Economy 101...

How the economy entered a recession again at the end of August:

“Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy.”

The Feds then "pondered" an intervention.

Everybody, let's do the "twist":

The Federal Reserve said Wednesday it will shuffle $400 billion of its portfolio to try to drive down long-term interest rates and get the economy going. But economists doubted it would do much good, the stock market sold off, and the Fed itself was unusually divided over the strategy.

Lowering interest rates makes it cheaper for people and companies to borrow money and spend it throughout the economy, which has slowed sharply more than two years after the Great Recession. Consumer spending makes up most of the nation's economic activity.

But rates are already at historic lows. Americans, still feeling insecure about the future, might not be willing to take on more debt, even at lower rates. Others see no reason to jump into the housing market when prices are still falling. Others can't get credit.

"Frankly, I don't see it having any meaningful impact on the economy," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "What the Fed did today was a distraction."

Come on, baby... let's do the "twist" (a mixed impact for consumers).

...and it goes like this ("Twist" Q&A).

Let's twist the knife a bit more:

The U.S. economy is on a "knife edge" between growth and contraction, and if it were a dashboard, it would be flashing "watch out, danger ahead on all gauges," Dallas Federal Reserve Bank's top economist said on Tuesday.

"The economy is moving along at stall speed," Dallas Fed research director Harvey Rosenblum told a forum sponsored by the greater San Antonio Chamber of Commerce. "Unless we start moving a little bit faster, we are at a tipping point where things may not go the right way."

The U.S. jobs engine has lost momentum and could be set for further "backtracking," Meanwhile, he said, there is also a "credible" risk of rising inflation.

"We are in the midst of the Second Great Contraction," Rosenblum said, demonstrating the economy's predicament with a picture of a place on the Appalachian Trail known as "Knife's Edge."

"This patient is still not ready to get out of the hospital, there are still tubes connected to the patient, and the patient is still not responding well to all the medicine."

The grim assessment of the economic outlook came a week after a majority of the Fed's policy-setting panel backed further monetary policy easing to help support a faltering U.S. recovery.

VP Joe Biden puts the blame of the economy square on The One and his administration. Thanks, Joe!!!

Senator Dick Dubin (D) blames fellow democrats for not passing The One's so-called "Jobs" bill (really just another bogus "stimulus" package).

The S&P downgrades Italy.

Fears about the world economy continue to drag markets.

Wall Street hits a low on fears of the on-going Euro-mess.

Moody cuts the ratings of BofA, Citi, and Wells Fargo.

And it's possible that the U.S.'s credit rating may soon get knocked down a peg again - this time by Moody's and/or Fitch. (This was already done by S&P in August.)

By August 30, the consumer confidence hit it's lowest level in two years:

Consumers' confidence in August dropped almost 15 points to the lowest level since April 2009 as worries about the economy fueled the wildest stock market swings since the financial meltdown in 2008.

At a time when Americans are increasingly worried about a weak job market, higher costs for food and clothing and recent stock market turmoil, the falling confidence numbers raise new concerns about their willingness to spend and jumpstart the economy. That's particularly important since consumer spending accounts for 70 percent of U.S. economic activity.

"Consumer confidence deteriorated sharply in August, as consumers grew significantly more pessimistic about the short-term outlook," said Lynn Franco, director of The Conference Board Consumer Research Center in a statement.

The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July. The number was the lowest level since April 2009 when the reading was 40.8. It also is far below the 53.3 that analysts had expected. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth.

Two months later...:

Americans say they feel worse about the economy than they have since the depths of the Great Recession.

Consumer confidence fell in October to the lowest since March 2009, a research group said Tuesday — an ominous sign for the economy as families begin to prepare their budgets for holiday shopping season.

The declining mood reflects the big hit that the stock market took in late summer — down almost 20 percent in one month — as well as frustration with an economic recovery that doesn't really feel like one.

The Conference Board, a private research group, said its index of consumer sentiment came in at 39.8, down about six points from September and seven shy of what economists were expecting.

The reading is still well above where the index stood two and a half years ago, at 26.9. But it's not even within shouting distance of 90, what it takes to signal that the economy is on solid footing.

Peachy!

Another Bubble About to Burst?

(Via Reuters)

The new round of cash the Federal Reserve is pumping into the U.S. economy to spur job growth could create bubbles that do the very opposite, some Fed officials are warning.

Dallas Fed President Richard Fisher suggested this week that a bubble is already forming in private equity, with cheap debt fueling high-priced deals in an echo of the torrid days of leveraged buyouts before the subprime credit crisis cut off financing in 2007.

Fisher, who argued against the U.S. central bank's decision earlier this month to buy $600 billion in Treasuries to boost the recovery, told a San Antonio audience on Monday he is concerned about signs of "speculative activity" in buyouts, along with stocks, bonds and commodities.

FORE-GONE CONCLUSION...

September foreclosures hit an all-time one-month high, going over 100k for the month:

Banks foreclosed on 102,134 properties in September, the first single month above the century mark, RealtyTrac said. There were 347,420 total foreclosure filings in September, 3 percent higher than August and 1 percent higher than a year earlier...

For the quarter, there were 930,437 foreclosure filings, an increase of 4 percent over the prior three months... The firm said foreclosures could spike after a brief lull if lenders are able to quickly resolve the paperwork questions.

"However, if the documentation issue cannot be quickly resolved and expands to more lenders we could see a chilling effect on the overall housing market as sales of pre-foreclosure and foreclosed properties, which account for nearly one-third of all sales, dry up and the shadow inventory of distressed properties grows - causing more uncertainty about home prices," [James] Saccacio said.

So, we had as many foreclosures in just one month last month as we had in ALL of 2005.

Meanwhile, remember those TARP contracts to FannieMae and FreddieMac???

The Treasury Department has relied heavily on private companies and troubled mortgage giants Fannie Mae and Freddie Mac to manage the $700 billion Wall Street bailout, a report released on Thursday said.

The report by the congressional panel overseeing the Troubled Asset Relief Program (TARP), said that the $437 million in Treasury contracts to Fannie Mae, Freddie Mac and private companies to manage critical aspects of the bailout program raised a number of concerns about public oversight and conflicts of interest.

FORE!!!

Even though BofA and other banks are temporarily halting foreclosures while they double-check their paperwork for "mistakes", foreclosures are up. And they're gonna get worse.

If you think the U.S. housing market is in bad shape now, prepare yourself for the "tsunami" that's coming. That's what at least one financial expert is saying.

Charles Brown of CB3 Financial says that instead of selling foreclosed homes, banks have been hanging onto them, waiting for the economy to improve. "These banks that have all this pent-up inventory will unleash it on the market, as soon as they see a minor uptick in real estate prices," Brown said, which will, in turn, reduce housing prices even further.

Experts agree that we have not hit rock bottom yet. People are still losing their jobs. Homes are going into foreclosure at a rate of 120,000 a month. Many who feared foreclosure in their future say they tried to work with the banks for "loan modification" -- but they "were denied or given the runaround," Rep. Mike Quigley of Illinois said. The banks weren't working with people so they made the problem worse. "Servicers are famous for delay tactics...like claiming the fax machine was out of paper," he said.

I kept telling you people about this.

Bankruptcies are also up, as well.

And so is unemployment (via Gallup).

Meanwhile, "The One" is mulling over another stealth bailout bill.

What Happened on September 15, 2008?

Now THIS is an eye-opener!

"...On Thursday Sept 15, 2008 at roughly 11 AM The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two. Money was being removed electronically.

The Treasury tried to help, opened their window and pumped in $150 Billion but quickly realized they could not stem the tide. We were having an electronic run on the banks. So they decided to closed down the accounts.

Had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn and the entire economy of the United States would have collapsed, and within 24 hours the world economy would have collapsed..."

And THAT is the reason for the first $700 billion bailout boondoggle.  And the continued reason for the latest $800 billion bailout mess.

As Drudge would say, "developing..."

CORRECTED: Date in headline.

So... they wanna bail out the Big 3 automakers as well, huh?

From the Heritage Foundation via RedState:



Read the whole article here.

Hmm... $73/hour full-time is equivalent to $150,000/year. Maybe "The Obamessiah" will consider them rich and tax their over-priced a**es. I bet that's how he and the congressional democrats intend to "pay for" the $300 billion bailout, if it goes through.

CHANGE!

You've gotta be friggin' kiddin' me!...

From Captain Ed:

The Senate will begin debate within minutes on their attempt to revive the bailout bill rejected by the House. They have released the bill text this morning, and the Senate Conservatives Fund website has it for public perusal. The new version has no allocations going to the Housing Trust Fund, which the Dodd version originally did, so ACORN will get no money from the bailout.

However, the Senate did add a few winners to this new version:

New Tax earmarks in Bailout bill
- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark “extenders” in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- Auto Racing Tracks (317)
- Wool Research (Sec. 325)

Read the full post here, and the whole bill here.

Some links & resources on Fannie/Freddie bailout fiasco (Part 2)

Now, let's analyze the whole thing with some perspective and some common sense, shall we?

Ace takes us through a review of certain members of congress over the years:


Ace then questions the whole potential "credit crunch" meme that's been going around if we don't take the bait... ummm, bailout hook, line and sinker. His charts show that that is NOT the case.

Ace then goes on to show a video that charts the housing prices 1890-2008 (in the guise of a roller coaster for visual demonstration purposes). The years appear in the lower right corner of the video (you have to go to this link to watch it). At the very end is the actual chart/graph – it appears very briefly, but you can pause the video to get a better view of it. Remember that graph/chart when you view the last video (below).

Then via Moe Lane at RedState, Protein Wisdom takes us through a detailed accounting of the problem over the years with an effective 11-minute video that explains the housing bubble/financial crisis. It points to the CRA Act of 1977 (Jimmy Carter) which unhinged housing prices from the rate of inflation, then the January 31, 1995 executive order from Bill Clinton that relaxed the regulations and forced banks to supply risky loans, then to Fannie Mae & Freddie Mac, then to Obama. This video goes fast, so use the pause button repeatedly to see all the gory the details:

Some links & resources on Fannie/Freddie bailout fiasco (Part 1)

RedState has been one of the main blogs that has been following this whole mess closely, so I'd suggest going there for regular info (though that's not the only place, so I suggest getting a balanced inflow of info on the whole matter).

One thing that RedState has been concerned about is the valuation of the MBS that the federal government would be buying in the $700 billion bailout. As Blackhedd says,

Get the valuation too low, and a lot of banks and Wall St. firms will bust because of the capital losses. Get it too high, and it’s a big transfer of wealth from the taxpayers to Wall St...

[On Sept 23] in open Congressional testimony, Bernanke finally spilled it: the purchases are to take place at “a price close to the hold-to-maturity price.”

I’ll say it straight out: that would be far higher than the current market for these securities. The Troubled Asset Relief Plan is a bailout of Wall Street, at taxpayer expense. Pure and simple.

This puts everyone in a very difficult position, for two reasons: First, it’s morally wrong and politically a disaster.

Blackhedd then goes into the "root causes" of the problem.

The House of Representatives, yesterday, voted down the bailout bill that went from 4 pages in length to over 110 pages long (with a lot of pork attached). A ton of Democrats voted "No" (94, or 40% of the Dems) along with the 134 Republicans (67% of the Repubs). Twelve (yes, 12) of the Dems committee members votes "No" despite Nancy Pelosi pointing fingers at those across the aisle. Now why would that be? Karl Rove explains here: