From Volume 6, Issue 44 of EIR Online, Published Oct. 30, 2007

U.S. Economic/Financial News

Home Sales Plunge to Record Lows

Oct. 24 (EIRNS)—Existing-home sales in September fell 8.0% from August, to an annualized rate of 5.04 million units, as cancellations rose on higher-priced "jumbo" mortgage loans.

This was the lowest sales pace since 1999, when the National Association of Realtors began compiling data on single-family and condominium sales combined. As a result, the inventory of unsold homes rose to a record-high 10.5-month supply, the trade association reported.

The national median price for both single-family homes and condos fell 4.2%—more than twice the largest year-to-year drop so far—to $211,700, down 4.2% from September 2006. Falling prices mean homeowners facing delinquency, default, or foreclosure, lack the option to refinance their mortgages.

Record Number of Empty Homes, as Foreclosures Increase

Oct. 27 (EIRNS)—According to the U.S. Census Bureau, there were a record 2.1 million owned homes standing empty at the end of the third quarter 2007, "as lenders took possession of a growing number of properties in foreclosure." In addition, many of these homes are vacant because the owners have had to move, while being unable to sell the house. The total represents 2.8% of all owned homes in the country, whereas a decade ago, 1.5% were empty.

Homeownership has fallen from its peak of 69.1% of households in 2003, to 68.1% now—back to the level of 2000, again according to the Census Bureau. Since the Cheney-Bush Administration took office in January 2001, home ownership has fallen by 0.1%—despite a vast bubble of nearly $15 trillion in mortgage originations and more than $6 trillion in mortgage-backed securities issued since 2002!

In addition to the owned homes, some 4 million rental dwellings—for year-round living, leaving out temporary or seasonal dwellings—were empty, more than 10% of the total of such dwellings. Here too, the waves of foreclosures are having an impact, because foreclosed multi-family dwellings are nearly always emptied by the foreclosing company.

Ford Will Demand 10,000 More Job Cuts from UAW

Oct. 28 (EIRNS)—The U.S. auto sector, which is the primary remaining machine-tool capability in the U.S. economy, has lost a net 350,000 jobs since 2007, and is now about to lose more jobs and plants. After a Chrysler contract—just narrowly approved by a roughly 53% vote of United Auto Workers (UAW) members, which leaves unsecured the future operation of most of Chrysler's assembly and engine plants—Ford Motor Company will demand that the UAW agree to 10,000 more job cuts in its new contract, according to the Detroit News. Ford has eliminated 27,000 production jobs in just the past two and one half years, and has taken on so much new debt in that period that it faces the threat of bankruptcy.

Nearly 100 auto assembly, production, and parts-supply plants in North America have closed or been put on the chopping block since the beginning of 2005, when Lyndon LaRouche and LaRouche PAC mobilized to urge Congress to intervene and rescue this irreplaceable capacity, by giving it the mission of building new national economic infrastructure. These plants, large and small, comprise over 80 million square feet of the best-tooled productive plant remaining in America's deindustrialized economy. Yet Congress has not lifted a finger to save it.

The continuing reports of falling auto sales during 2006 and 2007 show that the automakers' production cutbacks are futile—they cannot "sell their way out" of their debt. Sales projections for October are in the range of 1.2 million cars and light trucks, according to and other auto analysis firms. If this total is matched in November and December, which are normally low sales months, the auto industry will have sold fewer than 16 million cars in 2007 for the first time since 1995; and its sales will have dropped nearly 10% since 2000.

Dollar Falls to Record Lows as Fed Feeds Inflation

Oct. 28 (EIRNS)—The U.S. dollar declined against 15 of the 16 major currencies this week, in part, on expectations that the Federal Reserve will open the money printing presses again by lowering the interest rate—likely by another half percentage point—at its Oct. 31 meeting.

The U.S. Dollar Index, measuring the dollar's performance against six major currencies, shows that the dollar has lost 8% in 2007 and set a record low of 76.977 on Oct. 26, according to Bloomberg news. The dollar hit an all-time low of $1.4395 against the euro yesterday, down 5% in just over two weeks. Gold hit a record high on Oct. 26 of $783.50 per troy ounce on the New York spot market. Gold is also rising steadily against the euro.

Columnist Warns, California Is 'At the Brink'

Oct. 27 (EIRNS)—As the mortgage and dollar crises continue to accelerate, some, more sane financial traders will step forward, echoing what Lyndon LaRouche has been saying for decades. Yesterday, at (which is both a publicly traded mutual fund and an investment news provider), Doug Noland's "Credit Bubble Bulletin" had a curious title, "Structured Finance Under Duress." In plain English, the headline should have actually read, "California Mortgage Bubble Is Finished!"

Here are some relevant excerpts: "With California now at the brink, uncertain but huge losses are in the pipeline for jumbo, 'Alt-A,' and 'Option-ARM' mortgages loans that were for the most part thought sound only weeks ago. The market began to revalue the top-rated CDO tranches this week, a process that should only accelerate. 'AAA' is not going to mean much. If things unfold as I expect, a full-fledged run from California mortgage exposure could be in the offing."

Or, how about this one? "The nightmare scenario—where the market abruptly comes to recognize that the leveraged speculating is hopelessly stuck in illiquid CDO, ABS, MBS, derivative and equities positions—doesn't seem all that outrageous or distant this week. Unfortunately, today's Ponzi-style acute fragility (as was demonstrated this summer in subprime, asset-backed CP, SIVs and the like) and speculative dynamics dictate that he who panics first panics best.... We'll see to what extent the Fed is willing to spur increasingly destabilizing global stock market speculation and dollar liquidation in the false hope that lower rates can somehow mitigate Structured Finance Under Duress."

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