Tuesday, April 6, 2010

The American Recovery, Lots of Puff But No Substance

Ok, ok, if one reads the US post and watches Wall Street, not to mentions listens to the "honest" American government, one "knows" that everything in America is perfectly fine, economy is thundering along and the Empire is back to full strength....or is it?

Behind the daily charade, the endless cheer leading are very unforgiving currents that ca not be hidden from an expert eye, no matter how much the Obama Regime and the rest of the American One Party Two Branch system wants it. Lets review:

1. Housing: American housing continues to be a disaster, absolutely and all the time. The second wave of resets, these in the Alternative-A category, that is, houses much more expensive than the Subprime, is just starting to crest and the full weight of this disaster will not hit until some time in late 2010, early 2011. All resets will not be out of the American system until 2013. So why the "good" numbers?

Well, first, it is hard to figure out what these numbers are. Every month, early in the month, one reads about issues and problems with continued worsening of the sales figures. Some of this is hidden by only comparing the numbers against the previous year's for the same month. Rather ridiculous comparison that does well to hide trends. A trend requires comparisons over a longer time period and more than a single data point. Further, by only comparing to last year's, a year already down sharply, it hides how far the numbers are down all together from the start of the Great American Collapse. Then there are the revisions, such as today's news that "Pending Home Sales Rise Sharply In February"....but wait, today is the 5th of April, and this news, revised and printed, is driving another bought of American stock inflation?

Then there are the numerous attempts to forestall the true state of the problem or hide it. One American program after another to keep the people in their houses, those who can not pay, are all sponsored by that single real American export, debt. But the cost of that debt has risen sharply, just in the past week, a full half of a percentage point. How much is that? We'll assume it is compounded only once for the year and we'll assume that we are only dealing with half a trillion, for nice round numbers. That's $2.5 billion in additional service fees, a pittance of a rise for the American printing machine. Of course, the problem is, this is a trend in itself. More on this later.

Furthermore, there is a year's worth of housing that is so far been kept off of the books, by the mega banks, who see no reason to put it on market since they will not sell anyways. Foreclosures, though with all government programs, continue to increase both in quantity and dollar volume. Prices continue to fall or are kept from falling by artificial means. Even the level of new house construction is done by artificial $8,000 stimulus, that is a credit, which is cutting into already lowered tax revenues.

2. Commercial Real estate
Just like the residential real estate markets, commercial is also over built, but unlike the residential, the Americans are still building commercial. Already this market has a 15% vacancy rate and growing, as small business and even large key stores go out of business. The latest in a long chain is Hollywood Video, leaving large store fronts empty in numerous strip malls. Unlike the residential debt, which was primarily held by giant banks who own the American regimes, the commercial debt is held by small family and company banks, banks the Washingtonians have no quams about shutting down, one after another. The government than sells these small fry to their big financial owners on Wall Street.

3. Cost of Financing
This is what will finally sink the Americans, surer than any iceberg. The costs are already increasing, on a long term trend. The 10-year bond notes are up, up and away, with interest rates rising to 4.01%, up .51% over the past 5 or 6 trading days, alone. There is no sign of this stopping as not only does the American regime have hundreds of billions more to sell of new debt, just for this month, but refinancing of old debt is needed and that refinancing is picking up steam.

Further, programs like Social Security (what passes for government pensions for the non-government workers) are finally bankrupt, 6 years ahead of schedule and will require some $30 billion in the first year alone. This sum will sky rocket over the next two or three years.

4. Infrastructural rot.
As for America as a whole, its rotting, quite literally. About 5 years ago a major bridge collapsed and killed over 30 people. Follow on investigations determined that over 700 major bridges were close to collapse. After billions of dollars wasted and stolen, none have been repaired.

The cities though are rotting to. Detroit, the former #3 city and main industrial center, is a total third world hell hole, where the average house sells for under $11,000 and no one wants them. Why? To live on abandoned streets, surrounded by feral dogs, feral peoples and Islamic lunatics? Or New Orleans, still rotting and the murder capital of America in body count, even while military police patrol it. Or LA, half of which is a war zone. Little Rock with a worse per capita gang problem than LA? Phoenix Arizona? Second kidnap capital of the world? Or maybe Atlanta, Chicago, Baltimore, Philadelphia, Miami and Reno, all crime ridden hellholes, just like Washington DC, once one leaves the government sector and the ultra rich chenovnik neighborhoods.

The US has not built a single new refinery or nuclear power plant in 40 years. It has an antique of a rail system. The massive automobile highways are jammed, even as the cost of gasoline is once again skyrocketing. The list goes on.

5. Anti-Business Government
Without a doubt, the government in Washington is extremely anti business, seeing the role of government not in guaranteeing a free market and regulating product quality and keeping corruption at bay, but in running the actual markets. From a massive socialist medical bill that is not a pay roll tax based sole payer (as in the very successful French and German models) but some Frankenstein of version of the NHS from the UK and Canada, this monster bill is already sucking out the funding of many thousands of large and small companies, who will be forced to increase layoffs. But most of its taxes do not kick in until after the 2012 elections, guaranteeing further depression. The government prescribed and mandatory private insurance will bankrupt many families and cause many other to go into sell off of assets, to pay penalties, thus will reduce the spending capability of most households.

Behind this is the Global Warming, anti-Carbon bills, as well as EPA regulation of carbon. This will kill off any energy intensive businesses, such as all manufacturing, and will increase the logistics costs of all goods needed for life. Most of this will be in the form of taxation through fines and business tax.

The American Marxists already control almost half the automotive industry, are taking over the small financial industries on behalf of their banker owners, are now able to take over the medical and medical services industry and have already started making noises about the aviation industry. This puts them in control of over half the American market. True, they will not take over the little family businesses, but than again, Leninist-Trotskyte Fascism, unlike Stalinist Communism, always cared primarily about the heights of industry, not the drags of markets. Remember NEP?

6. Outsourcing/Illegals...or Better Productivity
The disappearance of work for the American citizen continues, at an increased pace, as more and more well paying jobs are fleeing the American disaster. Of course, these same companies continued main market remains America, the disconnect has actually grown even worse not better. The present power regime has done nothing to stymie this, only complained, while pursuing the exact same policies of the past 22 years. Their one solution to stymie out flows has been to massive increase government pay rolls, and everyone know, bureaucrats only improve over all productivity of an economy...correct?

Mean while, Americans are now told a schizophrenic message: get used to high unemployment (from a liar regime who swore it would never get that high, just hand us your children's futures) and spend for all you are worth to save yourself from high unemployment. That the American unemployment rate is almost twice as high as Russia's, a nation that the American business world continues to belittle as a broken mercantilistic society, is ignored. After all, America has better worker productivity....that is, they have fewer people doing more work for less pay....see, the system can "improve" with no end. To say that the 60-80 work week of the 17th century is back, is redundant, for the Americans, it more than likely never really left.

Than there is the mind boggling 21% real unemployment, counting the semi employed, unemployed and the untouchables who do not really exist, that is people who have run out of unemployment benefits. These are not longer citizens to the American regime, but human garbage to be swept under the rug. Funny thing is, those hurt the most are black Americans, but then again, Islamic Arabs, like Obama's father's clan, always hated blacks, which is why one of the 40 Arabic words for slave is the same as their word for Black Africans and why his clan butchers and burns alive Black Kenyan Christian Africans. At the same time, it comes out that there are 8 million jobs in America, still occupied by illegal workers. Incredible, but the Americans take it, so they must deserve it.

7. War, War, War
That is right, not only is the war in Iraq continuing, even though the Americans are paying everyone off as they retreat from the ruined cities of that ruined nation, but the war in Afghanistan, both the real war and the imaginary war, are heating up. Imaginary? Why yes, like the report I printed of the conquest of the Taliban city of Marjah, where some 80,000 people lived and hundreds of Taliban stayed. Except that the city turned out to be a tiny village with a mosque and a couple of stores..

Now the Obama regime has intensified its air war on Pakistan's villages. Involved itself in the Yemeni civil war, as if the Saudi leading a Jihad against Shei rebels was not bad enough, but is now threatening and moving force to attack Iran, even as it ditches allies like Britain and Israel and continue to try and surround Russia with rockets...these being portable, though, while rearming Georgia, for round 2.

And, we must not forget, the trade war the US is now waging with its main financial backer and thus owner: China.

Over stretch has a whole new meaning for the "hyper"power.

So, if you are about to invest your monies in dollars or the US economy, one would have to be insane, knowing all this.


Juniper in the Desert said...

You are absolutely correct about this. However, it seems to be a deliberate policy by the Obama marxists. They are deliberately destroying American hegemony and passing it to the "have nots". These so-called have-nots are Iran, Arabia, Brazil, Venezuela, China, Russia, India. Of course Russia and India do not NEED help but, if you'll forgive me, every little helps. As in Obamas wish to get rid of all US nukes.

This, I believe is called "de-coupling", which is a financial term, but which is followed by marxist, Jim O'Neill, head of Goldman Sachs UK, and creator of BRICs.

P said...

Out of topic, but what do you Stanislav think about the flood of heroin from Afghanistan to Russia? Do you think it is an intentional policy of NATO to flood Russia with heroin and weaken it that way?

Currently Russia has 2-3 million heroin addicts (mostly 16-38 year olds) so this is becoming a huge problem for Russia.

How should Russia react to prevent the flood of heroin from Afghanistan? Is there any other option but military one since NATO won't destroy those poppy fields?

hamilton x said...

You probably give the fool Obama too much credit for even having something like a "foreign policy" or even a clue as to how wars are actually waged and won. His risible Af-stan "strategy" guarantees defeat. Even the puppet Karzai openly mocks the African Queen. We still have a predominately Christian population subjugated now by a godless,even demonic elite but this self-appointed elite is too incompetent and widely disrespected to hang on much longer. I like your idea of an Orthodox Union, Mr. Mishin and our prayers for that.If Russia ever really went in that direction there will be no resistance from the weakening USA...no more Kosovos, no more Daytons.It is now entirely up to the Russians as to what type of nation they wish to be.

Looney said...

Nice summary. One thing that just popped up recently is a claim that half of all US commercial real estate is under water.

Having spent a lot of time recently driving around America, I am not too worried about the infrastructure problems. Traffic bottlenecks are fixing themselves automatically as jobs are destroyed. The bigger problem is the unionized maintenance which always costs 10x too much, but that can be fixed with the stroke of a pen.

Mentioning unions, however, and we see another aspect of the economic vandalism. Union prisons can no longer hold prisoners, so the criminals are starting to pour out onto the streets. One of Obama's new appointees is planning to try to force unionization on the remaining parts of America's industrial base, with the predictable results.

It all has a Revelation chapter 18 feel to it, although in slow motion: "Fallen! Fallen is Babylon the Great!"

Juniper in the Desert said...

To P: legalise all heroin, tax it and get it out of the hands of the mafia/jihadis.

Actually in the West there is a shortage of morphine but dont expect a sensible response from the Witch Doctor in the White House or Mr Bean in the House of Commons.

Why is Putin not stopping the flood of heroin?

Dallas said...

Your blog is quite refreshing to me, and I enjoy it frequently. I love to get your Russian perspective on news and I very much enjoy your analysis of American issues.

As a Louisianian, I felt inclined to defend my beloved City of New Orleans. I suppose I mean to both defend and excuse, in a way. New Orleans is of the most remarkable, beautiful cities in North America. The Christian (though Roman) liturgical seasons are still sensed and observed there. New Orleans is home to the largest Orthodox community between Texas and Georgia, and is also the home of many pious Western Christians -especially Roman Catholics - who maintain beautiful, pious traditions in a land largely starved of traditions and iconoclast. You are quite right that New Orleans has a horrible murder rate, but the large part of the city I know and love is beautiful and ancient (for America), and acts as a veritable preserve of an older, more traditionally governed life. No military police govern the streets, and though drugs and murder govern whole districts, the city is in no way like Detroit.

Ironically, in Detroit, one looks towards the Iraqi Oriental Orthodox neighborhoods for security, order, and faithful people. Those neighborhoods were built by refugees fleeing Washington's latest war.

You make a very good point that the major American cities are declining, that violent crime is on the rise, and that the housing credit crisis is destroying whole neighborhoods. America is suffering terribly from divorce and the decline in moral education that accompanies the decline of the family. The Amercan family, like the American government, is horribly reliant on gigantic debts to survive.

The Orthodox of Louisiana frequently look towards Russia for encouragement at her revival and for inspiration. Thank God for the Russian light of faithful belief and practice.

MaggotAtBroad&Wall said...

We're experiencing a global economic boom. The ramp in new orders is greatest in America, but it's happening globally.

This graphic from the New York Times shows the strength in new orders for several countries:


The profit cycle for the S&P500 bottomed a year ago. Those companies typically start re-hiring about a year after profits bottom, so I'd expect at least 200,000+ new private sector jobs created per month through year end, and we may even see a month in which 500,000 jobs are created in June or July. Once the jobs start being created, and they will, then the expansion will be self sustaining and last for probably another 2-3 years.

For more evidence, here is a great blog entry from Mark Perry:


subscriptionblocker said...

Ever see that segment in Planet of the Apes when those monkeys were working themselves up?

Well, that's what happened here with US real estate and financing swindles. And it's probably gonna take another 10+ years to clean it up.

Until then, expect to hear more news of incomprehensible disasters as the debt and the speculators get squeezed. Not pretty, but it's fact...and children watching the folly of their parents will be much more cautious with their own affairs.

Has happened before. Will happen again. Trick is to make absolutely sure people don't confuse their own folly with someone else's "sinister plans".

Rereading some of those 1929 newspapers is a very frightening thing......

subscriptionblocker said...

Canadian friend sent this to me today. Not very pretty, probably true: http://www.cnbc.com/id/36422316

Arguably, our greatest generation was comprised of depression kids. They clearly worked hard not to copy the mistakes of their elders. But most of those folks are gone now, and their kids/grandkids are duplicating the miserable habits of depression era parents.

Hvae heard of a similar cycle with drug addiction. People just forget.

tkellymd said...

I was surprised at some of the truths of your article. The article would have been exceptional if you would have left some of the sophomoric hyperbole and gross exageration out. The truths in your article are horrific enough without the distortions. You are right in that most U.S. citizens remain clueless as to the perilous state of our economy. Current social security and medicare obligations are unfunded to the tune of tens of trillions of dollars with no solution in sight. I agree that the housing and commercial real estate collapse is far from over and may get worse. It would be nice to read such an article in Pravda from time to time that sticks to the truth and avoids sensationalistic exageration at the expense of the West.

Zach said...

In support of your article, I suggest these two articles: