Tuesday, August 24, 2010

Work will set you Free

Sales figures for existing homes plunged by 27% in July, the biggest drop since 1968 when records were first kept. There is a 12 and a half months supply of houses for sale, this is more than twice the normal amount on the market. This does not count millions of homes in default that banks are holding back from foreclosure sale to keep the market from falling even faster.

This new tidbit of economic woe has driven down equity markets worldwide. Not that anybody that plays the stock market much cares about the middle class dream of owning a home or being able to pay for it but it puts into motion something they can’t ignore, derivatives. Derivatives don’t represent anything of value, they are just huge casino bets that are triggered by a particular number coming up. A big downward swing in the housing market can start triggering Credit Default Swaps even without actual defaults occurring, this is the magic of derivatives where anything can be written into the contracts to trigger a payoff. This in turn can trigger other derivatives purchased as a hedge and those still more and so on.

We don’t know what these trigger numbers are since Derivatives are not regulated and these “dark” markets are really just back room deals. But this is the free market so what could possibly go wrong? Hundreds of billions in TARP money were required the last time, plus trillions of newly created money from the Federal Reserve. The Inspector General for the TARP program estimated that the FED and Treasury Department purchased or guaranteed 24 trillion in toxic “assets” to keep the Ponzi scheme from collapsing.

So were these abominations done away with? Attempts to include a ban on even some derivatives in the financial reform legislation met with the typical response from Republicans, “Hell NO you can’t”.  There are still some 600 trillion or perhaps twice that much worth of these contracts piled up like snow above the ski lodge waiting for a trigger to start the avalanche. It only takes one more snow flake.

So what to do with all the unsold houses on the market? Obama’s pledge to help people stay in their homes has fallen flat and foreclosures continue to rise. Interest rates are at record lows but good luck getting a loan. A new twist at the bank is that they need to believe you will be able to keep your job, who qualifies for that? The copper market is down with the slump in housing but that doesn’t keep the scavengers from stripping anything of value from entire neighborhoods laid waste by foreclosures, copper thieves are the only people with steady employment, maybe they could get a mortgage. Whole subdivisions are now seen as potential farm land, it seems almost post apocalyptic. Was there a rapture and I missed it?

So what to do with all the former home owners who didn‘t rise up naked to heaven? The Republican candidate for New York governor, Carl Paladino said he would transform some state prisons into dormitories for welfare recipients, where they could work in state-sponsored jobs, get employment training and take lessons in "personal hygiene."

Paladino is a wealthy Buffalo real estate developer popular with the tea baggers and says he didn’t mean the state should jail poor people: The program would be voluntary. How long will it remain voluntary?  Seven million people have no other income but food stamps. That was last year’s figure and the number of people who are falling off unemployment is going to be millions in the next few months if nothing is done.

Even if tier five unemployment benefits are created it is really a just a band-aid if no real economic reform is implemented. Republicans and far too many Democrats can only think of “austerity” as the solution and that means putting millions of people on the street. The economic drag reduced spending will cause will put still more out of work and the safety net will be gone for them as well.

So what do you do with all those millions of people in the street? “Volunteer” them for the work camps.   "Arbeit macht frei"  www.prairie2.com


ickenittle said...

I read about Paladino the other day and thought to myself,"what a great idea!" Why waste all that perfectly good jail space. New York must have a real handle on the crime thing,what with so many jails sitting around empty. And the way he decribed those "beautiful facilities," complete with basketball courts,and toilets! No more going behind a bush for those poor folks, no siree! God I wish I was on welfare!