The National Association of Realtors released its most current report on pending home sales; it was utterly dismal. April witnessed a contraction from March of 11 percent; year-on-year pending house purchases fell by 26.5 percent. It must be recalled that a year ago the U.S. housing market was already in feeble shape.
These numbers confirm that America’s residential housing market remains in pathetic condition. This massive share of U.S. economic activity, the faltering of which triggered the ongoing global financial and economic crisis, remains in pathetic condition. With no recovery in sight-and it must be recalled that housing is typically the leading edge of a real economic recovery from a deep recession, there is no clear path towards healthy economic metrics. This sobering statistic, in conjunction with other tepid economic indicators, including a weak employment market, highlights the fragility of the U.S. economy. At this point, it is only massive government deficits, projected at more than $1.6 trillion for the current fiscal year, that has prevented a continued massive contraction in overall economic performance in America. And, as I have pointed out before, massive public debt is no viable strategy for creating long-term sustainable economic growth.
The International Monetary Fund, as predicted in a recent post, will need to find a new managing director, following the arrest and indictment of Dominique Strauss-Kahn over allegations of sexual assault involving a maid at a Manhattan hotel. With Europe engulfed in a full-blown sovereign debt crisis, and the IMF viewed increasingly as the lender of last resort for the insolvent PIGGS nations on the periphery of the European monetary union, a vacancy at the top of the International Monetary Fund adds further to already elevated levels of market uncertainty.
Among the names being floated for new head of the IMF is the finance minister of France, Christine Lagarde. Her name has been surfaced by a strong faction within the IMF which believes its head must remain a European, just as the leader of the World Bank is traditionally an American. In any event, whoever is the new leader of the IMF, he or she will head a pivotal backstop to the unraveling of the global financial system and economy that has been severely weakened and tarnished by a scandal that is an allegory for all the ills of the current global economic system.
A new video on YouTube provides a unique overview of my political novel, “Sarah Palin Apocalypse Americana.” An animated version of Sarah Palin provides a synopsis of my book, based on Sarah Palin being elected 45th president of the United States after winning the GOP presidential nomination and defeating President Barack Obama in the general election due to a continuing economic crisis and high unemployment.
The link to the YouTube video of President Sarah Palin reviewing “Sarah Palin Apocalypse Americana” is here: http://www.youtube.com/watch?v=ECeCKD1ZZxE
Tokyo has reported its second consecutive quarter of negative GDP growth, meeting the technical definition of an economic recession. Undoubtedly, the recent earthquake, tsunami and nuclear disaster exacerbated Japan’s already weak economic performance. Nonetheless, the trends were already bleak, but clearly are weaker in the wake of the recent disasters.
In the first quarter of 2011, the Japanese economy contracted at an annual rate of 3.7 percent. The return to recession in the world’s third largest economy will undoubtedly have negative repercussions on the trajectory of the overall global economic crisis. Furthermore, Japan already has the largest ratio of public debt to GDP of any advanced economy. The borrowing requirements of Tokyo are being further expanded due to the cost of reconstruction stemming form the earthquake and tsunami. A weakened economy coinciding with a worsening public debt crisis does not portend towards a positive overall outlook for the Japanese economy.
In a bizarre twist in the still-evolving global economic crisis, Dominique Strauss-Kahn, the iconic Director General of the IMF, has been arrested in New York in connection with allegations involving the sexual assault on a maid at a Manhattan hotel. According to news reports, the IMF head was removed from a Paris-bound flight just prior to take-off from JFK airport.
Normally, an allegation of sexual assault would not be a relevant factor in the global financial and economic crisis. However, the 62 year-old Strauss-Kahn and the International Monetary Fund he runs is so pivotal a player in the global economic crisis, any hint of scandal or illegality that may force him to resign is bound to have a profound impact on global markets. It was under the leadership of Strauss-Kahn that the IMF was center-stage in constructing the bailouts of insolvent nations in the Eurozone, specifically Greece, Ireland and now Portugal. Should he be formally charged, it is a certainty that the IMF will need to find a new leader. This will add a huge dose of uncertainty just as the European sovereign debt crisis is growing to levels that may have surpassed the possibility of containment.
The International Monetary Fund has released a report that contradicts what the Eurozone politicians have been boasting of for about a year. Despite assurances that vast sums of borrowed money loaned to the even more indebted Eurozone nations of Greece, Ireland and very soon Portugal would contain Europe’s sovereign debt crisis from spreading like a malignant cancer to the more substantial economies in the monetary union, the IMF apparently begs to differ.
According to the most recent IMF report on the European debt crisis, “contagion to the core euro area, and then onwards to emerging Europe, remains a tangible downside risk.” In the meantime, European politicians are already frantically looking at renegotiating their bailout loans to Greece and Ireland, with a reduction of the unbearably high interest rates being incurred by Athens and Dublin. But many savvy economists have already warned that these massive bailouts are an expensive fallacy, and will only delay the inevitable: restructuring loans that can never be repaid, or sovereign default.
The tone of the most recent semi-annual IMF report makes it clear that those who actually look at the numbers know that the European sovereign debt crisis is far from over, and has every possibility of getting much worse.
In a surprise and disturbing development, weekly unemployment assistance claims in the United States have reached 474,000. This is the largest weekly jobless claims report in eight months, and an increase of about ten percent over the prior week, despite predictions by economists that this week’s jobless report would actually show a drop in unemployment claims.
The current report is a major negative shift from several weeks earlier, when jobless claims dropped below 400,000. The unexpected and rapid acceleration in jobless claims is a clear indicator that the U.S. economy remains mired in deep crisis, with persistent and historically high rates of unemployment.
With the Obama stimulus expenditures running out of steam, a Republican dominated Congress unwilling to further increase deficit spending for more stimulus, and the Federal Reserve’s massive monetary intervention proving to be ineffective in facilitating job creation, all the signs are that the American economy is headed for a double-dip recession.
If anyone really believed that Federal Reserve Chairman Ben Bernanke was not deliberately destroying the intrinsic value of the American dollar through his recklessly loose monetary policies, the current downward spiral of the greenback is abundant evidence to the contrary. Most telling, despite severe fiscal problems in the Eurozone, even the wobbly euro is gaining strength in significant measure against the U.S. dollar.
It is not only against the basket of foreign currencies, including those considered weak, that the American dollar is winning the dubious race to the bottom. Commodities across the globe have risen sharply against the dollar. This is reflected not only in the price of known hedges against price inflation and currency manipulation such as gold and silver. A diverse range of resource commodities, including oil and natural gas, minerals and basic foodstuffs have increased in their dollar price. With the U.S. dollar remaining (for now) the global reserve currency, the morbidly inverse ratio between the plummeting value of the dollar and rising cost of commodities has had severe negative repercussions across the globe, both economically and politically. The current unrest sweeping the Arab world is at least in part due to rising food prices precipitated by Bernanke’s deliberate policy of eroding the value of America’s dollar.
My read of this situation is that the Federal Reserve is in a panic. They know that the American fiscal imbalance is unsustainable, and it seems Bernanke and company are deliberately eroding the value of America’s currency in order to default stealthily on the nation’s massive foreign debt, which the Fed knows can never be repaid, at least in terms of real value as opposed to nominal repayment. Inflation is the direct outcome of the Fed’s quantitative easing and monetization of the debt. The American taxpayer and consumer is being sacrificed, at whatever the cost, in order to inflate away that portion of the U.S. national debt which cannot be repaid.
The fools at the Federal Reserve really believe that China, OPEC and other foreign creditors are going to accept the destruction of their investment in U.S, Treasuries lying down, and that the U.S. dollar will forever remain the world’s reserve currency. I think that sooner rather than later future developments will render inoperative all the flawed assumptions of Ben Bernanke and his wrecking crew, otherwise known as the Federal Reserve.