Thursday, July 04, 2013

Housing Bubble 2.0 Is Likely Peaking As I Type This And Economic Crisis 2.0 Is On The Way

Update on July 5th – Just released BLS data confirms that the laundromat  or service or consumption economy continues to create nonliving wage, no benefit, no retirement slave labor jobs that tax our social safety nets and social uplift programs while the production economy that drives the vast majority of surplus economic value, that allowed us to create these safety nets and social uplift programs in the first place, contracted this past month again.  This is easily predicted as noted below and in countless other posts on here.

Yesterday the MBA reported mortgage applications imploded from the prior week.   In fact, the broader statistics are looking a lot like the housing bubble near its last peak. 

I’m going to coalesce some prior posts into this post because it  bears repeating for newer readers and because we can all lose sight of reality with the daily pump of corporate state propaganda.

Let me first start out with something I have talked about before on here.   In fact, I wrote about it a lot before the last collapse.  Most economists, Wall Street bankers and politicians tell us that consumer spending is 70% of the U.S. economy.  That is an ignorant statement that is completely false.  Consumer spending is 70% of GDP.  GDP is an arbitrary measurement of economic activity.  The reality is consumer spending accounts for only about 20% of total trade in the U.S. economy.  I‘ve never explained how this is calculated because it’s an esoteric data point.    No one in the economics, political or financial community understands this.  I mean no one.  Understanding this dynamic helps one to appreciate, along with other esoteric factors, how the housing bubble started in the first place and how it has been reflated.   That all of the money printing is going into real estate again could easily be predicted if one understand the entirety of U.S. economic activity and how a functioning capital-driven economy is supposed to work. 

Why has all of this money gone back into housing?  It’s a simple answer.  Because, again as noted time and again, there is no demand for capital in our nation.  In fact as I noted at that time, we were in a capital depression before the 2008 collapse.   It has only gotten worse.  So, almost all new money is routed into what is still working; laundromats.  That means  the laundromat or service economy and housing have been experiencing a 400-800% increase in money flowing into those sectors.   That is why we had a housing bubble in the first place.  And that is how it has been reflated.

People want to blame this crisis on the Fed.  No.  The Fed only raises and lowers rates.  It’s the politicians that are completely responsible for the state of the U.S. economy.  100%.  Both parties.  The Fed has nothing to do with it.  That the housing bubble has again been reflated is not positive news as is hailed by political, economic and financial idiots.  It is a sign of impending doom.  A sign that the underlying American economy is still showing no demand for capital. 

Obama and both political parties have done nothing to fix anything.  Nothing.   Thousands and thousands of pages of health care and financial laws doesn’t fix shit.  They have made the economy worse.  Much, much worse.  Three times as many people on food stamps as when Obama took office is the only proxy you need to understand.  Certainly there are many other easy to point to data points but our economy is substantially weaker than it was in 2008.

There is no housing recovery.   Period.  Housing is a consumption item.  It does not create wealth but rather consumes it.   Now many may argue that housing is key to basic human needs of safety and that creates some form of emotional wealth.   I would certainly agree.  But that’s not what I’m talking about.   I’m talking about quantifiable economics.   

With food stamp usage three times what it was when Obama took office, and with capitalist overproduction in the early stages of collapse around the entire globe, we know that the vast majority of new jobs being created are renter capitalists and poverty wage jobs in the mythical new laundromat or service economy.  

Without wealth, there can be no recovery in consumption.  That includes housing.  Only money printing.  Which, by the way, I support when it makes sense.  And it often does.   Money is not wealth whether it is gold or paper currency or juju beans.  But there has to be some tangible wealth created in the exchange of money otherwise we are simply doing each other’s laundry.  And that means the underlying value of money is essentially worthless.   

Reflating asset prices to bail out the one percent who own 90% of the world isn’t something anyone who supports freedom and democracy could ever support.  It’s more trickle down feudalism or renter capitalism that caused the asset collapse in the first place.   ie, The belief that pushing around paper and finance creating wealth is preposterous.   If you were stranded on a deserted island with fifty other people and you put up a sign to loan out sea shells, have you created any wealth?  Is your lot in life or that of those who share the island any different?   Under globalization the Fed can never quit printing or monetizing debt or both.  Ever.   Or the mirage disappears.  Whether the Fed or bankers or politicians yet realizes this is irrelevant.  As noted on here many times, a service economy cannot grow.  And that means the Fed cannot inflate away debts through economic growth.  Only through the debasement or devaluation of the currency.  If they quit, the service economy will cave under its own weight. 

There certainly is another smaller housing bubble in the works that has been created completely through failed economic, monetary and financial policies but there is no recovery.   Frankly, we would expect a smaller bubble simply because of the damage done in the first  one.  ie, There are far less economic participants and far less speculation due to the winnowing out of economic losers in the last bubble, higher lending standards, an ongoing collapse in overproduction, etc.  

There quite a few dynamics that point to nearing another top in real estate beyond declining mortgage applications that we have been witnessing for some time.   First is that renter capitalism’s manipulation of residential real estate is nearing exhaustion.  As an example, the Blackstone Group has become the largest real estate private equity firm by gobbling up tens of billions of dollars of real estate.  They have now taken that renter capitalism portfolio public in the last month.  This type of hubris – that the investor class is once again willing to buy packaged real estate assets as an investment– is typical of exhaustion.   Long time readers will appreciate my perspectives on private equity being generally dumb money.  Very dumb as noted right before the collapse of the last bubble.  They are always on the wrong side of major turning points as are all of the central planners in corporate capitalism.   (Think the ultimate renter capitalist who became wildly wealthy through its endless predation - Mitt Romney.  Mitt Romney didn’t create the cure for cancer.  He plundered his renter wealth from others just like the East India Trading Company mentioned in a post last week.)  

Private equity, hedge funds and other examples of renter capitalism have bought untold billions of dollars of residential real estate in the last few years.   This was obviously done to provide a steady stream of income off of the backs of enslaved citizens by denying them their constitutional property rights. 

In Phoenix, one of the ground-zeros for the renter capitalism housing disaster,  the plunderers appear to have acquired tens of thousands of single-family homes as “investments” after the 2008 collapse.  This is happening almost everywhere.  That includes even cities that have been dying for decades like Cleveland and Detroit.  (Can you imagine a nation where no citizen ever had to ever rent their home from a private for-profit investor?  But, instead owned his or her own property?  That is what Thomas Jefferson envisioned in a free society.)   

Additionally, other countries are plowing into U.S. real estate and other renter capitalism investments.  Why?  There is nothing else for them to buy with their accumulated dollar reserves.  (As I have noted on here before, allowing noncitizens to acquire real estate or property in this nation while our citizens are being kicked out of their houses and denied their own constitutional property rights is a corporate state crime against the sovereign people of this nation and I believe rises to the level of high crimes and misdemeanors.  Property in our nation is a right that should be granted only to its sovereign people.  Not to corporations or noncitizens.  Noncitizens who are most often looters themselves.  Ain’t no corporate capitalist exploited people from Somalia snapping up U.S. financial holdings and assets.) 

A few years ago the Federal Reserve granted banks the ability to stop foreclosures and to expand their renter capitalism by becoming real estate landlords.  Ahem, emphasis on lords.  ie, To create portfolios of rental properties on foreclosed homeowners.  

Corporations have simply tightened their renter capitalism grip over the last four years and thus have destabilized society even further.  Any economic recovery has been an illusion primarily driven by corporate capitalism and investor class demand.    The status quo is all-in.   That’s as it should be since they have created this monster.

posted by TimingLogic at 8:56 PM

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