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DailyReckoning.com
Food up 9%. Houses down 11%. What’s an upside-down homeowner to do but walk away? According to yesterday’s USA Today , so many are walking away in Denver that it is producing an ‘Exodus’ of Biblical proportions. Some neighbors have one out of 8 houses in foreclosure. Citywide, the total last year was one out of 32.
Where do these people go? They rent, naturally. Rental vacancy rates have fallen from 10% two years ago to 5% today
Meanwhile, from Manhattan come two bits of conflicting news: apartment sales are down to an 18-year low...but prices are at an all-time high. Buyers are holding back, in other words...but sellers hold out too – for more money.
Across the nation, repossession filings are up 93% from last year. And as we saw yesterday, food stamps are up big time. But there really aren’t any “stamps” any more. Now, the food comes via plastic, a type of credit card that can be used – theoretically – only for buying food. In practice, nice shopkeepers in bad neighborhoods take the card and give back cash at steep discount. Say a $10 charge for 7 bucks worth of cash to buy life’s real necessities – liquor, cigarettes and gas.
It’s all going according to plan, as we see it. The empire is rolling over. Now, in its advanced, decadent phase, the imperial government must provide bread – in the form of plastic food stamps...and circuses – in the form of national party conventions, elections and foreign wars. The combination settles the public...and distracts them. They become docile, subservient, willing to stand in line to protect themselves from make-believe threats ...and ready to put up with any nonsense, no matter how grotesque, absurd or faithless.
In the latest financial news comes word of new proposals to “regulate” Wall Street...and new initiatives to “save” homeowners. The free market is out. ‘Public responsibility’ is in.
Treasury Secretary Paulson:
“I think you will continue to see flexibility as we learn and go forward,'' changing his tune from last month when he said proposals to use government funds were a “non- starter.”
Why are they a starter now? People come to believe what they must believe when they must believe it, is our observation. Both private citizens and the government too have taken on obligations that they can’t possibly fulfill. Since it cannot be paid, the debt must be made to disappear. The world – or at least most of the Anglo-Saxon part of it, must be de-leveraged. So, people must believe in a fantasy about how the government will “bail out” the homeowners...and how the Fed will “rescue” Wall Street... Among all the great debtors in the U.S.A., circa 2008, only one has the power to pay its debts – no matter how large they are. Only one has printing presses that turn out pieces of paper with pictures of dead presidents on them. And only one can trade bad debt for political favor. That one is, of course, the U.S. federal government...lender of first, last, and holiday resort.
Already, the Fed has taken onto its balance sheet some $30 billion in smelly collateral from Bear Stearns...and billions more from other financial institutions. That is just the beginning. Somehow, the whole shebang of mistakes, misjudgments, greed-stoked miscalculations will end on the shoulders of the U.S. Treasury...on the backs of U.S. citizens...and dollar holders all over the world.
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