Dollar meltdown

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In Parts of U.S., Foreclosures Top Sales

Floyd Norris

NY Times

March 1, 2008

Mortgage foreclosure notices are going out so fast that in
some states the number of new foreclosure proceedings each month is
greater than the number of homes sold that month.

The foreclosure problem appears to be greatest in the West,
particularly in Nevada, where home prices soared in the housing boom
and are now falling rapidly.

Worries about foreclosures have led to a variety of legislative
proposals in Washington and in state capitals, as well as to a
voluntary plan organized by the Treasury secretary, Henry M. Paulson
Jr., that seeks to delay foreclosures while homeowners and lenders try
to work out agreements. But so far, no consensus has emerged on
legislation, and the volume of foreclosure notices continues to rise.

During January, it was reported this week by RealtyTrac,
there were 153,745 initial foreclosure notices sent out in the United
States. That dwarfed the 43,000 total sales of newly built
single-family homes and amounted to nearly half the total sales figure,
which includes sales of existing homes and condominiums.

In the West, however, the picture was much worse. There the
number of sales was barely higher than the number of foreclosure
notices. It appears that in the most heavily affected states the sales
totals lagged behind the number of foreclosure notices.

Moreover, the volume of foreclosures is especially high in some states. In
California, RealtyTrac reports, nearly a quarter-million properties
were subject to some legal action related to foreclosure in 2007.
Not all those foreclosures were completed, of course, either because
the process dragged into this year or because the homeowner managed to
sell the house or come up with money to make the missed payments. But
those foreclosure moves affected 1.9 percent of the living units in the
state - or 1 in 52 homes.

California led the country in number of properties affected by
foreclosure moves, but was only fourth in terms of the percentage of
homes affected. Nevada led in that dubious category, with 3.4 percent -
or 1 in 30 - of the housing units affected. It was followed by
Michigan, which missed out on the housing boom but is playing a large
role in the bust, and by Florida, which like Nevada experienced a wave
of speculative building amid rapidly rising prices.

Those foreclosures, of course, represent dislocation for the
homeowners being forced out of their homes and losses for the lenders.
But they also represent an alternative supply of homes for buyers,
providing competition for other sellers.

That can be particularly true because sales of homes that have been
foreclosed, or are about to be foreclosed if they cannot be sold
quickly, are made by sellers who are in no position to wait for better
prices. Those sales can help to push prices lower for everyone.

For new-home builders, one result has been growing inventories of
completed homes without buyers. The number of such houses across the
country hit a record 197,000 in December, and slipped only to 195,000
in January, the Census Bureau reported this week. Moreover, the median
age of such houses is up to 6.7 months, nearly twice the age of such
houses when the housing market was peaking in the fall of 2006.

The states with the lowest rates of foreclosures tend to be states
that missed the boom in housing prices and now have reasonably good
economies. In South Dakota, there were only 50 homes involved in
foreclosures last year, a minuscule 0.007 percent of homes in the
state. Vermont, Maine, West Virginia and North Dakota also turned in
rates below 0.1 percent.

Houses are being abandoned and vacant houses dot formerly prosperous neighborhoods.

Vacant Homes in U.S. Climb to Most Since 1970s With Ghost Towns

Brian Louis and Dan Levy

Bloomberg

Feb. 29, 2008

When Quinn Cuthbertson looks around his new neighborhood in El
Dorado Hills, California, he sees rows of empty homes and barren
hillsides. A promised new school and a clubhouse haven't materialized.

Cuthbertson paid $460,000 for a four-bedroom house in this northern
California town named for the mythical golden city. He now suspects his
neighbor spent $45,000 less. Nearby, 87 of 98 Toll Brothers Inc. home
sites are undeveloped.

Almost 200,000 newly constructed single-family homes are
sitting empty in the U.S., the most since Commerce Department
statistics began in 1973. Partially completed developments
reduce revenue for cities and towns and hurt businesses, said Nicolas
Retsinas, the director of Harvard University's Joint Center for Housing
Studies. Rising foreclosures and falling property values may cut tax
revenue by more than $6.6 billion for 10 states, including New York,
California and Florida, the U.S. Conference of Mayors said in a
November report.

"Half-filled developments are an advertisement for a failing housing
market," said Retsinas, a former assistant secretary for housing at the
U.S. Department of Housing and Urban Development. "It also has a
spillover effect on the surrounding community."

Falling Prices

About 370,000 new homes are for sale because people who
initially contracted to buy them backed out, according to estimates in
a Feb. 15 report from analysts at New York-based CreditSights Inc. An
additional 216,000 homes are under construction, according to Commerce
Department data.

In January 1973, the number of finished new homes for sale was
97,000, when the U.S. population was about 212 million, according to
the U.S. Census Bureau. In December 2007, 197,000 completed homes were
on the market and in January 2008 there were 195,000. The current
population is 303.5 million.

Home prices may fall at least 8 percent nationwide and by as much as
26 percent from the third quarter of 2007 before hitting bottom,
according to a Feb. 13 report from New York- based Deutsche Bank AG
analyst Karen Weaver, the firm's global head of securitization
research.

El Dorado Hills and the nearby towns of Bass Lake and Cameron Park
started growing in the mid-1990s as Californians sought out new suburbs
within commuting distance of Sacramento, the state capital. El Dorado
Hills is about 30 miles east of Sacramento and used to be known as just
a bus stop between the San Francisco Bay Area and Lake Tahoe resorts.

El Dorado's Growth

"Thirty years ago, El Dorado Hills was a Raley's and a 76 gas
station, and some homes off in the hills," said Mike Applegarth, a
senior administrative analyst in the El Dorado County chief
administrative office. Raley's is a grocery store chain based in West
Sacramento, California.

Today the town has a Target Corp. store, a Mercedes-Benz dealership and a Regal Cinemas with 14 screens, Applegarth said.

Most of the community's growth came in the late 1990s when the El
Dorado County Board of Supervisors gave approval for construction of
11,598 homes as part of five development agreements, said Laura Gill,
the county's chief administrative officer.

Lennar Corp., Centex Corp., Cambridge Homes and Parkland Homes plan
to build 1,500 houses on 990 acres in El Dorado Hills in the Blackstone
El Dorado development south of Highway 50, according to the project's
Web site. So far, Centex has built 30 of the 105 houses it plans to
construct there, said salesman Bob DeWitt.

Building permits in El Dorado County are estimated to drop to $3.5
million in the fiscal year ending June 30, from a peak of $5.7 million
in fiscal 2004, Gill said.

Cutting Prices

In Yorkville, Illinois, a town 55 miles southwest of Chicago,
residential building permits fell 47 percent in 2007 from the year
earlier.

In El Dorado Hills, Cuthbertson, a California Highway Patrol officer
who has two sons ages 4 and 6, plans to stay in the area, and says he
can afford to wait for prices to recover.

"We'll wait to see what the neighborhood will be like," Cuthbertson
said. "We know prices might be going down, but in five years we'll be
OK."

Homebuilders can't wait. They're cutting prices even further than
last year and some are courting real estate brokers and using auctions
to get rid of homes. They usually rely on their own staff to sell
properties.

Builders Retrench

"It's a desire for the companies to do whatever is necessary to
retrench and put themselves in a position to succeed when the
residential markets turn more favorable," said Keven Lindemann,
director of the real estate group at SNL Financial in Charlottesville,
Virginia.

The five largest U.S. builders had almost 8,900 completed homes for
sale at the end of their most recent quarters, according to data
compiled by Bloomberg.

D.R. Horton Inc., the second-biggest U.S. builder, held an
"UnAuction" on Feb. 16 and Feb. 23 with prices cut as much as 50
percent at 23 developments in Southern California.

Pacific West Cos., a Reno, Nevada-based builder, said this month
that it's offering a "risk free" price guarantee to buyers in its
California communities, including El Dorado Hills. If a similar
property in the same development sells for less than a homeowner paid,
the company will refund the difference.

'Element of Fear'

"We're taking the element of fear away," said Taylor Cohee, Pacific West's vice president of sales.

Builders such as Los Angeles-based KB Home and D.R. Horton of Fort
Worth, Texas, are seeking out real estate agents to bring buyers to
developments, said Joellen Chappell, sales manager at Century 21
M&M and Associates in Stockton, California. Century 21 realtors are
now getting commissions of as much as 4 percent for a sale.

"They're bribing us with bonuses," Chappell said.

Stockton's metropolitan area had the second highest foreclosure rate
in the U.S. last year and again in January. Almost 5 percent of
households in that community were in some stage of foreclosure in 2007,
according to RealtyTrac Inc., an Irvine, California-based seller of
foreclosure data.

At least 14 new-home auctions are scheduled through April in
California, Florida, Illinois, Arizona and Nevada, said Brigitte
Boudress, a Beverly Hills, California-based spokeswoman for Kennedy
Wilson Inc.

Moving Inventory

"The builders are looking for ways to accelerate sales and get
inventory moving," said Marty Clouser, senior vice president at Kennedy
Wilson. The company auctioned 450 properties last year for $170 million
at prices 85 percent to 90 percent less than the homes' listings,
Clouser said.

The decline in housing values is reducing the amount of revenue that
counties make from property taxes, said Jacqueline Byers, director of
research and outreach with the National Association of Counties in
Washington. In states like California that require builders to use
sales proceeds to pay for streets, fire stations and schools, that
means slower development.

Brent Sease, who bought a five-bedroom home built by Miami- based
Lennar in El Dorado Hills, said a park and school that were supposed to
be constructed are at least two years from being completed. Across the
street, red tags that say "Available" are pasted on two houses.

"That's the thing I'm concerned about," said Sease, a software
manager with three daughters. "It's going to be a while before they put
all that in, because they're not selling homes."

It's getting to the point where once pristine suburbs are turning into slums:

The Next Slum?

Christopher B. Leinberger

The Atlantic Monthly

March 2008

The subprime crisis is just the tip of the iceberg.
Fundamental changes in American life may turn today's McMansions into
tomorrow's tenements.

Strange days are upon the residents of many a suburban
cul-de-sac. Once-tidy yards have become overgrown, as the houses they
front have gone vacant. Signs of physical and social disorder are
spreading.

At Windy Ridge, a recently built starter-home development
seven miles northwest of Charlotte, North Carolina, 81 of the
community's 132 small, vinyl-sided houses were in foreclosure as of
late last year. Vandals have kicked in doors and stripped the copper
wire from vacant houses; drug users and homeless people have furtively
moved in. In December, after a stray bullet blasted through her son's
bedroom and into her own, Laurie Talbot, who'd moved to Windy Ridge
from New York in 2005, told The Charlotte Observer, "I thought I'd bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen."

In the Franklin Reserve neighborhood of Elk Grove, California, south
of Sacramento, the houses are nicer than those at Windy Ridge - many
once sold for well over $500,000 - but the phenomenon is the same. At
the height of the boom, 10,000 new homes were built there in just four
years. Now many are empty; renters of dubious character occupy others.
Graffiti, broken windows, and other markers of decay have multiplied.
Susan McDonald, president of the local residents' association and an
executive at a local bank, told the Associated Press, "There's been
gang activity. Things have really been changing, the last few years."

In the first half of last year, residential burglaries rose by 35
percent and robberies by 58 percent in suburban Lee County, Florida,
where one in four houses stands empty. Charlotte's crime rates have
stayed flat overall in recent years - but from 2003 to 2006, in the 10
suburbs of the city that have experienced the highest foreclosure
rates, crime rose 33 percent. Civic organizations in some suburbs have
begun to mow the lawns around empty houses to keep up the appearance of
stability. Police departments are mapping foreclosures in an effort to
identify emerging criminal hot spots.

The decline of places like Windy Ridge and Franklin Reserve is
usually attributed to the subprime-mortgage crisis, with its wave of
foreclosures. And the crisis has indeed catalyzed or intensified social
problems in many communities. But the story of vacant suburban homes
and declining suburban neighborhoods did not begin with the crisis, and
will not end with it. A structural change is under way in the housing
market - a major shift in the way many Americans want to live and work.
It has shaped the current downturn, steering some of the worst problems
away from the cities and toward the suburban fringes. And its effects
will be felt more strongly, and more broadly, as the years pass. Its
ultimate impact on the suburbs, and the cities, will be profound.

Arthur C. Nelson, director of the Metropolitan Institute at Virginia
Tech, has looked carefully at trends in American demographics,
construction, house prices, and consumer preferences. In 2006, using
recent consumer research, housing supply data, and population growth
rates, he modeled future demand for various types of housing. The
results were bracing: Nelson forecasts a likely surplus of 22 million
large-lot homes (houses built on a sixth of an acre or more) by 2025 -
that's roughly 40 percent of the large-lot homes in existence today.

For 60 years, Americans have pushed steadily into the suburbs,
transforming the landscape and (until recently) leaving cities behind.
But today the pendulum is swinging back toward urban living, and there
are many reasons to believe this swing will continue. As it does, many
low-density suburbs and McMansion subdivisions, including some that are
lovely and affluent today, may become what inner cities became in the
1960s and '70s - slums characterized by poverty, crime, and decay...

Not surprisingly, consumer confidence continues to plummet.

U.S. Michigan Consumer Index Falls to 16-Year Low

Courtney Schlisserman

Bloomberg

Feb. 29, 2008

U.S. consumers lost confidence in February as the labor market cooled and inflation picked up.

The Reuters/University of Michigan final index of consumer
sentiment decreased to 70.8, from 78.4 in January. The measure is the
lowest final reading since February 1992 and compares with a
preliminary measure for February of 69.6 reported two weeks ago.

The first drop in employment in more than four years last month and
higher gasoline prices are causing Americans to take a dimmer view of
the economy and their own financial situations. Federal Reserve
Chairman Ben S. Bernanke earlier this week signaled the central bank is
prepared to lower interest rates further to keep the economy out of a
recession.

The decline in confidence "points to slowing spending going
forward," said Dana Saporta, an economist at Dresdner Kleinwort in New
York, who forecast a final reading of 70.5. "The combination of tighter
credit conditions, falling home prices and an uncertain labor market
argue for little or no spending growth until the tax-rebate checks come
in, around mid- May."

Economists had forecast the measure would fall to 70, according to
the median of 55 projections in a Bloomberg News survey. Estimates
ranged from 67.8 to 73.

The final Reuters/University of Michigan consumer confidence report
for the month reflects about 500 responses, compared with the 300
households for the preliminary survey, which was released on Feb. 15.

The monthly gauge averaged 86.1 last year and has weakened in six of
the past seven years since peaking at 112 in January 2000...

Jobs Report

The U.S. lost jobs for the first time in four years last month. The Labor Department is scheduled to release February's employment report on March 7.

This month, weekly initial jobless claims have remained elevated
and the number of Americans continuing to stay on benefit rolls reached
the highest level in more than two years, signaling that weakness in
the labor market continues.

Outside of the labor reports, other releases are showing weakness in
the housing market is spreading to other parts of the economy. Orders
for U.S. durable goods fell 5.3 percent in January, the Commerce
Department said Feb. 27, signaling businesses are cutting spending.

Higher energy and food bills also are hurting consumers' outlooks
and contributing to them having increasingly less to spend on
discretionary items. The price of regular-grade gasoline rose to an
eight-month high of $3.152 on Feb. 26.

Consumers already are scaling back spending. Spending adjusted for
inflation was unchanged in January for a second consecutive month, the
Commerce Department reported today.

Target Corp., the second-largest U.S. discount chain, said earlier
this week that revenue rose 0.8 percent in the quarter ended Feb. 2.
Executives on a conference call said sales in the first half of this
year would trail the latter part of 2007.

Where is this leading? SOTT.net's banking expert, Simon Davies, posted in these pages
last week an excellent and chilling description of the coming collapse
of the world financial system. The bottom line, according to Davies, is
this:

The collapse of the international banking system is imminent. For
the elite it will be a bonanza while for the rest of us it spells a
return to servitude in a feudal society.

The article is a must read not only for the larger context but also
as an analysis of the Northern Rock crisis in the U.K. But what's
really chilling is the larger picture and its implications for those of
us who work.

...The issue is one of confidence in the banking system
which can reasonably be measured by the willingness and ability of
banks to lend to each other. The fact is that in September 2007 the banks simply stopped lending to each other. In plain English the banking system stopped and very nearly collapsed. It was this fact and no other that led the UK government to step in and rescue Northern Rock.

No doubt they were persuaded that it was a fine idea by the coterie
of bankers that stepped forward to advise them. Bankers who had
everything to lose if the government did not step in where the UK and
international banking system was unable and/or unwilling to lend to
Northern Rock directly or at least without a direct government
guarantee.

This begs the question of what was wrong with the UK and international banking system in September 2007 and has anything changed?

The Global situation

The Sub-prime crisis originated in the US, its contagion spreading
through the global financial system. Despite what the mass media has to
say on the topic the real issue isn't whether poor Americans are
defaulting on their mortgages; the issue is the pyramid of
structured financing companies, repackaging companies and their
plethora of bonds, notes and other financial instruments, not to
mention the vast array of structured derivatives that make it nigh
impossible for anybody to assess the real financial performance of
those entities, securities and derivatives.

In a nutshell none of the banks know just how broke the others are.

The fact is that the Federal Reserve assisted by other
central banks including the Bank of England and the European Central
Bank deliberately engineered the greatest expansion of credit in
history by pumping vast sums of money into the banking system.

...The game could continue, like musical chairs, until something caused the music to stop. Except,
unlike musical chairs where one person doesn't have a chair, in this
game almost nobody has a chair and the players know it. The Sub-prime crisis caused the music to falter and the players ran for their chairs.

The banks got caught in the trap of their own and the regulator's
making. They have had to bring the value of many of these complex
financial instruments back on to their books, prop up their offshore
structure investment vehicles and make substantial provisions for the
most obvious losses. The reason it became a crisis is that the banks stopped lending to each other and the system relies on them doing that.

Why did they stop lending to each other?

Because they each know how bankrupt the
system is and how the game has been played and they are desperately
trying to make sure they get one of the few chairs if the music stops
completely. They panicked and the system shuddered.

At this point the regulators stepped in and basically wrote blank
cheques to keep the banks afloat. It is the desperation of this central
bank support that we are seeing in the Northern Rock case.

Davies then connects some dots, specifically "repos" and the Fed's decision to stop publishing M3 numbers and concludes:

It would seem that the Federal Reserve has created for
itself and its banking collaborators a means of secretly supporting
banks that are in fact insolvent. This is immoral but absolutely necessary if the international banking system is to be kept alive.

Deliberate Policy?

I'd now like to examine more closely this massive, Central Bank engineered, expansion of credit.

Central Banks literally create money, fiat currency, at their whim.
When they do this the supply of money goes up. If this supply mirrors
the real activity in an economy such as the production of gold, other
metals and commodities, the construction of real property etc., then
the expansion in "money supply" equals the expansion in "assets". On
this basis the price of those assets would remain level as a new dollar
would only be created to match the creation of a new dollar's worth of
something.

As we can all vouch this has not been the case, the price of almost
everything has risen dramatically. Nowhere has this been more apparent
than the stupendous inflation in house and commodity (metals, oil,
grain, rice etc.) prices. In day to day terms this means that the price
of the things we must have (homes, transport, communication, energy,
food, medicine) have risen substantially. This has been due to this
fact that far more money has been created than the value of real things
produced. More money chasing relatively few goods and assets results in
inflation.

...All this is a deliberate policy. If you stand back it's all rather obvious:

- bankers create new money out of thin air

- it's essentially valueless but we all use it and have no choice

- we provide our REAL labour in exchange for this valueless "money"

- we enter into binding legal contracts to pay for "life" by
borrowing large amounts of this "money". In effect we agree to provide
our future labour in exchange for more of their "money". We have to do
this to buy our homes, our cars, our foods, everything

- By making the "money" worth less and less the bankers force us to
provide even more of our real labour to get the same things that cost
us less labour in the past. In effect they push down the value of our
labour without our consent

- The quality of what we buy goes down so that nothing lasts and we
have to keep replacing it; hence demanding even more of our labour.

- However, we acquiesce as we believe we have no choice.

The end result is that we are effectively slaves; not bound by
chains and shackles but by debt. Debts of money that the system has
created out of nowhere but we have to pay back with our very real
labour. The legal system, credit card system, banking system - the
whole system - is set up to enforce this form of indenture, this form
of servitude.

We are serfs in the New Feudal World Order.

Not many people recognize it for what it is yet. But they will do very soon, it is to this that we should now turn.

Banking system collapse

When banks collapse, as they did in 1929, the entire economy
collapses with them. Savings are lost (money becomes worthless), jobs
are lost and only those things that are essential to survival become
important and even they can become impossible to obtain and people
starve. However, pay attention here: two things do not change,
1) the debts that are owed remain and 2) the assets they financed, for
the most part, remain. To the extent that debt was used not to buy real
things but rather for financing a certain "lifestyle", then just the
debt remains with no assets connected to that debt.

These debts are legally enforceable and are historically
enforced by the full weight of the law; truncheon, taser, 9mm and all.
That means that you lose everything - all your assets, everything - to
repay loans for money created by bankers, worth nothing in reality, but
used by you to finance a certain "lifestyle" (buying an overpriced
house or vehicle, take vacations, send the kids to private schools,
dance lessons, etc) or perhaps just to survive.

When banks collapse, at the extreme, there is no money available.
This was deliberately engineered by the Federal Reserve in 1929 as they
withdrew huge sums from the banking system and only partially reversed
under the New Deal. In 1929, with less money and fewer jobs even those
still in employment were paid less and less until the banks seized the
assets that the debt was secured on. Homes, farms, businesses, all were
seized by the banks. Even seemingly large companies were bankrupted and
seized by the bankers and their friends.

Conclusion

It is my conjecture based on the data I have collected that we are
being set up for a total financial system collapse. The UK government
has been persuaded by bankers to keep the system alive for a while
longer, an act of great folly but one so well engineered that no
politician could fail to fall into the trap.

The Federal Reserve would seem to be illegally and secretly supporting the US banks in a similar way.

The rich are getting richer not through the rise in value of
their assets but because they are pulling vast amounts of cash out of
the system and using it to buy more and more real assets while the poor
are getting poorer and everyday more people join their ranks as they
desperately struggle to maintain a quality of life that is advertised
via the media as the "right" of all.

Certainly, one would not consider owning a home, a car, or
feeding one's family a "quality of life" but the elite do. From the
elite's point of view, all the masses deserve is a hovel and rags, just
as long as you can work.

When the system is finally allowed to collapse we will all
find ourselves stripped of those things we thought we owned. We will
lose our homes, our savings (if we even have any), our jobs (in the
most part) and much else besides. The money system will collapse.

At this point we will be offered a deal:

- You can remain in your house but it will be owned by a central housing company.

- Your will work at a designated job and credits for that work will be used to pay the housing company for you accommodation.

- You will travel by company owned transport within your local area only.

- You may not travel nationally or internationally unless you have enough credits and are approved by the system.

- Your children will be educated in company controlled schools the way we want them to be educated.

- You will eat food that the company will provide you with using
your credits regardless of whether or not this is the diet you prefer.

- You may not question the content of your food; we will add as many
chemicals as we see fit to ensure the shelf life of the food.

- You will get what healthcare is available to you depending upon
your credits and your behaviour. If you do not behave as we tell you
to, you will get no healthcare.

- Nobody will survive outside this system.

What can we do? First, gather real knowledge. Then, work on creating
a true will that can act upon that knowledge. Why? The elite must be
preparing the lockdown as an antidote to chaos that they can see
coming. (What type of chaos? for example.)

Non-linear dynamics teach us that in chaotic periods of
transition from one stable state to another, seemingly small actions
can tip the balance and have profound effects on the new stable state.

//www.sott.net/articles/show/150243-Signs-Eco...