1.25 Trillion dollars of worth(less) real estate Pt. 2

A few months back I wrote an article questioning what exactly the Federal Reserve was purchasing with 1.25 Trillion dollars worth of tax payers money that the FED didn’t have nor it has been argued was even legal for the Fed to do. But that is another matter. I questioned whether the Federal Reserve was over paying for assets that had clearly depreciated in value. Why else would a bank, bond holder, hedge  fund or Government sell an asset unless they were getting a good deal? After all, these are Toxic assets. I made an assumption that since the housing market had lost 30-40 percent of its value that it was conceivable that the 1.25 Trillion dollars worth of garbage on the Feds balance sheet that they purchased at par value (100%) was probably worth a lot less. One thing I did not include was the commercial real estate properties that the government probably has on its balance sheet (Like the foreclosed shopping mall in the above photo they purchased when they helped JP Morgan Chase buy Bear Stearns.)

Well the Financial Times has just released and article that gives us a peek inside the lies from the Federal Reserve, Treasury and Jamie Dimon, the head of JP Morgan Chase.

Here are some snippets from the article:

“The Fed holds these and other real estate assets in a vehicle known as Maiden Lane I, which was set up to pave the way for JPMorgan Chase’s purchase of Bear.”

“The assets in Maiden Lane I – all of which came from Bear’s mortgage desk – were originally valued at $30bn when a final agreement on the portfolio was reached in June 2008 by the New York Fed, its advisers at asset managers BlackRock and JPMorgan. At the end of 2009 the Fed said the assets were worth $27.1bn (€20bn, £17.4bn).”

“Maiden Lane I was funded with $28.8bn from the New York Fed and $1.15bn from JPMorgan, which agreed to absorb the first $1bn of any losses.”

“As of September they had been marked down to $4bn, filings show.”

You got that? The Fed has assets worth 4 Billion dollars right now that they paid 28.8 Billion for! That is a huge loss of more than 86%. Although this is one example of the assets the Fed has purchased and it is possible that not all of the securities the Fed have purchased has lost this much it is possible that the Fed has spent 1.25 Trillion dollars on assets that are currently valued at 50-85% less than what was paid for them. That could equate to a loss of 500-800 billion dollars.

And Today Barak Obama says he saved America from a Depression. Bullocks! He has only transferred the losses of private banker buddies onto the back of the taxpayers. Once the 2010 elections are over taxes are going to explode higher to pay for all of this and contrary to what this moron says, America is in big, big trouble.

Paul Weller “Headstart for Happiness”

One of my favorite artists singing one of my favorite songs.

The main reason the American Economy is dying

 

A couple of weeks ago I came across a website that has an up-to-the-second U.S. trade deficit ticker. The  U.S has had a trade deficit every year for more than 30 years!

Every month and every year we run a trade deficit we are giving away American wealth to the rest of the world. When  U.S. companies build factories in China and ship our jobs overseas for cheap labor while we import the goods back into America. Everything is made in China now and very little is made in the U.S.  China is just one of the countries we have outsourced our jobs to as Japan, taiwan, Singapore, Malaysia and other Asian countries are now the manufacturing hub of the world. In addition to manufacturing goods we import more than 80% of our oil. While some of this money goes to Mexico and Canada the majority of it goes to the middle east so some sheikh can drive a car made of solid silver. Over the last few years we have even started outsourcing customer service jobs to India and other countries. A recent study showed that 25% of the jobs in the United States are outsourcable.

The Trade ticker does not go all the way back to 1978 but you can see that since January of 2003 the United States has had a trade deficit of more than 4.3 Trillion dollars. That is 4.3 Trillion dollars of U.S. wealth that now belongs mainly to the Chinese and the Middle East. The very same people we are now indebted to and are some of our biggest creditors

The real cost of cheap goods from Walmart

Not really much to say here. I think the pictures say it all. Take a look at the Environmental cost of China’s rise to economic glory and think about these photos the next time to run to Walmart for that $4 dollar toaster.

http://www.chinahush.com/2009/10/21/amazing-pictures-pollution-in-china/

Bernanke confirmed even though Americans disapprove

When politicians do not listen to the people who got them elected they generally do not stay in office for too long. Lat week the Democratic lead congress voted for  Ben Bernanke to continue to lead the Federal Reserve and to continue to lead America off of an Economic cliff.

Both Fox News and the Wall Street Journal show the overwhelming majority of people polled did not think Bernanke should be reappointed. Now granted, Fox business news is a Right leaning news outlet and the Wall street is slightly less leaning. But I have searched many articles including one by Rasmussen which said fewer than 21% of Americans favor Bernanke.

I don’t think it really matters as the Republicans are just as big of failures as the Democrats but the 2010 elections are going to be very interesting. All of those who voted for Ben Bernanke’s reappointment may want to look for other work.

America is turning Japanese

Last week the Democratic Congress voted to raise the U.S. Debt ceiling to an astounding 14.3 Trillion dollars. Every Democrat voted for the increase.

Japan has been mired in a deflationary spiral for more than two decades. They now have a debt to GDP ration of more than 200%. Two top American Economists have written a paper  that studies the effect of debt on GDP and concluded that once a country reaches a debt to GDP ratio above 90% the average growth rate is lowered by 1%. So, apparently Dick Cheney was wrong when he said deficits don’t matter.

The U.S GDP in 2009 was estimated at 14.27 Trillion. Which means the United States has reached a debt to GDP ratio of 100% percent. So growth forecasts will now actually come in lower than the Obama administration’s rosy forecasts. What is even more disturbing is the Obama administration has passed a 3.8 Trillion dollar budget where 1.9 Trillion of it is debt! So even if America manages to survive 2010 (which I doubt), we will still have to lift the debt ceiling a year from now.

If that weren’t bad enough we have done nothing to address the debt that is STILL in the system more than 3 years after the crisis began. Banks have trillions in toxic assets on their books, the US consumer is de-leveraging but still has a long way to go, real estate is being artificially propped up etc. Rather than take our medicine and experience a depression for two or three years and clear the bad debt America is going the way of Japan. So get ready for 20 years of sad economic times.

Bonnie Raitt “Angel from Montgomery”

One of my favorite artist Bonnie Raitt singing “Angel from Montgomery”. Blue-eyed soul at its finest!

Initial Claims rise to 482,000…much higher than estimates

Weekly initial unemployment claims are on the rise again to the dismay of the CNBC pumpers who continue to believe a recovery is right around the corner. The claims number came in at 482,000 which is 42,000 more than the estimates number of 440,000.

 Now that the holidays are over I expect a lot of temporary workers to start receiving the pink slip. This should add to the unemployment numbers for the month of January. Add to that the BLS birth / Death adjustment and the unemployment number for January could be ugly.

Stimulus for infrastructure projects does not create jobs

Associated Press analysis of stimulus spending found that regardless of whether a large amount of stimulus money was spend or not the unemployment rate rose and fell the same as if no money was spent at all.

In another blow to all the keynesian imbeciles who believe spending borrowed money to try to create jobs re-paving roads or doing other infrastructure projects creates jobs or has a lasting impression on the employment picture are sadly mistaken. Although these measures may offer short-term employment for workers they do nothing to stem the rising unemployment in the US.

“The AP’s analysis found there was nearly no connection between stimulus money and the number of construction workers hired or fired since Congress passed the recovery program. The effect was so small, one economist compared it to trying to move the Empire State Building by pushing against it.”

Yet despite this The Obama administration wants to allocate Billions more to infrastructure projects and add even more to the federal deficit. re-paving roads, painting bridges and building new highways do not create economic growth. Innovation and the creation of things people around the world want or need create growth. America is a consuming nation that imports most of the things we have and exports very little. For the fiscal year of 2009 the United States had a 420 Billion dollar trade deficit. Which means the US gave away 420 Billion dollars of its wealth to the rest of the world. Since 2003 the US has had a trade deficit of more than 4 Trillion dollars.

The politicians just don’t see the real problem with the US economy. They continue to live in denial and continue to enact the same failed policy. Change you can believe has become business as usual.

Historic Massachusetts Senate race today

Today one of the most important elections in American history will take place as Republicans try to wrestle away a Senate seat held by Ted Kennedy. Scott Brown vs. Martha Coakley.

I must say I am rooting for Scott Brown not because I am Republican but because I feel the democrats have too much power and are on an un-sustainable sending spree that will soon bankrupt this country. Those who read my blog know I despise Republicans as much as I do Democrats but having Brown win would remove the Democrats 60 seat majority and reign in some of the Democrats ridiculous social plans and mishandling of the financial crisis.

This will also kill Obama’s healthcare bill. I know there are many different avenues the Democrats could take like stalling Browns seating or having the House pass the same bill that the Senate did but I don’t believe either of these wold happen.

The election of Scott Brown in a blue dog state like Massachusetts (Home of the Kennedy’s) where a Kennedy held the seat since 1962 would send a resounding message that the country is not behind universal healthcare. It would also send a strong message that even Democrats have become tired of the bailouts and the Obama administrations handling of the financial crisis.

If the Democrats then try to stall the seating of Scott Brown in a deliberate attempt to circumvent the will of the people the Democrats will lose all credibility and be destroyed in the 2010 elections. And there is no way the democrats in the House will pass the bill as is because they know they would soon be voted out soon too.

If the Democrats lose this election it will be a crushing blow to the Obama administration. Both he and Nancy Pelosi crown jewel (Healthcare) would be dead. In addition the Democrats majority will be gone and since they have not been bipartisan in any way and have run rough shot over the Republicans, there is no way he will get anything passed for the rest of his term.