Thursday, September 24, 2009

Home Sales Down, even I was surprised

Existing home sales were down sharply in August despite an $8000 government subsidy that has been pushing up sales as the program nears its end. This was an unexpected drop, even I was surprised.

Unemployment claims were down slightly but really only because they are comparing today’s preliminary number against last week’s revised number. We may not have any improvement and in fact the rate of joblessness may be up slightly and of course these numbers mean thousands continue to be put out of work every day. Continuing claims were reported as down but this is only from people dropping off as their eligibility runs out. Congress is expected to pass an extension of benefits that will give about ¾ of claimants a 13 week extension. It depends upon what state you reside in, if your state has less than 8.5% unemployment you can starve.

To cast still more gloom; we are entering the period when firms traditionally layoff regardless of the state of the economy. With retail sales continuing to decline and manufacturing showing only slight seasonal gains, Christmas will not be very cheery for many. Rather than a Black Friday after Thanksgiving where retailers start to make a profit for the year, you may see an exceptional number of bankruptcy clearance sales.
The Fed has just announced that they will keep interest rates at zero but will cut back on securitized mortgage purchases. The big banks have unloaded so many toxic assets that there may not be that much for them to buy. The Fed says they are not concerned about inflation hence the cheap money policy and really there isn’t that much money being lent. The big banks are still using our tax dollars to speculate in oil, keeping it at about double the price it should be and not loaning money to stimulate the economy besides the drag high oil prices are creating.

There is a problem with the Dollar as it continues to decline against the broad index of currencies. The Dollar is nearing its all time low again where it has always been rescued by foreign banks. It could break through that floor and that could trigger hyper-inflation. Some economists and even a few progressives are promoting the idea the some inflation would be a good way to stimulate the economy. It could be a good time to hedge against inflation with a few bars of gold for talk radio hosts or some canned goods for the rest of us. The right-wing nuts are buying up all the ammo but you’ll be able to trade canned goods for that.