.But things always need to be kept in perspective. Only in America, I thought to myself after reading the article, can someone be driving a Jaguar and portrayed as living in an impoverished underclass. Context is crucial with these issues.The recent Occupy Wall Street protests have aimed their message at the income disparity between the 1% richest Americans and the rest of the country. But what happens when you expand that and look at the 1% richest of the entire world? Some really interesting numbers emerge. If there were a global Occupy Wall Street protest, people as well off as Linda Frakes might actually be the target.In America, the top 1% earn more than $380,000 per year. We are, however, among the richest nations on Earth. How much do you need to earn to be among the top 1% of the world?$34,000.That was the finding World Bank economist Branko Milanovic presented in his 2010 book The Haves and the Have-Nots. Going down the distribution ladder may be just as surprising. To be in the top half of the globe, you need to earn just $1,225 a year. For the top 20%, it's $5,000 per year. Enter the top 10% with $12,000 a year. To be included in the top 0.1% requires an annual income of $70,000.Of course, goods and services cost different amounts in different countries. These numbers only apply to those living in the U.S. To adjust for purchasing power parity, those living in Western Europe should discount their dollar-denominated incomes by 10%-20%, Milanovic says. Those in China and Africa should increase their incomes by 2.5-fold. India, by threefold.The global distribution figures may seem incomprehensibly low, but consider a couple of statistics you're likely familiar with: According to the U.N., "Nearly half the world's population, 2.8 billion people, earn less than $2 a day." According to the World Bank, 95% of those living in the developing world earn less than $10 a day.Those numbers are so shocking that you might only think about them in the abstract. But when you consider them in the context of the entire globe, including yourself, the skewing effects they have on the distribution of income is simply massive. It means that Americans we consider poor are among some of the world's most well-off. As Milanovic notes, "the poorest [5%] of Americans are better off than more than two-thirds of the world population." Furthermore, "only about 3 percent of the Indian population have incomes higher than the bottom (the very poorest) U.S. percentile."In short, most of those protesting in the Occupy Wall Street movement would be considered wealthy -- perhaps extraordinarily wealthy -- by much of the world. Many of those protesting the 1% are, ironically, the 1%.This isn't to disparage the occupiers' message. Protestors are, I think, upset because so many of America's top 1% are perceived to have earned their income unjustifiably -- think bankers and bailouts. Most are not against inequality of wealth; they're against inequality of opportunity. As they should be.But take a step back and put things in perspective. As Milanovic notes, "One's income ... crucially depends on citizenship, which in turn ... means place of birth. All people born in rich countries thus receive a location premium ... all those born in poor countries get a location penalty. It is easy to see that in such a world, most of one's lifetime income will be determined at birth." He continues, "it turns out that place of birth explains more than 60 percent of variability in global incomes." And there are few better places to be born than America -- even if you end up poor by American standards. If there is inequality in opportunity, those born in America are the ones with the unfair advantage.As author Matt Ridley put it, "Today, of Americans officially designated as 'poor,' 99 percent have electricity, running water, flush toilets, and a refrigerator; 95 percent have a television, 88 percent a telephone, 71 percent a car and 70 percent air conditioning. Cornelius Vanderbilt had none of these." Nor does much of the world.Food for thought.

Click Here to View This Article

Shilling: 5 of 7 Deflation Signs Already Here

Click here to View this article

Schools Would Benefit from Exemption to State’s Prevailing Wage

Every year, Delaware’s school districts face the task of improving school conditions, staying current with technology and meeting the high demands the public expects of public education. With these demands and voters’ insistence on efficiency, every dollar that is spent should stretch as far as possible.

The state’s prevailing wage law undermines this objective. There is no question that the prevailing wage requirement forces school districts to pay more for construction projects than they would otherwise need to.

The Problem
Delaware’s law requiring construction firms to pay workers the prevailing wage when working on public projects needlessly inflates the costs of such projects. Delaware’s law requires the prevailing wage to be used on new projects costing $100,000 or more and on remodeling projects costing $15,000 or more.
The prevailing wage is determined by a survey of both union and merit shop firms in Delaware. The prevailing wage is set at the majority amount provided by survey respondents in specific trades. For example if various “laborers” submit 99 different wage rates, broken down as 50 at $17.95, 39 at $16.25 and 10 at $17.55, the prevailing wage will be $17.25.

The Bureau of Labor Statistics (BLS) noted the following wage rates for Wilmington in May of 2007:
· Carpenter: $22.39/hour
· Sheet Metal: $22.89/hour
· Laborer: $14.69/hour
· Electrician: $25.21/hour
· Iron Worker: $21.39/hour

With the State’s prevailing wage law in place, the hourly rates become:
· Carpenter: $45.91/hour
· Sheet Metal: $59.28
· Laborer: $34.60/hour
· Electrician: $54.05/hour
· Iron Worker: $53.27/hour

The Solution
Estimates from the LEAD Report commissioned by former Governor Ruth Ann Minner state that the savings from exempting school construction from the prevailing wage requirement would save the state between $21 and $34 million annually.

Why This Works
Prevailing wage laws create a disincentive to complete projects in a timely and efficient manor as workers desire to stay on the job with the higher mandated pay as opposed to private jobs that are not required to pay the prevailing wage. As the State of Delaware faces a $750 million plus budget shortfall, exempting school construction projects from the prevailing wage offers a reasonable piece to the broader solution of closing this gap. If added to Governor Markell’s plan to balance the budget, this proposal will provide needed relief and possibly a reduction in the
proposed salary and benefit cut (a combined 10%) for state workers. Delaware currently ranks 8th in the nation for overall school spending, but only 27th in performance. Implementing
this proposal will surely help to reduce the cuts that are coming to school funding and the reallocation of funds may help to insure that Delaware does not slip further in performance.

Click Here to View Article

Ain't no Chairs

COMMENT: We don't know who this gentleman is but his comments, especially the first half regarding the condition of banks and the financial system, should be heeded by all.

I came across an interesting quote recently in The Gartman Letter. Dennis Gartman quotes Charles Biderman of TrimTabs fame.
"European leaders are searching for a relatively quick and easy way out of the government debt bubble that has been building for decades and just started to burst a few years ago. Unfortunately, there is no quick or easy way out.
"Debt has to be reckoned with one way or another. It either has to be repaid, or someone has to bear the losses on what cannot be repaid, either through default or inflation and currency debasement. If it were otherwise, everyone could be rich.
"The bailouts proposed for the Eurozone do not solve the underlying solvency problem. Instead, they are little more than shell games to shift losses on bad debt from bondholders to taxpayers."
That of course is a variation of my very important concept that all debt gets paid, either by the borrower or by the lender.
Greece is a serial deadbeat and has not even the slightest intention of paying their bills. The EU can play games until the cows come home but the Greek debt is not going to get paid. Greece defaulted many months ago and the governments of the EU and the financial media keep pretending there is a solution. There is none.
Here are the facts. There is $195 trillion dollars of debt in the world but only $150 trillion in assets. That assumes there isn't trillions more of debt hidden in the $600 trillion in derivatives. I suspect the debt may be far higher than anyone anticipates today.
The debt cannot be paid, even if the entire load is dumped like bales of hay onto the backs of the taxpaying camels. The debt must be written off and governments, like corporations and families, must learn to live within their budgets. We cannot float in a sea of debt attached to an anchor of unpaid obligations.
No one in the United States has done the math on the obligations the Federal Reserve dumped on the backs of Americans since 2008 else they would be carrying pitchforks and hot tubs of tar to the local OWS rally. If you assume 330 million Americans and $16 trillion in loans from the Fed, that is $48,000 and change per every American. Will that ever be paid back? No.
I made the comment years ago that the $600 trillion in derivatives is like a game of musical chairs in a giant casino with people playing with Monopoly money. Well, the music stopped in September of 2008 and there ain't no chairs.
The world economy is in a minefield where each day another unforeseen mine explodes. The Dexia Bank, Belgium's largest, which passed the fake stress tests with the highest ratings, crashed a few weeks ago. I cannot help but be reminded of the failure of the Credit-Anstalt Bank of Austria that crashed in May of 1931 and led to a series of cascading bank failures and eventually to a total shutdown of all US banks in March of 1933.
I'm going to crawl out on a limb and suggest that 2012 is going to go down in history as the year of the bank failures. Every bank in the United States has been underwater since 2008 and the only reason the doors remain open is a mob psychosis insisting the King is indeed clothed. Well, he ain't and the banks will collapse.
We had a perfect example of surprise explosions proving market forces are far more significant than government manipulation with the sudden collapse of MF Global on October 31st. This is the biggest bankruptcy since the fall of Lehman Brothers in 2008 but was a total shock to the market.
November 1, 2011 brought yet another mine explosion with the release of news from Greece where Prime Minister George Papandreou announced that he would call for a referendum by Greek voters as to implementation of new austerity measures. Given that 80% of voters indicate they are against the measures and 70% are in favor of staying in the Euro (And why not? It's a Goodo Dealo.) Greece just blew the French/German bailout plan sky-high. The Greeks literally are caught between a rock and a hard place.
I want to make it abundantly clear that there are no good solutions in Europe, the Euro is doomed. Indeed there are no good solutions on our side of the water, our financial system is toast.
The AWA protests in the United States (Americans with an Attitude) have escalated to a new degree with the shooting in the head at point blank range of a Former Marine protester by a San Francisco policeman working in Oakland on October 25. It's interesting and noteworthy that a Federal Judge ruled that the demonstrators were there perfectly legally. Clearly Scott Olsen was peaceful in his actions and presented no threat to anyone.
Videos show a SFPD officer firing a tear gas grenade at Olsen at a range of about 10 feet. When Olsen collapsed and fell to the ground, other demonstrators tried to come to his aid. The same policemen pulled out a flashbang grenade and tossed it into the middle of the group.
If the United States were a nation of laws, that officer would be in jail on charges of attempted murder. But when the biggest criminals in the country are working on Wall Street and the Justice Department thinks that arming Mexican drug gangs is a great idea, we are long past the point where those in power obey laws. It's interesting that the Oakland PD says that it will take months to investigate the case. Yea, right.
I wasn't shocked over the protests in New York and spreading protests all over the United States. Frankly I've wondered since 2008 just how long it would take Americans to wake up and recognize the shafting they were getting from the government. Frankly I was shocked over the protests spreading to Canada.
Face it, the only thing Canadian have felt like rioting over in the last 350 year was ice hockey. For Canadians to recognize that maybe Big Government wasn't their best friend is a sea change in attitude. We are in the early days of a Global Revolution. It's going to be ugly, it's going to be bloody and no one today can even guess how bad things will get. The AWA demonstrators are demanding changes government will not make until the entire false edifice has burned down.
For months I have been suggesting that cash was the best investment you could hold and a better time for investment would come at the end of October. It was a good call in that cash was the best investment since May but I don't see a safe environment for investment now. It's time to stay in cash and head for the bunker. Times are about to get fugly.

Click here to view article