midtowng's blog

Round Two of the Housing Bust

After more than a year of a housing bust, and eight months of a credit crunch, its hard to believe that the real estate market could get much worse. With suburbs turning into ghost towns, major Wall Street banks going under, and people losing their homes right and left, you would naturally think that we must be near the bottom.

And yet, if you look at the raw numbers you realize that the real estate market could get much worse. In fact, it is likely to get much worse in the coming years.

You don't have to believe me. Look at the numbers for yourself.

The Triangulation of Class War

A popular topic of discussion in my family is, "Why do poor and lower middle class people keep voting for the party of the rich? Why don't they vote in their own best economic interests?"

None of our guesses ever seemed to answer the question. It's an important question to answer because democracy only functions correctly if the public votes in their own best interests.

I've done plenty of research into the topic, including reading the excellent book, What's the Matter with Kansas. It was a great read and I highly recommend it.
However, it still failed to answer my question. Thomas Frank explained why religious people have been captured by the Republican Party and the "cultural war", but he was still somewhat vague about why so many poor and lower middle class people who aren't religious vote Republican.

Federal Reserve considering Unconstitutional measures

By now everyone should be familiar with the fact that the Federal Reserve bailed out Wall Street investment bank Bear Stearns. You are probably aware that your taxes are now underwriting $380 Billion in subprime, mortgage-backed securities (that's $1,251 for every man, woman, and child in America).

But it wasn't until I read this article did I realize just how much trouble we are in.

"The U.S. dollar is a 'faith-based currency' dependent on the credibility of a central bank"
-- Dallas Federal Reserve Bank President Richard Fisher

The world's faith in the U.S. Dollar is based on not just on the credibility of our central bank (aka the Federal Reserve), but reflected in how they manage their own portfolio.

The 401k Scam

"The 401(k) will turn out to be the greatest systemic financial hoax ever perpetrated on an unsuspecting public."
- William Wollman, The Great 401(k) Hoax

Like most people I was told to plow as much money into my 401k as possible. So like millions of other workers out there, I did as I was told. By 2003 I had accumulated a nice little nest egg...that I couldn't touch.
Then one day I was in a bookstore and I happened across a book called The Coming Generational Storm. What I read about 401k's that day made me immediately stop all contributions.

Since then I came to realize that the 401k model is hopelessly flawed and will lead an entire generation to despair.

Author Laurence J. Kotlikoff made two points that were simply too logical for me to ignore:

Bush's "Hoover Plan"

Last week the financial markets swung wildly back and forth between "We're All Going To Die!" and "Hurray! We're Saved!".
At the center of this drama was the buyout of the insolvent investment bank Bear Stearns by JP Morgan Chase. Most of the attention was focused on the fact that JPM bought Bear Stearns for just $2 a share, thus giving current shareholders the shaft.
While this is a worthy characteristic to focus on, I was more interested in the fact that JPM only agreed to this deal after the Federal Reserve offered to shift $30 Billion of Bear Stearns mortgage-backed securities onto its books.

Sovereign Wealth Funds: The Rise Of Corporatism

"The first stage of fascism should more appropriately be called Corporatism because it is a merger of State and corporate power"
--Benito Mussolini

Last week Treasury Secretary Paulson had a meeting with representatives from Abu Dhabi and Singapore. The meeting involved setting up "rules" for future investments in America from their Sovereign Wealth Funds.

"SWF investment decisions should be based solely on commercial grounds, rather than to advance, directly or indirectly, the geopolitical goals of the controlling government," the agreement stated.

No one noted the obvious irony.

A sovereign wealth fund (SWF) is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments.

The first ironic twist of this agreement is the fact that America has spent more than half a century pushing third world nations to open their markets to unrestricted foreign investment. Refusal to comply with America's wishes all too often meant a CIA-sponsored coup.
Now we are trying to put restrictions on how former third-world nation can invest in America.

The second, and more important, ironic twist is the obvious weakness this displays. If America had a strong economy would we really care what the motivations of the SWF's were? If we weren't desperate for the money, would there even be opportunities for the SWF's to buy significant amounts of American assets?