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today's WSJ, page A3, upper right corner article "Credit Tightens, Demand=
=20
Falls" says the crunch is spreading beyond real estate.
=3D=3D=3D=3D=3D no change to below, included for reference and context
=3D=
=3D=3D=3D=3D
On Tue, 5 Feb 2008, Mani Deli wrote:
> Really!
>
> 1) _The U.S. housing market will not revive any time soon_.
> Seasonally adjusted December housing starts fell by 14.2% (15.2% net
> over revisions) on a monthly basis. Year-over-year, December starts
> were down by 38.2%. Subprime mortgage resets are projected to
> continue for many months. The mortgage securitization business, which
> in recent years helped facilitate lots of easy lending, is now
> seriously impaired due to increased default rates, =93dark liquidity=94
> concerns, and the credit crunch.
>
> 2) The _re****ted official annual CPI inflation_ rate of 4.1%
> exceeded re****ted annual growth in December, 2007 retail sales.
>
> =93Though still shy of reality, the December CPI inflation rate was high
> enough to take the re****ted 4.1% annual growth in December retail
> sales into contraction, net of inflation. Such rarely is seen outside
> of recessions and is particularly ominous where retail outlets often
> make or break their year with holiday sales.=94**
>
> _Real Consumer Price Inflation_ (i.e. the SGS, Shadowstats Government
> Statistics, Alternative Consumer Inflation Measure, which reverses
> gimmicked changes to official CPI re****ting methodologies since 1980)
> _was roughly 11.7% in December, 2007_. (shadowstats.com, January 19,
> 2008, Flash Alert).
>
> 3) _The Municipal Bond =93Insurers=92 business model is irreparably
> broken=92_. Municipal bond insurers are extremely im****tant because it
> is their insurance which provides the basis for the bond ratings
> (often AAA) which allows municipalities to get low-cost credit. But
> the viability of several leading insurers is now seriously in
> question. Thus, Municipal Bond financing will likely be seriously
> impaired, as will the =93market=94 value of those bonds held by banks in
> their ****tfolios. In a domino effect, Banks will be forced to write
> down the value of these ****tfolios which will impair their credit
> ratios.
>
> And lest anyone think that massive public works projects, of which the
> U.S. is in great need given its deteriorating infrastructure, can pull
> the financial system out of its doldrums, just consider that this
> vehicle for obtaining high ratings (and thus low interest rates) on
> bonds for public works projects has just crashed.
>
> 4) Manufacturing, which used to be the engine of the U.S. economy,
> has been severely weakened - - the U.S. has lost more than 3 million
> manufacturing jobs since 2001, due to NAFTA, CAFTA, (and other
> globalist projects) and the refusal of the U.S. government to protect
> U.S. industry and American workers jobs with tariffs.
>
>
> 5) Consequently, foreign made goods now account for 1/3 of all
> goods consumed in the United States, tripling their share over the
> last quarter century.
>
> 6) Thus, the 1980s claim that the U.S. could profit by replacing
> bricks and mortars factories with financial services has now been
> shown to be a paper falsehood. The =93Paper Emperor=94 of Financial
> Services Sector Excesses has been shown to have no clothes. Those
> Financial Services Entities which overreached are now in the process
> of imploding.
>
> This implosion should have been expected since the strength (or
> weakness) of the financial services industry is ultimately derived
> from the real underlying economy which provides _tangible_ goods and
> services. With a diminished manufacturing base, massive and increasing
> deficits and downstream-unfunded liabilities, and a weakened and
> compromised financial services market sector, the U.S. economy is in
> deep trouble.
>
> 7) A tem****ary =93solution=94 to the =93debt=94 and related crises
ha=
s
> been the now ongoing sale of key U.S. assets to foreign investors. But
> this is another tem****ary =93cure=94 which is worse than the disease.
U.S=
=2E
> industries remain on sale at discount prices. Given the recent
> weakness in the U.S. Dollar, in 2007 foreign investors poured a record
> $4.14 billion in buying stakes in American companies, factories, and
> other properties. That was up 90% from 2006 and more than double the
> average of the past decade.
>
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