Americans’ home debt greater than equity for first time since 1945; home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, steepest decline in the 20-year history of the Case-Shiller index.

Excerpt of article published at Tampa Bay’s 10 dot com (click to read whole article): WASHINGTON (AP) — “In a troubling report, the Federal Reserve said Americans’ equity in their homes has fallen below 50% for the first time since 1945.

Home equity is the percentage of a home’s market value minus mortgage-related debt.

The Fed’s flow of funds report shows home equity slipped to a revised 49.6% in the second quarter 2007 and fell further, to 47.9%, in the fourth quarter. It marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

The total value of equity also fell for a third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.

Home equity has steadily declined even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans, lines of credit and an increase in 100% or more home financing.

Economists expect equity to drop even further as declining home prices eat into the value of most Americans’ largest asset.

Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3% of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9%, will be “upside down” if prices fall 20% from their peak. That is, they will owe more than the home’s current market value.

The latest Standard & Poor’s/Case-Shiller index showed U.S. home prices plunging 8.9% in the final quarter of 2007 compared with a year ago, steepest decline in the 20-year history of the index.”

US reports Largest total monthly job loss in 5 years.

the great depressionExcerpt from original CNNMoney.com article by Chris Isidore:

NEW YORK (CNNMoney.com) — “Employers made their deepest cut in staffing in almost five years in February, according to a closely watched government report that showed the labor market to be far weaker than expected.

The weak report fueled already mounting recession fears and is likely to influence the Federal Reserve’s decision on interest rates later this month.

There was a net loss of 63,000 jobs, according to the Labor Department, which is the biggest decline since March 2003 and weaker than the revised 22,000 jobs lost in January. Economists surveyed by Briefing.com had forecast a gain of 25,000 jobs in the most recent reading.

“These poor jobs data are the strongest evidence yet that the economy has slipped into a recession of uncertain depth and duration,” University of Maryland Professor Peter Morici said.

Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000 and manufacturing, where job losses hit 52,000. Retailers cut 34,000 jobs, while business and professional services cut 20,000 jobs.

Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back, and hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.

Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.”

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy. -U.S. Congressman from Texas, Ron Paul, M.D.

“The greatest threat facing America today is not terrorism, or foreign

economic competition, or illegal immigration. The greatest threat

facing America today is the disastrous fiscal policies of our own

government, marked by shameless deficit spending and Federal Reserve

currency devaluation. It is this one-two punch -Congress spending

more than it can tax or borrow, and the Fed printing money to make up

the difference -that threatens to impoverish us by further destroying

the value of our dollars.”

“Unfortunately no one in Washington, especially those who defend the

poor and the middle class, cares about this subject. Instead, all we

hear is that tax cuts for the rich are the source of every economic

ill in the country. Anyone truly concerned about the middle class

suffering from falling real wages, under-employment, a rising cost of

living, and a decreasing standard of living should pay a lot more

attention to monetary policy.”

-Texas Congressman Ron Paul, M.D., April 10, 2007

People have hope:

“The official national debt figure, now approaching $9 trillion,

reflects only what the federal government owes in current debts on

money already borrowed…It does not reflect what the federal

government has promised to pay millions of Americans in entitlement

benefits down the road…Those future obligations put our real debt

figure at roughly fifty trillion dollars -a staggering sum that is

about as large as the total household net worth of the entire United

States…Your share of this fifty trillion amounts to about $175,000.”

-Texas Congressman Ron Paul, M.D. March 6, 2007

CNNMoney (See original article here.) By Brian O’Keefe, senior editor, quoting Jim Rogers on the US economy right now:

“Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I’m afraid it’s going to be much worse,” he says. “Bernanke is printing huge amounts of money. He’s out of control and the Fed is out of control. We are probably going to have one of the worst recessions we’ve had since the Second World War. It’s not a good scene.”

(The central bank’s second interest rate cut in a week raises the risk of inflation and bails out the banks.)

(Interest rate cut=increased money supply=inflation=hard times for poor and working families)

Rogers looks at the Fed’s willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? “It is a real danger and, in fact, a probability.”

The dollar headed for the biggest weekly loss against the euro since December after Federal Reserve Chairman Ben S. Bernanke signaled the bank may cut interest rates further to avert a recession.

(click play on video below to see more…)

the following is an excerpt of Feb. 15 (Bloomberg) article by By Stanley White and Kosuke Goto– “The dollar headed for the biggest weekly loss against the euro since December after Federal Reserve Chairman Ben S. Bernanke signaled the bank may cut interest rates further to avert a recession.

The currency traded near a one-week low versus the euro as Bernanke said the Fed “will act in a timely manner as needed to support growth.” The allure of U.S. assets diminished as the yield premium of European government bonds over Treasuries widened to the most in more than a week.

“The dollar will remain weak today after Bernanke’s speech,” said Motonari Ogawa, vice president of interest-rate products and foreign exchange in Tokyo at Morgan Stanley, the second-largest U.S. securities firm. “The U.S. yield disadvantage is increasing. I was about to turn into a dollar- bull, but I’m now rethinking it.”

CNNMoney (See original article here.) By Brian O’Keefe, senior editor, quoting Jim Rogers on the US economy right now:

“Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I’m afraid it’s going to be much worse,” he says. “Bernanke is printing huge amounts of money. He’s out of control and the Fed is out of control. We are probably going to have one of the worst recessions we’ve had since the Second World War. It’s not a good scene.”

(The central bank’s second interest rate cut in a week raises the risk of inflation and bails out the banks.)

(Interest rate cut=increased money supply=inflation=hard times for poor and working families)

Rogers looks at the Fed’s willingness to add liquidity to an already inflationary environment and sees the history of the 1970s repeating itself. Does that mean stagflation? “It is a real danger and, in fact, a probability.”

Great explanation of what is going wrong with our economy and why we should be upset on behalf of the people and the founding fathers:

GM offers buyouts to entire unionized workforce after $722 million loss in forth quarter; record $38.7 billion loss for the year in 2007

Published: February 13, 2008 in the New York Times: (see entire article here.)

“DETROIT — A surprisingly tough fourth quarter and a gloomy outlook for the United States market prompted General Motors to offer buyouts Tuesday to its entire unionized work force.

CNBC: Rick Wagoner, G.M. Chief, on Earnings

G.M.’s latest “special attrition program” covers all its 74,000 hourly employees and underscores the challenges it faces in its turnaround effort.

G.M. said Tuesday that it lost $722 million in the fourth quarter and a record $38.7 billion in 2007, although the annual loss was inflated by a one-time charge of $38.3 billion to write down deferred tax assets.

Still, few involved with the industry had predicted that G.M. would begin another companywide program to shrink its payrolls.

“A buyout that broadly based is a surprise and a very bold statement about the condition of the American auto industry,” said Harley Shaiken, a labor professor at the University of California, Berkeley.

G.M.’s buyout package follows a similar one made by Ford Motor, which last month extended offers to its 54,000 workers represented by the United Automobile Workers. Chrysler has offered buyouts to workers at certain plants.

G.M.’s chief financial officer, Frederick A. Henderson, called the buyouts “an important step” in the reorganization of the troubled domestic auto industry.

The company has already cut nearly 40,000 United States jobs in the last two years through buyouts and early retirements and has closed a number of plants to bring production in line with weaker demand for its vehicles.”

Congressman Ron Paul, MD vs. Fed Reserve Chairman Ben Bernanke, 11/08/2007:

China’s latest export to the US: Inflation.

Published: February 1, 2008

inflation graph

SHANGHAI — China’s latest export is inflation. After falling for years, prices of Chinese goods sold in the United States have risen for the last eight months.

Soaring energy and raw material costs, a falling dollar and new business rules here are forcing Chinese factories to increase the prices of their exports, according to analysts and Western companies doing business here.

The rise was a modest 2.4 percent over the last year. But even that small amount, combined with higher energy and food costs that also reflect China’s growing demands on global resources, contributed to a rise in inflation in the United States. Inflation in the United States was 4.1 percent in 2007, up from 2.5 percent in 2006.

Because of new cost pressures here, American consumers could see prices increase by as much as 10 percent this year on specific products — including toys, clothing, footwear and other consumer goods — just as the United States faces a possible recession.

In the longer term, higher costs in China could spell the end of an era of ultra-cheap goods, as well as the beginning of China’s rise from the lowest rungs of global manufacturing.

Economists have been warning for months that this country’s decade-long role of keeping a lid on global inflation was on the wane.

“China has been the world’s factory and the anchor of the global disconnect between rising material prices and lower consumer prices,” said Dong Tao, an economist for Credit Suisse. “But its heyday is over. We’re going to see higher prices.”

“…In the meantime, makers of toys, apparel and footwear — highly labor-intensive industries — are being forced to consider raising prices even as growth in the United States slows, a rare confluence of events not seen in decades.

Companies that began outsourcing production to China in the 1990s mostly benefited from lower costs, which translated into both higher corporate profits and lower consumer prices. Now, many Western companies have to rethink pricing.

“Companies are now ordering for the spring of 2009,” says Nate Herman, director of international trade at the American Apparel and Footwear Association, based in Arlington, Va., that represents some big clothing and footwear makers. “Factories are coming back and asking for 20, 30, 40, 50 percent price increases.”

Will importers pass those costs on to consumers? “It’s going to be hard to avoid some increase,” he said.”