I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.- Thomas Jefferson.

debt clock

Tuesday, May 11, 2010

Grecian formula $700+ billion

I wonder what the Greek mailboxes look like

The European Union (EU) and International Monetary Fund (IMF) announced a plan that comes straight out of the United States’ playbook: smother debt flare-ups with truckloads of “free money” while the central bank manipulates rates.

The Greek bailout, btw, is yet another Bank Bailout, but this time US$'s are going to save mostly European banker's.  While I doubt the european bank CEO's get quite as much as Ameirican bankers do in bonuses, I sure they deserve their compensation as little as Blankfein.  How are we American taxpayers to keep tabs on how the money we send to the EU banks gets used, when we don't even know how our own TARP and TALP funds were used?

European leaders unveiled a $957 billion plan to save themselves and their currency. Here’s quick and dirty:

The EU will pony up $560 billion in new loans and $76 billion in existing deals for the GIIPS nations (as we’ve taken to calling them… no reason to give pigs such a bad rap)

The IMF says its ready with $321 billion

The European Central Bank (ECB) has abandoned its old stance (and credibility) by launching a program to purchase government and corporate debt.

The U.S. taxpayer has inadvertently financed billions of the euro bailout, since the U.S. funds the majority of the IMF.
“The government doesn't have money,” Chuck Butler reminds us this morning, “unless they take if from us. So in the end, who helped provide the $321 billion parachute for the eurozone countries? That's right, you, me, and the other 53% who pay their taxes.”

That’s not entirely true. China, India, Japan and South Korea help out by lending the feds the rest.


There couldn’t be a better day for Fannie Mae to ask for more money, could there?

Flying under the radar thanks to the euro bailout, Fannie Mae’s quiet request for another $8.4 billion will go largely unnoticed today. The mortgage masters lost $13.1 billion in the first quarter, including a $1.5 billion dividend it paid to the Treasury Department. Now they’re almost out of cash… again.

When the Obama administration approves the additional funds, Fannie Mae’s bailout tab will exceed $83.6 billion. Along with Freddie Mac, that bill will be ring in at $145 billion.

So long as their expense doesn’t come too close to the $5.5 trillion in mortgages they guarantee, no doubt the government will keep paying the tab, leaving Fannie and Freddie with little incentive to clean up their act.


And what about the housing market?  from my friends at Casey research-

Is housing really on the mend?

According to the most recent data from the National Association of Realtors (NAR), existing home sales, which are completed transactions that include single-family, townhomes, condominums, and co-ops, rose 6.8% to a seasonally adjusted annual rate of 5.35 million units in March, from 5.01 million in February, and are 16.1% above the 4.61-million-unit level in March 2009.

But home inventory climbed to 3.584 million units in March and is only 1.7% below the 3.648-million-unit level in March of 2009. And although the median sales price for homes in the U.S. jumped 3.7% to $170,700 in March from $164,600 in February, the current median sales price is only 0.4% above the $170,000 figure in March of 2009.

Considering the data, you might be tempted to say, “Yes, housing appears to be on the mend.” But your optimism may be tempered when you recall all the ARM resets coming in 2011 and 2012, and that March was the second-to-last month of the $8,000 first-time homebuyer tax credit and the $6,500 move-up/repeat home-buyer tax credit.

All these programs did was shift future sales backwards, skewing the data. April sales will probably look strong, too, for the same reason. We can, however, expect a fall-off in future months now that the programs are over.

We saw the same thing with the “Cash for Clunkers” program. The twelve months prior to the program, monthly automobile sales averaged about 451,000. During the Clash for Clunkers program, monthly auto sales jumped 40% to an average of about 636,000. Since the program ended, sales have fallen significantly, down to an average monthly level of 439,000 for the period of September 2009 through April 2010.

What about unemployment?

U-3: The U-3 unemployment rate is the monthly headline number quoted by the Bureau of Labor Statistics (BLS). According to the BLS, the U-3 unemployment rate jumped to 9.9% in April from the 9.7% level seen in the previous three months.

U-6: The U-6 unemployment rate is the BLS’ broadest unemployment measure, including short-term discouraged and other marginally attached workers as well as those forced to work part-time because they cannot find full-time employment. The BLS reports that the U-6 unemployment rate jumped to 17.1% in April from 16.9% in March.

SGS Alternate: Published by John Williams’ Shadow Government Statistics, the seasonally adjusted SGS Alternate unemployment rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers. According to Shadow Government Statistics, the SGS Alternate unemployment rate rose to a staggering 22% in April.

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