Gold Rallying to $1,500 as Soros's Bubble Inflates

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By Nicholas Larkin

Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most- accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21. Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high.

“Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year. “A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.”

Gold Rallying to $1,500 as Soros's Bubble Inflates

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• Gold inches up, ignores personal income data (reuters.com)

Gmail’s Priority Inbox strikes a blow against email overload

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Anthony Ha

Email overload has become a constant presence in my life, and I’m not the only one. Overload seems to be the big focus of many new email products, including the latest version of Microsoft Outlook. Now Google is launching an ambitious new attack on the problem called Gmail Priority Inbox.

Most of the solutions I’ve seen so far focus on organizing your inbox (for example the conversation grouping in Gmail, which Outlook has copied) and on helping you find useful information that’s buried in a pile of emails (for example a startup called Postbox, which helps you find content like links and attachments). Google’s new Priority Inbox goes a step further, by actually identifying the emails that are important, and that you need to read right away.

The feature divides your inbox into three areas, all viewable in one screen — at the top, there’s the “priority” emails, the ones you should read right away; below that are the emails you have starred (an existing Gmail feature to mark emails as comments); and the inbox with everything else. Google Enterprise Senior Product Manager Rajen Sheth said that it has been a challenge developing the algorithm to find the best emails, which is based on “signals” like who sent the email, the words used, and how you’ve treated past emails.

“A message that might be important to you might not be important to me, and might be even more important to someone else,” he said.

Gmail’s Priority Inbox strikes a blow against email overload

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• Gmail's "Priority Inbox" sorts important e-mail for you (arstechnica.com)

The Age of Mammon

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by JimQ

As our economy hurtles towards its meeting with destiny, the political class seeks to assign blame on their enemies for this Greater Depression. The Republicans would like you to believe that Bill Clinton, Robert Rubin, Chris Dodd, and Barney Frank and their Community Reinvest Act caused the collapse of our financial system. Democrats want you to believe that George Bush and his band of unregulated free market capitalists created a financial disaster of epic proportions. The truth is that America has been captured by a financial class that makes no distinction between parties. These barbarians have sucked the life out of a once productive nation by raping and pillaging with impunity while enriching only them. They live in 20,000 square foot $10 million mansions in Greenwich, CT and in $3 million dollar penthouses on Central Park West.

These are the robber barons that represent the Age of Mammon. The greed, avarice, gluttony and acute materialism of these American traitors has not been seen in this country since the 1920′s. The hedge fund managers and Wall Street bank executives that occupy the mansions and penthouses evidently don’t find much time to read the bible in their downtime from raping and pillaging the wealth of the middle class. There are cocktail parties and $5,000 a plate political “fundraisers” to attend. You can’t be cheap when buying off your protection in Washington DC.

The Age of Mammon

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Bank of England will use 'all powers' to stave off any future crisis

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By Dominic Midgley

In a major position paper, Charles Bean said that the Bank had been powerless to prevent what he called the "Great Contraction" of 2008 because control of interest rates was not, in itself, a powerful enough tool.

He also hinted that the days of quantitative easing may not be over: "The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off," he said. "Further policy action may yet be necessary to keep the recovery on track."

He was speaking at the Jackson Hole Economic Policy Symposium in America the day after the Federal Reserve chairman, Ben Bernanke, buoyed the markets with an upbeat assessment of the US's growth prospects.

Mr Bernanke also hinted that he was prepared to employ more asset purchases if necessary.

But Mr Bean devoted much of his speech to promoting the need to extend the range of the Bank of England's powers as part of the new "macro-prudential policy" – details of which will be revealed in the Financial Services Regulation Bill later this year.

In his speech, Mr Bean gave examples of the sort of powers that could underpin such a policy.

These included the right to force banks to build up extra reserves during boom times, increase risk-weights on high-risk lenders and impose loan-to-value ratios in the mortgage market.

Bank of England will use 'all powers' to stave off any future crisis

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• Central banks 'face more tasks' (bbc.co.uk)

Forever Born to Run

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By Quin Hillyer

Thirty-five years ago the day I write this, on Wednesday, a rising artist released the greatest rock-n-roll album of all time. It was not a political album by any means, and the lead musician was and is anything but a conservative, yet conservatives should nonetheless celebrate almost every chord and lyric of the entire album known as Born to Run.

Please, readers, don't have a conniption fit. Yes, I know that the album's impresario Bruce Springsteen can spout off liberal tomfoolery in an obnoxious, self-important manner. We all know he sometimes fancies himself a protest troubadour, and that a few of his songs -- such as the anti-police "American Skin (41 Shots)" -- are absolutely insufferable. Forget all that. This is about the majesty, pathos and profoundly expressed yearning, backed by absolutely anthem-like, soul-stirring music, of a particular album in the summer of 1975 that really did "rock" the world.

This is an album of a striver, of somebody who won't accept a lesser destiny defined by his socio-economic class or by the lower expectations of others. These are the songs of a quintessentially American character (or, rather, characters, plural), of people who know the proverbial American Dream isn't a pie-in-the sky fantasy or an inherited birthright but a matter of grit, imagination, pluck, and the rawest of raw energy unleashed in the right direction.

Forever Born to Run

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• "Bruce Springsteen revisits 'Darkness on the Edge of Town' in expansive reissue package" and related posts (latimesblogs.latimes.com)

The Obama Administration Has No More Options

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DEREK THOMPSON

Paul Krugman blasts the economy's stewards for doing nothing while the recovery shrivels. On the Fed, he skewers Bernanke for staying the course rather than buying new debt. On the Treasury, he claims that while Congress is an unmovable object, the administration still has options:

It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families -- yes, Republicans will howl, but they're doing that anyway.
It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it's time to act?

The Treasury has options. It can give more money to upper-middle class homeowners or scowl more sternly at China. In other words, the Treasury basically has no options.
As Dan Indiviglio has written, the Fannie/Freddie refinancing gambit is otherwordly. It could work and it bypasses Congress, but it has huge drawbacks and concerns. First record low mortgage rates have failed to encourage more home buying, already. Second, wealthier homeowners would benefit, but all taxpayers would be on the hook for a bigger mortgage market exposure.

The Obama Administration Has No More Options

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• "Paul Krugman: This Is Not a Recovery" and related posts (economistsview.typepad.com)

Bernanke At Jackson Hole: Economic Outlook 'Inherently Uncertain,' But Fed May Act

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JEANNINE AVERSA

Ben Bernanke is struggling to build consensus among Federal Reserve officials about what steps are needed – if any – to give the economy a boost.

It showed in a speech the Fed chairman delivered Friday that carried a mixed message: He sees the economy improving next year, but he stands ready to take bold action if it falters.

Bernanke acknowledged the economy is fragile, especially after the government just reported the weakest quarterly growth in a year. And he said high unemployment poses a serious threat. Still, Bernanke remained optimistic enough to repeat the Fed's forecast for some pickup in growth in 2011 and beyond.

The Fed chairman's colleagues have more latitude to speak their minds bluntly, and many have done so recently.

Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, says keeping interest rates at record lows is a "dangerous gamble" that could unleash inflation or new speculative bubbles in the prices of financial assets.

Bernanke At Jackson Hole: Economic Outlook 'Inherently Uncertain,' But Fed May Act

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• Bernanke: The Fed Won't Let the Economy Falter (dailyfinance.com)

The Elites Have Lost The Right to Rule

From Michael Krieger

“As far as the speech itself, it confirms something I mentioned several weeks ago.  Banana Ben absolutely wants to do a massive QE2 program.  The only thing holding him back is gold is near an all time high.  What he wants is gold much lower and stocks much lower to give him cover.  Gold has not cooperated so he is in a bind.  He cannot print a massive amount of money with gold here and stocks at 1055 because what happens if gold soars and stocks sell-off in the days that follow such an announcement?  What if the response in the treasury market is not as desired?  He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there.  The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that.  The most powerful institution in the world is fighting for its survival.  Never forget that.”

The Elites Have Lost The Right to Rule

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• Investors flock to gold on fears of double-dip (newstatesman.com)

Why Are Home Sales Plummeting?

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George Washington

Why are home sales plummeting?

On the surface, it is because the government's tax-credit for first-time home buyerslapsed in April. It takes a couple of months lag-time between buyer purchase decisions and the actual close of escrow, and so the expiration of the tax-credit is just now hammering the market.

And there is a huge backlog of housing stock.

And sellers are holding out hope that they can get close to peak prices for their homes, while buyers believe that prices will fall further - and so are waiting until prices decline further.

But there is a more fundamental reason that home sales are plummeting.

Specifically, when housing crashed in 2007 and 2008, the government had two choices. It could have:

(1) Tried to artificially prop up housing prices;

or

(2) Created sustainable jobs, broken up the big banks so that they stop driving our economy into a ditch, and restored honesty and trustworthiness to the economy and the financial system. All this would have meant that the economy would recover, and people would have enough money to afford to buy a new house. (See this).

The government opted to try to prop up prices.

Indeed, as I have repeatedly pointed out, the government's entire strategy has been to try to artificially prop up the prices of all types of assets.

For example, I noted in March:

The leading monetary economist told the Wall Street Journal that this was nota liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.

The Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".

***

David Rosenberg [former chief economist for Merrill Lynch] writes:

Our advice to the Obama team would be to create and nurture a fiscal backdrop that tackles this jobs crisis with some permanent solutions rather than recurring populist short-term fiscal goodies that are only inducing households to add to their burdensome debt loads with no long-term multiplier impacts. The problem is not that we have an insufficient number of vehicles on the road or homes on the market; the problem is that we have insufficient labour demand.

Indeed, as I pointed out in April, unemployment is so bad that 1.2 million households have "disappeared", as people move out of their own houses and move in with friends or family.

Why Are Home Sales Plummeting?

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• Why Our 'Lost Decade' May Only Last 5 Years (money.usnews.com)

This Is Not a Recovery

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Paul Krugman

What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.

But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.

The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?

The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.

All of this is obvious. Yet policy makers are in denial.

This Is Not a Recovery

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Existing Homes Sales PLUNGE To 15-Year Low

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ALAN ZIBEL

Sales of previously occupied homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.

July's sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

The plunge in home sales also magnified fears about the broader economy.

"The housing market is undermining the already faltering wider economic recovery," said Paul Dales, U.S. economist with Capital Economics. "With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse."

Sales were particularly weak among homes in the lower- to mid-priced ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.

As sales have slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. That's a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.

Existing Homes Sales PLUNGE To 15-Year Low

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• Home sales plunge 27 pct. to lowest in 15 years (seattletimes.nwsource.com)

Fannie and Freddie - The Exit Doors are Shut

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by Ilargi

From a purely political point of view, it’s a simple story.  Existing homeowners are a far more powerful force at the voting booth than potential owners, homebuyers, are.  It’s therefore very much in the interest of the incumbent government to keep home prices as high as it can.  Let them slide too much and you will pay for that at the next election.  For potential buyers, you can devise plans that lower interest rates and down payments, but that's all.  More affordability simply through lower prices is not on the political table.

Still, in the "listening conference" on US housing policies - Fannie Mae and Freddie Mac in particular - that started this week, it's not voters who have the biggest say.  That is reserved for the financial industry, and how could it not be?  Not that the Obama administration has to hear the truth from the bankers anymore:  Washington has long since realized that truth.  Which is that without Fannie and Freddie and the 80% stake the US took in them in 2008, as well as the unlimited financial guarantee issued by Tim Geithner at the end of 2009, it's not just the housing industry that would instantly collapse.  The banking industry would, like a shadow, rapidly follow in its footsteps.

Which is why the conference is largely an elaborate piece of public spectacle, bereft of any true substance.  It’s the government going through the motions of an exercise when it knows the outcome beforehand; perhaps silently praying for a miracle to come forward, but at the same time not even remotely considering the one and only solution to the problem.  Which is to get rid of Fannie and Freddie, let the share- and bond-holders take the haircuts they deserve for investing in overtly bankrupt walking dead, take the losses that remain on the federal balance sheet, and let the housing and mortgage industries sort it out for themselves for a while.  Say, five years.

Fannie and Freddie - The Exit Doors are Shut

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The imminent failure of the second London Gold Pool

Adrian Douglas: The imminent failure of the second London Gold Pool

Shocking new accounting rules

WHEN you lease something—a boat, a warehouse, a machine for making ball-bearings—you agree to pay for it bit by bit over time. So it is like incurring a debt, say the International Accounting Standards Board (IASB) and America’s Financial Accounting Standards Board (FASB). Therefore, it should be on your balance-sheet. This new rule, proposed on August 17th by the two regulators, has shocked companies everywhere. It is up for public comment until December, but could be enacted as soon as June next year.

Today, companies can opt either for a “capital lease”, which goes on the balance-sheet, or an “operating lease”, which does not. This distinction makes a certain sense. But the IASB and FASB think it is open to abuse. By labelling leases as “operating”, firms can appear less indebted than they really are. The new rules would put the right to use the leased item in the assets column. The obligation to pay for it would go in the debit column.

That will make a lot of firms look wobblier: a survey by PricewaterhouseCoopers, an accounting firm, found that it would add about 58% to the average company’s interest-bearing debt. Not only new leases but also existing ones would immediately be subject to the new rules. On the other hand, since rents will no longer be a running expense, operating earnings could see a bump upwards. But since the downturn, many companies are close to their maximum debt limits, and the new rules could push them over the edge. Small wonder they are howling.

Shocking new accounting rules

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• New leasing rules could hit bank lending (accountancyage.com)

More ways to find the right Chrome Extension for you

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A few months ago, we launched several categories of featured Chrome extensions to help you find the right one. Today, in addition to updating these pages with new extensions, we are also launching more categories to enhance your web experiences in News and weather, Photos,Productivity, Search tools and Social.

If you have a busy life online and offline, extensions in the Productivity category can help you be more efficient and productive on the web. With Start! or Incredible Start Page, you can customize your New Tab page to quickly access your favorite sites. Extensions like StayFocusd and Time Tracker can help you keep track of your time spent on various web sites.

More ways to find the right Chrome Extension for you

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Israel's Compelling Reasons to Attack, Despite the Uncertainties

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REUEL MARC GERECHT

But Israeli calculations for a preventive strike don't have to be conclusive to be successful. If the Israelis do nothing, they know that they would eventually be staring at an internally unstable, virulently anti-Semitic, terrorist-fond regime with nuclear weapons and ballistic missiles. Simply imagining the probable hair-trigger scenarios in which Israel will have to play atomic-bluff with Iran's supreme leader Ali Khamenei and the Revolutionary Guard Corps -- the organization that oversees Iran's nuclear program -- ought to be enough to make any rational nuclear planner shudder. For the first time ever, the same organization that has been responsible for all of the Islamic Republic's terrorist liaison relationships -- including an operationally supportive relationship with al-Qaeda after the 1998 Africa embassy bombings, according to the 9/11 Commission Report -- would control nuclear weapons. Then imagine other Middle Eastern regimes, especially the Saudi state, built upon Wahhabism, also acquiring the bomb in order to counter Iranian Shiite power -- and you can see why the nerves of any Israeli nuclear planner have to be fried. Although it's possible that the American sanctions approach could eventually succeed in producing sufficient internal turmoil to derail the atomic program, the odds of this seem unlikely. The sanctions regime still has too many Russian and Chinese holes, not to mention German breaches, to have a sufficiently crushing effect.

What the Israelis need to do is change this dynamic. A preventive strike offers them the only conceivable alternative for doing so. Any bombing run will, at least temporarily, shock the international system and rock Iran internally. The Israelis will have shown that they are deadly serious about confronting the Iranian nuclear threat, that they are willing to go on a permanent war-footing with the Islamic Republic and its deadliest ally, the Hizbollah, which will probably unleash rocket hell on Israel in turn. Although President Obama may become (privately) furious with the Israelis, any Israeli strike will make the United States, and probably even the reluctant Europeans, more determined to shut down Iran's program. If Khamenei and the Guard Corps respond to an Israeli strike with terrorism, which is likely, then they could well put themselves into a strategic cul-de-sac, especially if they strike out against American targets or do something truly stupid, like trying to shut down the Strait of Hormuz. 

Israel's Compelling Reasons to Attack, Despite the Uncertainties

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• Iran condemns possible US military action (sfgate.com)

Tensions Rise in Greece as Austerity Measures Backfire

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By Corinna Jessen

The austerity measures that were supposed to fix Greece's problems are dragging down the country's economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.

The feast of the Assumption of Mary on Aug. 15 is the high point of summer in the Greek Orthodox world. Here in one of the country's many churches, believers pray to the Virgin for mercy, with many of them falling to their knees.

The newspaper Ta Nea has recommended that the Greek government adopt the very same approach -- the country's leaders have to hope that Mary comes up with a miracle to save Greece from a serious crisis, the paper writes. Without divine intervention, the newspaper suggested, it will be a difficult autumn for the Mediterranean state.

This dire prognosis comes even despite Athens' massive efforts to sort out the country's finances. The government's draconian austerity measures have managed to reduce the country's budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country's economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country's gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.

Tensions Rise in Greece as Austerity Measures Backfire

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Did IMF Say USA Is DOA?

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Tim Cavanaugh

Recent International Monetary Fund statements on U.S. fiscal solvency have been alarming. But do they point to a future debt of $202 trillion?

Boston University econ prof. Laurence J. Kotlikoff has put together some pleasingly apocalyptic documentation:

Last month, the International Monetary Fund released itsannual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.

Double Our Taxes

To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.

Did IMF Say USA Is DOA?

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• Fixing our enormous fiscal gap (Rep. Michele Bachmann) (thehill.com)

China Favors Euro Over Dollar as Bernanke Alters Path

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By Candice Zachariahs and Ron Harui

China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S.

The nation has been buying “quite a lot” of European bonds, said Yu Yongding, a former adviser to the People’s Bank of China who was part of a foreign-policy advisory committee that visited France, Spain and Germany from June 20 to July 2. Japan’s Ministry of Finance said Aug. 9 that China bought 1.73 trillion yen ($20.1 billion) more Japanese debt than it sold in the first half of 2010, the fastest pace of purchases in at least five years.

“Diversification should be a basic principle,” Yu said in an interview, adding a “top-level Chinese central banker” told him to convey to European policy makers China’s confidence in the region’s economy and currency. “We didn’t sell any European bonds or assets, instead we bought quite a lot.”

China’s position may make it harder for the greenback to rebound after falling as much as 10 percent from this year’s peak in June as measured by the trade-weighted Dollar Index. The nation cut its holdings of U.S. government debt by $100 billion, or 11 percent, through June from last year’s record of $939.9 billion in July 2009, according to Treasury Department data released today.

U.S. Concerns

Concern the U.S. economy is faltering was underscored by the Federal Reserve on Aug. 10. Chairman Ben S. Bernanke said the central bank will reinvest principal payments on its mortgage holdings into Treasury notes to prevent money from being drained out of the financial system, its first expansion of measures to spur growth in more than a year.

“The pace of economic recovery is likely to be more modest in the near term than had been anticipated,” the Federal Open Market Committee said in a statement after meeting in Washington. “The Committee will keep constant the Federal Reserve’s holdings of securities at their current level.”

China’s holdings of long-term Treasuries fell for the first time in 15 months in June to $839.7 billion, a 2.5 percent drop. The nation’s overall Treasury position declined for a second month to $843.7 billion, the lowest since May 2009, Treasury data showed.

The decline represents the first year-over-year drop in China’s Treasury holdings since 2001.

China Favors Euro Over Dollar as Bernanke Alters Path

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• China Reduces Long-Term Treasuries by Record Amount (businessweek.com)

Homebuilder confidence falls for third month

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Homebuilder confidence dropped for the third straight month in August as the struggling economy and a flood of cheap foreclosed properties kept people from buying new homes.

The National Association of Home Builders said its monthly index of builders' sentiment about the housing market fell to 13, the lowest reading since March 2009. The index is adjusted for seasonal factors.

Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006.

Fewer people are buying new homes, even though prices have stabilized in the past year and those who have good credit can qualify for the lowest mortgage rates in decades. The market is struggling because jobs are scarce and credit is tight. And many analysts predict home prices are likely to drop again in the fall.

"Buyers just aren't stepping up to the plate," wrote Mike Larson, real estate analyst with Weiss Research. "Unless and until the job market improves, we are simply not going to get any traction in the housing market."

Another key reading of housing activity will come Tuesday when the Commerce Department releases its report on home construction in July. Construction plunged in June to the lowest level since October.

Homebuilder confidence falls for third month

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Forgotten men

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The Economist

FEARS that the recovery of America's economy after the financial crisis would fail to spur an increase in employment are being realised. In July, 52,000 fewer people were employed on non-farm payrolls than in July 2009, the month in which it is estimated the American economy climbed out of recession. Comparing the latest recession with previous ones is unflattering. The American economy has seen downturns this severe and recoveries this jobless, but never one on top of the other.

Forgotten men

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Fooled by Stimulus

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by Eric Sprott and David Franklin

Despite our firm’s history of investing primarily in equities, we’ve spent much of this past year writing about the government debt market. We’ve chosen to focus on government debt because we fear its impact on the equity markets as a whole. Government debt is an intrinsically important part of the financial landscape. It is the bellwether by which we measure risk, and we believe we have entered a new era where traditional "risk-free" assets are undergoing a tremendous shift in quality.
In studying the government debt market, we have inadvertently been led to question the economic theory that most fervently justified recent government spending programs: that of Keynesian economics. The so called "beautiful theory" of Keynesian economics is arguably the most influential economic theory of the 20th Century, shaping the way Western democracies approached the balance between free market capitalism and government initiatives. Like many beautiful theories, however, Keynesianism has ultimately succumbed to the ugly facts. We firmly believe the Keynesian miracle is dead. The stimulus programs are simply not producing their desired results, and the future debt costs associated with funding these programs may cause far greater strife in the future than the problems the stimulus was originally designed to address.

Fooled by Stimulus

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• Keynesianism Is Dying (lewrockwell.com)

Gold and U.S. Treasury and Mortgage Bonds Naked Shorts As Liquidity Machine

Jim_Willie_CB

The article of July 22nd on "Smoking Guns of USTreasury Monetization" hit more desks, raised more dust, and brought more attention than expected to the grand fraud in progress using USGovt debt securities. The glaring actions continue without any hint of legal prosecution but deep foreign resentment among creditors as publicity mounts. Nobody appreciates counterfeit of the instruments held in great volume as supposed savings. The only counterfeit of honorable origin is of Microsoft products, since mostly stolen and surely not the output of in-house innovation.

Gold and U.S. Treasury and Mortgage Bonds Naked Shorts As Liquidity Machine

Chris Dodd, Top Democrat, Fights Against Elizabeth Warren

Image by Getty Images via @daylife

Shahien Nasiripour

Despite the outpouring of support for bailout watchdog Elizabeth Warren's candidacy to lead a new consumer protection agency, one prominent Democrat continues to publicly stand in her way: Senate Banking Committee Chairman Christopher Dodd.

The Connecticut Democrat, who has lambasted lenders for taking advantage of cash-strapped borrowers and bank regulators for their poor record in protecting consumers, led the effort to get the recently-enacted financial reform law through Congress. The agency it calls for -- a unit specifically charged with protecting borrowers from predatory lenders -- survived attacks by the financial services industry and Republicans. It's now hailed as one of the Obama administration's top achievements.

But now that the fight has shifted from the creation of the agency to who's going to lead it, Dodd's role seems to have reversed, say some financial reform advocates -- rather than fighting for the toughest possible advocate to fight for consumers and families, he's openly doubting the wisdom of that selection. And it's not clear whether the two have even had a meeting in the last year.

Elizabeth Warren, a Harvard Law professor with an expertise in bankruptcy and consumer finances, came up with the idea for the agency in a 2007 article. Courted by Congressional Democrats and the White House, she's served as the public face of the campaign to get the idea enacted into law. And since the fall of 2008 she's led the Congressional Oversight Panel, a watchdog agency keeping tabs on the government's massive bailout of the financial and auto industries.

Chris Dodd, Top Democrat, Fights Against Elizabeth Warren

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China's new rating agency

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By Matthew McClearn

The term "AAA" is the highest accolade in the alphabet soup churned out by credit-rating agencies; issuers bearing it are theoretically capable of enduring depressions, and can borrow at the cheapest rates going. So, many noticed when the United States — the world's largest economic and military power — lost that coveted status in July.

The downgrade came not from the widely recognized American agencies (Standard & Poor's, Moody's Investors Service and Fitch Ratings, known colloquially as the Big Three) but rather from an obscure Beijing-based entity called Dagong Global Credit Rating. It wasn't, strictly speaking, even a downgrade, for this was Dagong's first stab at rating sovereign issuers. But its opinions of 50 nations were strikingly different than those offered by the Big Three: Dagong granted higher scores to developing nations like China, Russia and Brazil, while meting out lower ratings for certain developed economies including Britain, France and Canada. Notably, Dagong deemed China's creditworthiness superior to America's.

There's a disconnect between Dagong's ratings and its official pronouncements. "The U.S. is insolvent and faces bankruptcy as a pure debtor nation but the rating agencies still give it high rankings," Guan Jianzhong, its chairman and president, recently complained to the Financial Times. If Guan actually believes that, should Dagong not cut the U.S. to junk status?

Even so, many share Guan's skepticism. Seemingly oblivious to its mounting trillion-dollar deficits, the Big Three continue to rate the country AAA with a "stable" outlook. But they've been wrong before. Over the past decade, they failed to predict the implosions of Enron and Lehman Bros. They handed AAAs to dodgy mortgage-backed securities, thus contributing to America's housing bubble. And lately they've also been accused of being behind the curve on Europe's sovereign debt crisis.

China's new rating agency

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Google’s Android mobiles overtake global iPhone sales

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By Tim Bradshaw

Global sales of Apple’s iPhone have been overtaken by the multitude of phones using Google’s Android system, which has quickly become the US smartphone market leader.

The latest evidence of Google’s rapid success in mobile comes from Gartner, the research group, which said Android’s global share of the smartphone market had leapt from 1.8 per cent a year ago to 17.2 per cent in the second quarter of 2010.

That growth came largely at the expense of Nokia and Research in Motion, which produces the BlackBerry.

Android handsets now outsell Nokia smartphones and the BlackBerry in the US.

Google’s success has provided a boost to struggling handset makers adopting Android such as Motorola and Sony Ericsson.

“We thought [Android] would be the second-largest global smartphone operating system by 2012, but we are now seeing it could be as soon as the end of this year,” said Carolina Milanesi, research vice-president at Gartner. “For a lot of companies, Android has been a godsend.”

Although the iPhone continues to gain on its rivals, the fact that it is available only from Apple and a limited number of mobile operators has constrained its growth rate compared with Android, which is free for anyone to adopt.

“Apple have gone from being the underdog and people rooting for them to seeing an increase in the level of scrutiny and criticism,” Ms Milanesi said. “Now they are seen as arrogant.”

Google’s Android mobiles overtake global iPhone sales

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Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

David Streitfeld

During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer here, where the problem is especially pronounced. “Their chances are pretty good of walking away and not having the bank collect.”

Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter.

Debts Rise, and Go Unpaid, as Bust Erodes Home Equity

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Gold Market Poised to Rally

Goldman Gold

U.S. Is Bankrupt and We Don't Even Know

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By Laurence Kotlikoff

Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.

What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.

Last month, the International Monetary Fund released itsannual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”

But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”

U.S. Is Bankrupt and We Don't Even Know

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