Tuesday, November 16, 2010

The Sh*t's Hitting the Fan, and No One Has A Clue

If you're curious as to why the U.S. economy continues on its disastrous course, all you have to do is peruse the ($2 in NYC) print edition of the NY Times. I like print because I can write on it, mash it into a ball and throw it right between the eyes like Ron Guidry used to. Also, origami.

The Fed is adding more paper to the money supply as it sold $600 billion worth of Full Faith and Credit. Unfortunately, instead of driving down the yield of the 20-year bond, the face value did a predator drone nose dive driving yield up. Everyone's scratching their heads and thinking/saying, "Huh?" Is it the uncertainty of what will happen after the Bush tax cuts expire? Is it Bush's face flogging his new book? Is it currency manipulation designed to drive down the cost of exports? Then you go to another story which explains that even with a weak dollar, fewer American jobs will be created because operations have moved overseas where the money is.

Perhaps the truth lies in the front page left column story where the entire Eurozone is in crisis mode You see, children, Eurozone countries, disparate though they might be, must keep their budget deficit at a certain percentage, which means pain and misery (aka "commitment to austerity"). Unfortunately, there comes a point at which dog food cannot sustain the population. For instance:

Of paramount concern to policy makers in Europe is Spain, which is struggling to close its own deficit of 9% of GDP at a time when unemployment is more than 20% and the economy is failing to grow.

Worries about the banks [in Spain] have peaked recently in light of data showing that distressed [read: will not be paid back] loans are now 5.6% of total Spanish bank loans--the highest level since 1996.

"This policy of saving banks at the cost of breaking the back of entire countries is a disaster," said Daniel Gros, direcor for the Center for European Policy Studies in Brussels.

As long as housing prices continue to fall, [losses] cannot be capped.

Our money is based on the sustained belief that horrible, worthless loans are actually worth something (mark-to market accounting) as opposed to fair value accounting (what bankers say their loans, and bottom line, is worth). The Fed transferred those failed mortgages for liquidity to the bankers. Not solvency, liquidity. No one is getting a hair cut except the foreclosed . Thank God the big banks figured out they could shovel the problem of lack of documentation, robo-signers, no ownership paper trail etc. into a huge PR push:

[In preparation for Congressional testimony about the fact that about 4 million families still face foreclosure], Barbara J. Desoer, president of the Bank of America Home loan...plans to apologize for shortcomings in the foreclosure process, while reiterating her defense that no foreclosure or eviction was pursued by mistake.

For the first time, Ms. Desoer also plans to highlight Bank of America's role as a servicer in most cases, rather than the investor that actually owns the mortgages.

David Lowman, chief executive of Chase Home Lending, is also scheduled to testify and adopt an apologetic stance.

1 comment:

maverick said...

all true CASSANDRA You have a clue as do more people than you might think. I believe we just have to simplify the story and work to get it out.