ragerunner

Even if no state officially declares bankruptcy, their fiscal decline will weigh on the economy for a significant time to come. If one or two do officially file bankruptcy of some form, (like Cali or Illinois) the financial shock to the system will be much, much greater than Greece, Spain, or Iceland every thought about being. Many state and local governments used the Federal stimulus program over the last year or two to keep things going. Without another big FED stimulus program states and local governments will have no choice but to cut deep and long for many years to come. Schools, Universities, transit, infrastructure, parks, and more are in for a very nasty ride. To tie this to some previous discussions about government structures in Ohio. I think we may very well see the reduction in government agencies (such as Counties, Cities, Townships, school district, park districts, etc.) because the option to keep them all seperate will no longer be available, financially. It’s “Chapter 66” as U.S. States Face De Facto Bankruptcy “Forty-eight of 50 states face budget shortfalls this year,” they further report. “Many shortfalls amount to more than 20 percent of planned spending. The plunge in state tax revenue is the worst on record.” Illinois "It has reached the point where the state has, quite literally, stopped paying bills. This means that jobs are getting cut, paychecks are getting delayed, and businesses are being shut down. There is simply – and again, quite literally – no more money." California “People think we’re becoming a third world country,” says Arnella Sims, a Los Angeles County court reporter. “We are on the verge of system failure,” warns the executive director of the California Budget Project." http://www.marketoracle.co.uk/Article21010.html

This will be a long term trend. Income options in the US are clearly showing signs of long term decline for more and more people.

To me the real number to watch is how many people are employed and that number fell another 301,000 people in June. Modest private sector hiring in June Jobless rate falls to 9.5% but even that isn't good news "Total nonfarm payroll employment fell by 125,000 in June as the number of temporary census workers dropped by 225,000, according to the Labor Department. This is the first decline in nonfarm payrolls this year." This is the second straight sharp monthly decline in the labor force. While unemployment fell by 350,000 to 14.6 million for June, employment also fell a sharp 301,000 to 139.1 million. http://www.marketwatch.com/story/modest-private-job-hiring-in-june-2010-07-02

Calling all new stimulus programs, calling all new stimulus programs. Please report to Washington as quickly as possible. First new home sales plunged, now previously owned homes sales have plunged. Pending Home Sales at Record Low as Tax Credit Ends "Contracts for pending sales of previously owned homes plunged a record 30 percent in May, far more than expected, after a popular tax credit expired at the end of the prior month, a survey from the National Association of Realtors showed Thursday." "The index is 15.9 percent lower than May 2009 and fell sharply in all regions of the country." http://www.cnbc.com/id/38036138

I am sure they will/are using all options. But, I think they must keep printing. I posted an article that showed that the total amount of US dollars in circulations continues to drop (I believe this has not happened since the great depression). I think they must keep printing or deflation will set in, in a big way.

I am more and more in the camp that the FEDs will try everything in their 'printing press power' to hyperinflate our way out of this mess. The next leg down is starting to show its ugly head. RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve "As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve." "Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy. The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost." http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7857595/RBS-tells-clients-to-prepare-for-monster-money-printing-by-the-Federal-Reserve.html

Things are really starting to take shape for Denver's transit system. Denver now has under construction or under bid, the west light rail line, the BRT system on highway 36 (towards Boulder), the Union Station transit hub, and these 3 new communter rail lines. RTD Board selects Denver Transit Partners for Eagle P3, FasTracks’ single largest contract "Denver, June 15, 2010 – The Regional Transportation District (RTD) has selected Denver Transit Partners for the single largest FasTracks contract to build and operate commuter rail lines to Denver International Airport (DIA), Arvada-Wheat Ridge and south Westminster." "Denver Transit Partners’ proposal is $300 million lower than RTD’s budget estimate and it plans to open the line to DIA by January 2016, 11 months ahead of RTD’s deadline. Denver Transit Partners’ proposal along with RTD’s project costs total $2.085 billion, compared with RTD’s budget estimate of $2.385 billion. The RTD “best-value” evaluation rated it both the higher technical proposal and the lower cost proposal of the two bidding teams." “It is a remarkable achievement for RTD to get a project of this magnitude through a public-private partnership that meets our goal of contracting under our budget and ahead of our schedule,” said RTD Chair Lee Kemp. “We said three years ago that public-private partnerships would be a vital part of keeping our FasTracks program moving forward. The decision tonight shows that the faith placed in us by the Federal Transit Administration and our stakeholders through some difficult times was justified has been rewarded.” http://www.rtd-fastracks.com/media/uploads/main/MEDIA_RELEASE20100615RTD_Board_Selects_Denver_Transit_Partners_as_Eagle_P3_Concessionaire.pdf

After working for government in Ohio for several years I say, eliminate townships governments, increase Board of County Commissioners to 7 members and have them each elected by a geographical area. Next, make cities have the upper hand for annexation laws. This will streamline the government system, give more representation to geographical regions and focus our resources and economic development towards the cities and not the countryside. This will also make the region more competitive economically, focus financial resources towards current infrastructure and in the long run save the taxpayer money and preserve the environment. Until then, the taxpayer continues to lose, the economy struggles, the return on investment is diluted and sprawl is the name of the game.

If you are right (I personally hope so - I don't think the government should continue to use taxpayer money to manipulate markets) then we will clearly have recessionary numbers by the holidays and a double dip will be a given.

Look for a new taxpayer funded support program soon. If not, look for recessionary data by the holidays. National new-home sales plunged to record low in May "Purchases of new homes in the United States fell in May to a record low as a federal tax credit expired, showing the market remains dependent on government support." "Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, according to a Commerce Department report released Wednesday. Demand in prior months was revised down." “Underlying demand for housing absent the government’s tax credit remains disappointingly weak,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report. “The housing market recovery is looking like a mirage.” http://www.ibj.com/national-newhome-sales-plunged-to-record-low-in-may-/PARAMS/article/20711

This will not do. It has quickly become apparent that just having historically low interest rates are not enough to keep the RE market up, without other direct government intervention. The chances are very high we will see another taxpayer funded bailout program for the RE market soon. U.S. June home builders index falls 5 points to 17 "WASHINGTON (MarketWatch) - Sentiment among U.S. home builders retreated in June after a tax break for home buyers expired, according to a monthly survey released Tuesday by the National Association of Home Builders. The housing market index dived to 17 in June from 22 in May, the NAHB reported. All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. The index was lower than the 21 that was expected by economists surveyed by MarketWatch, and was the lowest since it hit 15 in March." http://www.marketwatch.com/story/us-june-home-builders-index-falls-5-points-to-17-2010-06-15 What Happened to the Green Shoots? "Mortgage applications for new purchases have indicated an incredible fall in home sales following the April expiration of the buyer credit. They're down 42%. Foreclosures also continued to occur at a very high rate, so housing market inventory almost certainly increased in May." http://finance.yahoo.com/banking-budgeting/article/109777/what-happened-to-the-green-shoots

It should be interesting to see what the new tower in Downtown Cincy does to the office market and vacancy rate. There is only so much demand to go around.

This part of the real estate system has only touch the edge of the iceberg when it comes to defaults. Delinquent properties in Greater Cincinnati on the rise "Cincinnati now ranks in the nation’s top 20 for its delinquency rate on securitized commercial real estate loans." “We’re early in that default game. That situation is going to continue to worsen before it improves,” said Paul Plattner, senior vice president specializing in property management for Colliers International/Cincinnati." Read more: Delinquent properties in Greater Cincinnati on the rise - Business Courier of Cincinnati http://cincinnati.bizjournals.com/cincinnati/stories/2010/06/14/story1.html

This is worth the read. Its a great article that explains employment numbers, how they are collected, its holes, the big picture and what is coming. The bad news - bad news on jobs Commentary: Five reasons the employment numbers are worse than they seem "BOSTON (MarketWatch) -- The news on jobs isn't as bad as it seemed on Friday. It's worse." "We already know that when you strip out the short-term Census jobs, May's jobs growth was a pitiful 41,000. But what people haven't realized is that the leading indicators for June are even worse." "A million and a half people disappearing? It sounds like a crazy conspiracy theory. But there it is, buried in the fine print of the government's own data." "Some of the new "jobs" may not even exist" "That's because they're being counted by the Federal Department of Guesswork. Ever since 1994, say economists, Uncle Sam has been using some statistical, er, "adjustments" to the core jobs data to come up with the, er, "true" picture. It will surprise no one that these "adjustments" make the data look better, rather than worse." "Some recovery: The number employed in the private sector is still about 900,000 below where it was even a year ago, and about 8 million below where it was in 2007. And remember, it has to keep growing just to stand still, because the population is growing." http://www.marketwatch.com/story/five-ways-the-jobs-numbers-are-worse-than-bad-2010-06-08?pagenumber=2

Take this for what it is worth. Ben didn't 'see' the house bust coming, the bank debacle coming, and didn't see the recession coming. I hope he is right, but after watching this event over the last few years one thing has become pretty apparent. When they (Ben, FEDs) start telling everyone something will not happen, it probably is already in the cards. Bernanke doesn't expect U.S. double-dip recession Fed chief: consumer spending, business investment will pull economy forward "My best guess is we'll have a continued recovery [but] it won't feel terrific," he said." http://www.marketwatch.com/story/feds-bernanke-doesnt-see-double-dip-recession-2010-06-08 I also find it concerning that one of the 'great' economist in the world continues to 'guess'.

The housing market and industry is about to take another noticable leg down. Housing experts predict more homeowners falling into foreclosures "Real estate experts predicted this week that 3.5 million homes nationally will go into foreclosure this year as risky adjustable-rate mortgages written in 2005 reset and unemployment continues." "That's up from 2.8 million homeowners who faced foreclosure in 2009, and sets a pace that isn't likely to plateau until late 2011, said RealtyTrac Senior Vice President Rick Sharga." "The second wave of toxic loans is about to hit," said Sharga, whose Irvine, Calif.-based company tracks foreclosure filings." http://www.palmbeachpost.com/money/real-estate/housing-experts-predict-more-homeowners-falling-into-foreclosures-725875.html

I think we may have seen the top of the stimulus bump in job creation.

Speaking of inflation, deflation and money supply. The US money supply shrunk, the first time since the great depression. This makes you realize just how bad things have been. We have 'created' trillions and the money supply is shrinking. WOW!!!! If this continues inflation will stay under control for the foreseeable future. Report: US Money Supply Plunging at 1930s Rate "The United States’ M3 money supply reportedly is plunging at an accelerating pace similar to that in 1929 to 1933, despite near-zero interest rates. The M3 data — which include a broad range of bank accounts and are tracked by British and European experts for danger signs about the U.S. economy — began shrinking a year ago, London’s Daily Telegraph reported. That race has since picked up speed. The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6 percent, the report said. The assets of institutional money market funds fell at a 37 percent rate, the sharpest drop ever. "It’s frightening," Professor Tim Congdon, from International Monetary Research, told the newspaper." http://www.moneynews.com/StreetTalk/US-Money-Supply-Plunging/2010/05/27/id/360292

Risk is very high right now. That is why the private sector is giving out very few loans and the Government is taking on almost all the home loans risk at this time. As far as interest rates, they are being kept artifically low and are currently not connect to the real risk that would be in the rates if the FEDs would step back and let the market reprice rates according to current risk concerns.

By mid to late summer you can either put a fork in the housing market again or the FEDs will have a newly implemented housing support program in place, again. FHA Home-Financing Volume Sign of ‘Very Sick System’ (Update2) "May 24 (Bloomberg) -- Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac." “This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.” http://www.businessweek.com/news/2010-05-24/fha-home-financing-volume-sign-of-very-sick-system-update2-.html Experts see underlying weakness in housing Spring sales propped up by expiring tax incentive, low mortgage rates "The housing market had a spring fling with buyers hoping to find bargains using the now-expired government tax credits and record low interest rates. Now it's back to reality. The sweet sales pace of March and April, many experts agree, will sour by mid-summer, and the national housing downturn has not yet ebbed." http://www.msnbc.msn.com/id/37340069/ns/business-real_estate/

Individual bankruptcies are on the rise, foreclosures are moving into new record territory, Commercial loans are the next be default wave and all these things are/will put Cities, States and Counties on the edge. Municipal Bonds: The Next Financial Land Mine? "As Wall Street nervously watches the sovereign debt crisis unfold in Greece, another potential landmine is looming closer to home, one that could bring U.S. cities and towns to their knees, force the federal government to cough up another bailout package, and potentially send the unemployment rate much higher. The danger this time? Municipal debt." "State and local government are frantically scrambling to meet budget shortfalls as high unemployment and shaky consumer confidence mean less income tax and smaller sales tax revenue for government coffers. At the same time, falling home prices and rising foreclosures will start to hit municipalities hard this year as all those property reassessments done over the past 18 months kick in." "A couple of municipalities, such as Los Angeles and Detroit, have even whispered the "B" word. Former Los Angeles Mayor Richard Riordan argued in an editorial in the Wall Street Journal earlier this month that the city will likely have little choice but to declare bankruptcy between now and 2014." http://www.time.com/time/business/article/0,8599,1991062,00.html

I know CincyDad has talked a lot about this on here. The good thing for the government is a lot of these grads won't show up in the unemployment stats since they didn't have a job to draw unemployment benefits from. They also will not be buying any real estate anytime soon. College Grads Flood U.S. Labor Market With Diminished Prospects "May 19 (Bloomberg) -- Ten months after graduating from Ohio State University with a civil-engineering degree and three internships, Matt Grant finally has a job -- as a banquet waiter at a Clarion Inn near Akron, Ohio." "Students who graduated in the early 1980s -- when two recessions drove unemployment to a peak of 10.8 percent -- suffered wage losses of more than $100,000 in the next 15 years compared with those who came into the job market during the decade’s boom years, according to Kahn’s research." “They get shifted down into a lower level and lower pay scale,” she said. “They are working for worse firms, they’re not learning as many skills and they’re not moving up the career pyramid as quickly.” http://www.bloomberg.com/apps/news?pid=20601109&sid=a8f9A4GYLECE&pos=14

This just can't be. Wall Street and the big Banks were 'stealing' from the taxpayer through the municipal bond market? I am shocked that their upstanding ethics would allow them to do such things. Man, the Banks and Wall Street were sure living it up on the taxpayer tab and still are. Conspiracy of Banks Rigging States Converged in Mortgage Crash "May 18 (Bloomberg) -- A telephone call between a financial adviser in Beverly Hills and a trader in New York was all it took to fleece taxpayers on a water-and-sewer financing deal in West Virginia. The secret conversation was part of a conspiracy stretching across the U.S. by Wall Street banks in the $2.8 trillion municipal bond market." "West Virginia was just one stop in a nationwide conspiracy in which financial advisers to municipalities colluded with Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Wachovia Corp. and 11 other banks." "They rigged bids on auctions for so-called guaranteed investment contracts, known as GICs, according to a Justice Department list that was filed in U.S. District Court in Manhattan on March 24 and then put under seal. Those contracts hold tens of billions of taxpayer money." http://www.bloomberg.com/apps/news?pid=20601110&sid=aAePAQdl8rKc

I think there is a very real possibility of inflation in needed items, food, energy, etc (we are already starting to see this). But, I am not sure we will see widespread inflation any time soon. A lot of this money is being lost in the deflationary void and never coming back out.

The debt never went away, it was just put into another account (taxpayers). What made matters even worse, we increased the debt load with these transfer. The second debt storm Who will bail out the countries that bailed out the world's corporations? SAN FRANCISCO (MarketWatch) -- The financial crisis never really went away. "The debt mountain that brought down some of the world's biggest banks and dragged the international financial system to the brink of disaster has simply shifted to governments. Now it's threatening countries around the globe -- and, if left unchecked, could rip the very fabric of Europe's economic system and wreck economic recoveries in the U.S., China and Latin America." http://www.marketwatch.com/story/the-second-debt-storm-hits-nations-2010-05-14 Looks like to me the market is also concerned about US domestic economic conditions. Not just the Euro. Lowes lowering it outlook and NY manufacturing dropping singificantly from last month. MARKET SNAPSHOT: U.S. Stocks Indecisive As Euro's Fall Tracked "U.S. stocks wavered on Monday as Wall Street remained cautious after the euro fell to a four-year low and a forecast from home-improvement retailer Lowe's Companies Inc. weighed on sentiment." "The New York Federal Reserve Bank reported its index of manufacturing activity in the region fell to 19.11 in May from 31.86 last month." http://www.nasdaq.net/publicpages/NewsDetailPublic.aspx?symbol=&storyId=20100517%5CACQDJON201005171052DOWJONESDJONLINE000226.htm