While our government spends who knows how much on their Open Source Indicators project and while various academics are tripping over their petchewzelwhackers trying to invent predictive linguistics, we’re pleased to announce that Clif has posted the link to the new Shape of Things to Come report over on his website.
A careful read of the bottom of page 9 will clear up my “watch for smoke” reference, but beyond that, many larger issues are cropping up like this reader question:
“Hi George,
Just got my HPH report and deflation appears to be on the horizon. You’ve been hinting at deflation, too.
But in a deflation, isn’t cash king? But if the dollar is crashing? So, should I empty the mattress or stuff it with more? (I’ve already got my food and my 1 ounce silver round.)”
This is indeed the hardest part of what’s ahead to wrap your head around, since orderly inflation has been de rigueur for most of us since birth. The idea was that a person could invest in ownership of something like a house and thanks to the changing purchasing power of money (reduced value of money = inflation) pay the home off with cheaper money.
Now, however, as we have been stridently warning, with the collapse of monetary velocity, the money is becoming more dear.
While I hit near-panic when I realize that of nine children between Elaine and me, less than half own homes and we’re talking kids in their 30′s and 40′s!
But they may be geniuses and here’s why: Say they had purchased a home for $180,000 in 2008 at the very top of the bubble. That home today might be worth only half that amount. So they would have paid twice the home’s value.
What’s worse, wages have been pretty much flat. And with other prices going up, the little money they would have becomes more dear (precious).
Now let’s push this out a bit: What’s the world like where people continue to have a house debt that’s big and unemployment keeps rising (no new jobs, after all) and consequently, wages continue to erode.
Wages eroding will then stabilize prices and actually bring some down. That’s what happens in deflation.
And where did all the money go? Into dead pools. All quite natural when the ratio of M2 (going up at a 3-month rate annualized) 23.3 percent and GDP is flat to declining slightly.
Which is why Peoplenomics this weekend is tackling the two biggest questions out there: When is the right time to bail out of gold and silver (if ever) and concurrently, what’s it mean when George writes “We’re losing the Sex Race”?
Gold and silver are likely to continue gaining real purchasing power, but only to the point where government confiscates like they did with gold and silver in the 1930′s. But in terms of wages? They really can fall. And housing prices? You know the answer to that one.
I’ve said it before but it bears repeating: We’re in a huge deflation now. The proof is in the Fed/Treasury hyperinflation which is almost completely gobbled up by the falling prices. Leaving 4% apparent inflation but behind the scenes velocity is still crashing and it will have the inevitable results when the market comes to its senses.
Power of the Hype
I get up every stinking morning and tell you for years about how the American Dream is toast. Does anyone pay attention? Not so far as I can tell.
But let old Slick Willie come out and say “The American Dream is under Assault!” and somehow that’s news.
No, make that hype.
Classless Congress
The old GOPsters have stuck their foot in it and they don’t even see it yet. Calling the idea of a balanced budget Class Warfare.
If you ever needed proof that the republicorps are lap dogs of the corpsters in the back room who write checks to both parties, here you go. The world corp-you-lent comes to mind.
Told you: Should have let them fail. Teach them corporate debt pigs that there’s real risk involved in finance and the American public isn’t going to go the route of Germany – getting stuck with the bill for Europe’s wild spending – without a fight.
Just a matter of whether it takes place in congress with gentlemen’s rules, or in the street. Wonder is them big lobbying outfits are ‘getting it’?
Throw ‘em all out next election, is how I’m voting. The straight Save America Ticket.
Housing Starts
Ah, remember the “good old days”? When we used to have a housing industry?
newest out this morning from the Census Bureau covering August activity:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 620,000. This is 3.2 percent (±1.0%) above the revised July rate of 601,000 and is 7.8 percent (±1.4%) above the August 2010 estimate of 575,000. Single-family authorizations in August were at a rate of 413,000; this is 2.5 percent (±0.9%) above the revised July figure of 403,000. Authorizations of units in buildings with five units or more were at a rate of 178,000 in August.
HOUSING STARTS Privately-owned housing starts in August were at a seasonally adjusted annual rate of 571 000 This is 5 0 percent (±10 6%)* below the revised July estimate of 601,000 and is 5.8 percent (±12.0%)* below the August 2010 rate of 606,000. Single-family housing starts in August were at a rate of 417,000; this is 1.4 percent (±10.3%)* below the revised July figure of 423,000. The August rate for units in buildings with five units or more was 148,000.
HOUSING COMPLETIONS Privately-owned housing completions in August were at a seasonally adjusted annual rate of 623,000. This is 2.7 percent (±12.7%)* below the revised July estimate of 640,000, but is 2.6 percent (±13.2%)* above the August 2010 rate of 607,000. Single-family housing completions in August were at a rate of 477,000; this is 0.2 percent (±10.2%)* below the revised July rate of 478,000. The August rate for units in buildings with five units or more was 143,000.
Unfortunately, the Census press release doesn’t go back very far, and it’s here where we dig into Excel a bit to come up with a comparison. In 2007, the announcing housing start rate was 1,046,000 homes (annual rate).
With starts this month at an annual of 571,000, we’re pretty comfortable alleging that we’re running 54.6% of where we were four years ago.
It Ain’t Over….
Yes, our bets are still on for a collapse of the EuroMess. Here, you hold the camel steady and I’ll put another straw on his back. How about this one? Italy’s credit rating has been cut by S&P.
Asia Bank Runs
Say, you see where seven troubled banks have been suspended in South Korea?
While the headlines are about saying hopeful things like “Banks avoid massive withdrawals” this seems to be a little bigger than just another straw on the old camel’s back.
Railroad tie is more like it, and a wet one at that.
More Straws – Quick!
EU banks may be needing more money to make it through the crisis says this report. Siemens was rumored to be rolling their dough out of some French banks. No problems for us, says BNP Paribas.
One hell of a strong camel, huh?
Cargo Stat
We talked last week about the general small slowing of imports via West Coast ports. Got an email from the Port of Tacoma folks with new cargo stats – exports up a bit but check this:
“Full import container volumes are down 2 percent. The lack of U.S. consumer confidence, due to economic uncertainty, is also contributing to the decline of Asian imports up and down the West Coast. In August, the U.S. consumer confidence level was at its lowest point since February 2009.”
Baltic Dry Index is rolling over and we’re hearing that the scrappers/ship breakers are getting ready for a lot of work to cut down on over capacity in ocean shipping.
Paying Off the Palestinians
$200-million from the Saudis to the Palestinians to quiet down the tone of things.
Check Your Brain at the Counter
What next in marketing? People for the Ethical Treatment of Animals is reportedly looking at launch of a porn site to raise money.
Sexploitation in the name of veganism? Right up there with killing people to prevent murder…sometimes I just stare at a story for hours…
More after this…
