U.S. Economic/Financial News
LaRouche on the Insanity of the Markets: A Bubble Popping
July 24 (LPAC)Lyndon LaRouche commented on the insanity of the financial markets today in the following terms: We are seeing a bubble at the popping point. It has leaks and stretches, and is blowing out. All the talk of what the "markets" are doing, or will do next week, has reached the stage of insanity. The markets are so far removed from any real transactions, that it's all hot air about what will be "up or down," based on the bets people are expected to place on future speculation. If the market is expected to go up, it's because futures speculation somewhere is expected to rise. It's now all a matter of new rounds of gambling.
If the markets go downyou might as well talk about down on a duckif they go down, and you bet right, and it's all "ducky!" Down is ducky. We really don't have an exchange market in any real terms. Just speculative investments in gambling and debts. You judge a market by side bets. It's as if there is the shooting craps part, but then the real game is all in the sidebets. The British press especially is blowing a lot of hot air about "the markets." It's unreal. There are projections of markets three days ahead, two weeks ahead and so on, all in terms of the prices that are posted, but it's unreal. Take the huge speculation based on biofuels. There is some appreciation in agriculture commodities because of biofuels, then wild speculation in play. It's all built on a small fraction of actual interchangeable transactions.
Somebody should write a story, to understand the market today. A guy says, "I have a used pair of shoes. I'm going to turn it into $10 million. I'll get some competing bidders...."
Home Builders Lead Losers on Wall Street
July 28 (EIRNS)Six U.S. home builders posted end-of-quarter losses in their earnings reports this week, according to Bloomberg July 27. Notable among them were Ryland Group, Pulte Homes, Beazer Homes USA, and D.R. Horton. For D.R. Horton, one of the biggest home builders in the country, this was its first quarterly loss ever, as it posted a net loss of $823.8 million. Beazer lost $123 million; Ryland, $52.4 million; while Pulte was down $507.6 million. New home sales have dropped 22% from a year ago.
Meanwhile, on the lending side of the housing market, Countrywide Financial Corp., the biggest U.S. mortgage lender, posted a 33% drop in profits for the last quarter, signaling loudly that the punctures in the financial bubble have moved beyond subprime, and into more conventional mortgages. Countrywide CEO Angelo Mozilo declared that the U.S. was experiencing "home price depreciation almost like never before, with the exception of the Great Depression."
California Foreclosures Jump to Highest Level Ever
July 25 (EIRNS)California foreclosures jumped to their highest level ever, in the second quarter, and are expected to rise even higher in the second half of the year. Foreclosures soared to 17,408 in the quarter ended June 30, up 57.8% from the first quarter, and an increase of 799% from the same period last year, according to DataQuick Information Systems. Lenders filed 53,943 notices of default sent to borrowers who have fallen behind on mortgage payments during the quarter, up 158% from a year ago, and the highest level in more than a decade, as interest rates reset higher on adjustable-rate mortgages.
Cleveland Area: 300 Foreclosed Homes Auctioned Weekly
July 27 (EIRNS)Every Monday in Cuyahoga County, Ohio, home to Cleveland, the County Sheriff's office auctions off 300 to 350 foreclosed homes. The County Treasurer, Jim Rokakis, depicted the reality of the crisis in a Senate Joint Economic Committee hearing July 25. Reporting that private home foreclosures in the county rose five-fold from 3,300 in 1995, to an expected 17,000 in 2007, Rokakis linked the "reckless, irresponsible" local lending practices with Wall Street and Federal Reserve policy.
In a follow-up interview with EIRNS, Rokakis ridiculed the "argument of the Federal Reserve Bank that the [mortgage] market will correct itself," saying that, "I hope Bernanke is right and that it's only $100 billion. I think it's wishful thinking. I think the losses will be a multiple of that number." He said that Cleveland and cities everywhere "have been decimated" by this policy. There was "nobody home" on the regulation side. Rokakis stressed that government should act to curb all the destructive practices. "There's a role for government to play in this, and they're not playing it." Some of the current Congressional bills for homeowner tax relief, or other special aid, may help a few problems, but, "The reality is, you have to rein in this industry."
Rokakis, who has been Cuyahoga County Treasurer for ten years, spoke of the impact of the severe de-industrialization of the region. "It's the decline of the cities ... not an Ohio-only phenomenon." He said that in 1965, half of the county property taxes came from Cleveland; today, that has fallen to 17 percent. Cleveland in the 1960s was a "big booming city." Today it is the worst "foreclosure nightmare" in the nation.
D.C.-Area Hospital Collapse Endangers General Welfare
July 27 (EIRNS)In the latest ratchet downward for the hospital system in the nation's capital, a Maryland court turned down a plea by the management of the Prince George's Hospital system to compel the County Council to pay the $14 million necessary to keep the system running through June of 2008. The court determine that the hospital system should receive $2 million, enough to keep it open for a few weeks more.
This development means two major hospitals in the D.C area are now running on a week-to-week basis: Prince George's, and the nearby Greater Southwest Community Hospital, which only remains open with reduced services, because the D.C. City Council forced the hospital's Arizona-based management to provide half-million-dollar infusions of funds a week. Aside from denying adequate health-care and emergency services to an estimated half-million mostly poor people, living in the Southeast quadrant of Washington, D.C. and adjacent areas of Maryland, the breakdown of these hospitals throws the entire area hospital system into chaos which will cost the lives of many, as those in need of medical care seek it at other over-burdened hospitals in the area, or simply go without.
According to the Washington Post today, Prince George's Hospital management is planning to meet Aug. 30 to decide on a bankruptcy filing while county official are considering appealing the Court's award of $2 million.
Lyndon LaRouche warned of just such a disaster in 2001, during the mobilization to save D.C. General Hospital, the one remaining public hospital in the city.