At what point do the financial experts have to admit the plan has not worked and that they are as lost?
Today the latest employment US figures revealed just how utterly clueless those financial experts are. The ‘expectation’ of surveyed Wall Street experts for the employment figures was for 105K to be added. The result was 18K added. That’s like throwing a dart at a board and hitting the bloke standing quietly behind you.
The employment figures for last moth were also revised down from initial reports of +54K down to an actual +25K. This chart shows clearly why even MarketWatch had as its sub-title “Report could raise fears of double-dip” Could raise fears?!
The rate at which the US economy grew has also fallen from 3.1% in the last quarter of last year to 1.9 in the first quarter of this.
America is now so in debt that the ‘unthinkable’ is now routinely discussed – could America have its credit worthiness downgraded? I think it will.
America has spent such vast sums bailing out its banks and those foreign banks who are up to their necks in dollar denominated debt such as Belgium’s Dexia Bank, that the Treasury has had to get lawmakers to vote new laws allowing America to have a higher ‘debt ceiling’ six times in the last three years to stand at $14.29 Trillion.
And it is not enough. The US reached that amount of debt in May this year. Since then the Treasury has been taking money out of the two largest Pension Funds of Public workers, the G-Fund and the Civil Service Retirement and Disability Fund, to pay it’s bills. There is currently 62 billion dollars left to take. Then the US Congress will either raise the limit and so put the tax payers even further in debt or the US will default. The tax payer will pay.
That is the failure of the present policy in the US. It is no better in Europe. Here we have Greece sinking under debts it has no chance of paying, Portugal having its debt downgraded to Junk status, forcing the ECB to say it will now accept Junk bonds as collateral for cash loans and Italy about to implode.
Italy’s main bank UniCredit had trading in its shares stopped once because they had dropped over 6%, They are currently down about 4%. Rumours are that Italy is hiding greater exposure to Greece. That Italian banks may not be as solvent as they claim and this may become undeniable when they fail the next Bank Stress Test currently being re-run. Attention has shifted from Spain to Italy simply because more of the ugly truth has already leaked out about ‘hideen’ debts in Spain’s regions and Cajas than has so far come out about Italy.
We won’t even mention Ireland because its rude to talk about the recently deceased.
And then there is China. China already had a vast bank and debt disaster in 1999. China’s four largest banks had bad loans estimated at about $430 billion, about 42% of all their loans. The Chinese government bailed them out by setting up 4 ‘Asset Management Companies’ which bought $205 billion’s worth of them at face value from the otherwise destined to die banks.The difference between what those bad loans were really worth and the 205 billion paid is the scale of what the tax payer had shoved down their throats. The Asset Management companies were charged with selling the ‘assets’ and ‘returning a profit for the tax payer.’
The same rotting offal lies which we hear our own governments regurgitating about our own nationalized bank debts. Our ‘bad bank’ is called the UKAR, UK Asset Resolution. It has 750 000 customers from the Bradford and Bingley and Northern Rock disasters. Of those mortgages 23000 or so are over 6 months behind.
The Chinese bad banks are still going, still trying to sell the unsellable and make a profit from bad loans made over a decade ago and now they are going to have to do it again. Because the exact same banks, largely staffed and run by the same greedy imbeciles as before as in trouble yet again.
The People’s Bank of China (The Central Bank) recently estimated that local governments in China were 14 trillion RNB in debt. Most of it owed to China’s big 4 banks. This money has almost exclusively been used for property speculation and development. A high percentage of these loans are likely to be poisonous. This prompted Professor Minxin Pei of Claremont McKenna College to write an article entitled “China’s Ticking Debt Bomb“, in which he said,
On paper, China’s debt to GDP ratio is under 20 percent, making Beijing a paragon of fiscal virtue compared with profligate Western governments. However, if we factor in various government obligations that are typically counted as public debt, the picture doesn’t look pretty for China. Once local government debts, costs of re-capitalizing state-owned banks, bonds issued by state-owned banks, and railway bonds are included, China’s total debt amounts to 70 to 80 percent of GDP, roughly the level of public debt in the United States and the United Kingdom.
The growth in China’s debt happened over the same decade as America’s. Both happened in the decade when Securitization of Debt Backed Assets became the new, unofficial, bank controlled global currency.
In all nations whose political class has been purchased by the banks that created the debt backed global currency and whose wealth is still tied to it, the only policy that has been allowed has been to create yet more debt, this time paid for by the tax payer. AND IT IS FAILING.
We are three years in to this policy and our debts are out of control, our banks are insolvent, now our nations are crippled with debts from bailing out the banks and buying up their worthless bonds and growth has not been re-ignited. Inflation has instead.
The policy is suicidal for all but the elite who insist on it. They are laughing as we drown in repossessions, cuts debts and unemployment.
Speaking from the land of the recently deceased the government has decided the most important thing on the agenda is getting some new unconventional left leaning TDs (MPs) to not wear jeans and tuck in their shirts in parliament!
As of May last some 50,000 or so domestic mortgages are distressed in Ireland i.e. 3 months in arrears or more. Theres a similar figure also in arrears but not by the 3 month lag. Though its a while since figures were published so that could be far higher.
Housing stock is just over the 2 million mark so thats about 5% or so or one in twenty of all housing. These losses aren't covered by NAMA or the bailouts to date. Its reasonable to assume these distressed mortgages include lots for newer, very overvalued properties – so theres proportionally a bigger hit in store than the 1 in 20 figure for the 'already deceased patient'.
Personally I'm waiting to see how much of a kicking the deceased patient can take before someone offical admits the truth and aknowledges it is dead.
Just a week ago the national cenus results came out and they confirmed a figure of just shy of 300,000 for all types completed and vacant dwellings (but not including holiday homes). The housing stock is just over 2 million units here. Apply normal vacancy rate and obsolescnce rates to that figure and you get an overhang of 170,000 units or so which is over four years supply based on actual new housing need per year.
The papers barely commented. One figure that is never mentioned in the media is the real demand figure. They do have property suppliments to sell. The broadseets used to have two per week. – I'm sure they don't like to anger their overlords or former overlords.
A UCD study estimated that 300,000 vacant figure almost bang on the nose about 21 months ago. It got quoted in a few places and then lots of studies and PR pieces ( government and construction industry led ) emerged trying to contradict it citing figures as low as 30,000 units for total vacant stock and get the message out that we should all get back to buying houses as their was/is "no better time to buy".
If anyone wants links I can supply them.
Joe R,
Thank you very much for giving us a clear if depressing picture. I would be interested in the links and in anything more you care to tell us.
It is great when someone who knows and is on the spot informs us. Thanks again.
Like you I keep hoping that at some point people in Ireland or Spain or Greece or even here in Britain will finally stand up and say "Enough!"
Please keep in touch.
@ Joe
I wonder which bank has the money to lend for these "great time to buy" properties.
@ Golem
Did the Greeks not try to say "Enough!" only a week ago when it hit the fan there only to be told "No, not yet, just bend over a little further so that we can check that you really are void of all assets and any notion of standing up to us" by the powers that be. Its a message to us all to put up and shut up or else.
I think most Irish people are just masochists, I can think of no other reason for the acceptance of the buggering that we are getting from the actions of our politicians. I think that our only hope now is for the markets to refuse to trade in the junk that is on offer in Europe and then Boom! away with the Euro.
We live in hope
Today the latest employment US figures revealed just how utterly clueless those financial experts are.
utterly clueless, no they know what there are doing. It is after all a racket and you have to keep up the pretence!
A lucrative racket and for many involved, the only one available!
This Depression began, in the west, in 1999. 9/11 allowed interest rates to collapse and for a reprieve for those who had access to loans to buy and pass on the parcel to a sucker. Now, the game is deny and pretend and take money out as fast as it comes in and say no one predicted it.
My anger is long gone. I see that history is repeating itself. But this is likely to be worse than any other depression, except in the BRICs. Their time may be coming to a close.
The Vampire Squid is choking economic life and it will require more fortitude than I see to alter this. GS is just an agent for others.
1517: Matin Luther sparks the Reformation
1618: The start of the Thirty Years War
1701: The War of the Spanish Succession
1800: The Napoleonic Wars
1914: World War I
The first two decades of a new century are especially dangerous it seems, a time of wars and upheavals. From around 1890 there was a general apprehension of Centennial Angst which the French labelled 'Fin-de-siecle'. Society was felt to be profligate, corrupt, complacent and ripe for destruction from without. Fourteen years into the new century WWI broke out.
Now, Centennial Angst compounded by Millenial Angst (the 'millenium bug', Islamism and Islamophobia are symptoms) must be factored into any discussion of what may be about to happen.
Without wishing to appear alarmist, but with the hindsight of history, there appears to be an element of inevitability in the prognosis of rapidly approaching social, political and fiscal upheaval. It seems no longer a question of whether or not it will happen, but how violent and destructive it will prove to be. Is there not also a Darwinist imperative at work here? I am thinking of the behaviour of the Lemming when faced with overpopulation and the scarcity of resources.
Golem xiv.
My apologies for the delay in getting back to this. This is going to be a three parter. I'll back quite soon with the final part.
Just to give you some background I'm a recently unemployed thirty-something year old architect. I studied and worked in Dublin and saw the rise and fall of the property bust from inside the fence and outside the fence. I fought some dodgy plannings in my home town and won. FF were particularly involved but virtualy all polticans were in on the game. I got away from speculative work into state a few years back and hung on until recently enough. I'm off to collect my first 'jobseekers benefit' after I finish this in fact!
1) First links – Housing stock;
The study I mentioned above. I had one of these guys as a lecturer in College so I know these were not industry people and spoke against the grain.In summary I quoted its figures more or less correctly. The study was not backed up by a complete survey so this was used to rubbish it. The link also has tables showing information on national mortagages taken out here in the noughties. The speculation driving up mortagages ( and propert prices ) is very visible as first time buyer numbers are shown.
http://www.uep.ie/pdfs/WP%201002%20W.pdf
The census summary documents which actually back up the vacant figures – p.18 to be exact. The problems are more exacerbated outside of Dublin.
http://www.cso.ie/census/documents/Prelim%20complete.pdf
Plus not so importantly heres an old report from the CSO from 2008 with some additional figures various matters including dwelling completions.
http://www.cso.ie/releasespublications/documents/construction/current/constructhousing.pdf
In short there is about 1.6 million households in the republic and 1.9 million dwellings with 0.5 million of those having being added between 2002-2008. Minus holiday homes and derelict homes thats about 0.25 million too many and 0.17 million above nearly healthy as the market goes.
2) Mortgage Arrears;
I was a wee bit off here but not that far. The news is getting worse not better so I might be right by now. There are 50,000 mortgages in arrears exceedin 3 months as off last March according to the central bank. However my claim that theres another 50,000 behind them is more speculation than fact – I think the the next report will reveal the true figure. Theres two PDF links in my first link. Repossession figures are mentioned too.
http://www.financialregulator.ie/press-area/press-releases/Pages/LatestMortgageArrearsDatashow63ofMortgageAccountsinArrears-.aspx
And a regular news article;
http://www.businessworld.ie/livenews.htm?a=2782975;s=rollingnews.htm
Indusrtry Speculation ( educated guess ) on the same.
http://www.irishexaminer.com/business/kfkfsnauojey/rss2/
3) Morgan Kelly;
You may not heard of this fella Dave so maybe the Vanity Fair article is worth looking at first. It is long though. Morgan was an economist who wandered into the middle of the property debate sort of by accident made the mistake of using clear simple language to explain himself and was treated firstly as an outright loonie and then as a sort of strange oracle. The 2nd article of his below, his most recent, is particularly scathing of the Irish governments lack of spine in the negotiations for the bailout.
http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html
http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html
and a Vanity Fair take on the whole celtic tiger shebang…
http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103
Actually after his ( MK ) second article 'aired' the FG led government were s******g it and wheeled out a proxy in ex-FG Taoiseach and now Euro apparatik John Bruton to go on the attack with some vague lies and stuff about keeping your word ( even if we didn't give it? ). They were scared to say anything themselves because Morgan had got it so right in the past. Nobody in the reaction could or did touch his argument though as far as I could see.
http://www.irishtimes.com/newspaper/opinion/2011/0510/1224296602550.html
http://www.irishtimes.com/newspaper/finance/2011/0513/1224296839491.html
( To be continued )
Paddy
Sorry for the slow reply here.
In my experience banks are still offering mortgages at multiples of income. They need to prop up the still false valuations so they don't take yet more hits on what they have lent out aleady. They are lending at a loss from the wholesale money markets. They need ( and the gvernent are with them ) if nothing else to keep the pretence of 'value' up.
Look at the simple figures in the CSO report linked above – 1.9 mllion dwellings & 1.6 million households. The only way to prop up the market is to create artifical prices because there is and will be no scarity of dwellings for the medium term and possibly long term future of the country.
Golem xiv – re your request above.
My apologies for the delay in getting back to this. This is going to be a three parter. I'll back quite soon with the other part.
Just to give you some background I'm a recently unemployed thirty-something year old architect. I studied and worked in Dublin and saw the rise and fall of the property bust from both inside the fence and outside.
1) Irish Housing stock;
The study I mentioned in my above post. In summary I quoted its figures more or less correctly. I had one of these guys as a lecturer in College so I know these were not industry people and spoke against the grain. The study was not backed up by a complete survey so this was used to rubbish it. The link also has tables showing information on national mortgages taken out here in the noughties. The speculation driving up mortagages ( and property prices ) is very visible as first time buyer numbers are shown.
http://www.uep.ie/pdfs/WP%201002%20W.pdf
The census summary documents which actually back up the vacant figures – p.18 to be exact. The problems are more exacerbated outside of Dublin.
http://www.cso.ie/census/documents/Prelim%20complete.pdf
Plus not so importantly heres an old report from the CSO from 2008 with some additional figures various matters including dwelling completions.
http://www.cso.ie/releasespublications/documents/construction/current/constructhousing.pdf
In short there is about 1.6 million households and 1.9 million dwellings with 0.5 million of those having being added between 2002-2008. Minus holiday homes and derelict homes thats about 0.25 million too many and 0.17 million above healthy as the 'market' goes.
2) Mortgage Arrears;
I was a wee bit off here but not that far. The news is getting worse not better so I might be right by now. There are 50,000 mortgages in arrears exceedin 3 months as off last March according to the central bank. However my claim that theres another 50,000 behind them is more speculation than fact – I think the the next report will reveal the true figure. Theres two PDF links in my first link. Repossession figures are mentioned too.
http://www.financialregulator.ie/press-area/press-releases/Pages/LatestMortgageArrearsDatashow63ofMortgageAccountsinArrears-.aspx
And a regular news article;
http://www.businessworld.ie/livenews.htm?a=2782975;s=rollingnews.htm
Indusrtry Speculation ( educated guess ) on the same.
http://www.irishexaminer.com/business/kfkfsnauojey/rss2/
3) Morgan Kelly;
You may not heard of this fella Dave so maybe the Vanity Fair article is worth looking at first. It is long though. Morgan was an economist who wandered into the middle of the property debate sort of by accident made the mistake of using clear simple language to explain himself and was treated firstly as an outright loonie and then as a sort of strange oracle. The 2nd article of his below, his most recent, is particularly scathing of the Irish governments lack of spine in the negotiations for the bailout.
http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html
http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html
and a Vanity Fair take on the whole celtic tiger shebang…
http://www.vanityfair.com/business/features/2011/03/michael-lewis-ireland-201103
Actually after his ( MK ) second article 'aired' the FG led government were s******g it and wheeled out a proxy in ex-FG Taoiseach and now Euro apparatik John Bruton to go on the attack with some vague lies and stuff about keeping your word ( even if we didn't give it? ). They were scared to say anything themselves because Morgan had got it so right in the past. Nobody in the reaction could or did touch his argument though as far as I could see.
http://www.irishtimes.com/newspaper/opinion/2011/0510/1224296602550.html
http://www.irishtimes.com/newspaper/finance/2011/0513/1224296839491.html
( To be continued )
Joe,
Fascinating stuff, thank you. Maybe you would consider a guest post adding your take on it all?
Golem/Dave.
Thanks for the offer its a very interesting one.
I'd very much like to do it.I guess it would involve rewriting the above in the main and editing it. I would need to figure out a theme to centralise the piece on as its easy for me to wander which can be good or bad. So yeah.
However I'm possibly immigrating to another part of the world in the immediate future so I maybe stuck for time.
Can I think about it, maybe start into it, and get back to you? I'd know for efinate then.Say early next week.
Joe R
Thanks for that link to Morgan Kelly's articles in the Irish Times. I had read the Vanity Fair article long before but his own analysis is so masterly it reads like a vital instruction manual. I had not realized how much in opposition the IMF (rarely seen as much in the way of heros)…were to the ECB position on the Irish Bailout. And of course why the ECB was only really interested in what went on next in Spain and any other Euro nation that was looking on. As for the role of Tim Geithner well again I had not realized his role and thus another nail in Obama's lamentable failure to deal with the banks.
I hope Morgan Kelly is working on what will be the definitive account of this whole sorry story. He has all the cool rapier wit in his analysis of a Galbraith.