Economy

There are a bevy of news articles beginning to appear, all centered on one of the central themes of the Crash Course – scarcity.

Below we see three examples. While there are more than a few who use the term “Malthusian” as though it were in irrefutable intellectual negation of an argument, more and more nation states and wealthy individuals are acting as if resource scarcity were a very real condition.

I truly believe that as net energy declines, the impact on resources, especially those requiring a lot of energy to extract and refine, will be multiplied.

I will be writing more on this at a later date. Here are the articles.

One of my favorite outfits is Sprott Asset Management, located in Toronto Canada, because their analyses tend to be quite data-rich and “reality-based” as well.

In this excellent, short-and-sweet report, the case is made that a 3.5% boost to GDP from government stimulus spending alone will hit in the third quarter of 2009.

This means that whatever reading is turned in, you should mentally subtract 3.5% from it, because “growth” resulting from government deficit spending is not real growth at all, it is merely consumption borrowed from the future.

These next two charts, showing that prime mortgages are now the key source of new foreclosures, are shockers. Taken together, they say that prime mortgages are just now beginning to act like subprime mortgages did back in 2007.

Note that prime fixed-rate mortgage foreclosures (red arrow) are now leading subprime adjustable-rate mortgages as the main source of new foreclosure activity.

I was not a good father today.

Instead, I engaged in laboriously hand-entering data to satisfy a question that has been bothering me for a while.

The issue that was worrying at me was the apparent discrepancy I’d mentally noted between the happy-happy increase in existing home sales, as reported by the NAR last week, and what I remembered from the MBS mortgage application releases.

But who could be sure?

Perceptions can be tricked and need to be tested and subjected to fact-based inquiry.

In the prior report on the FDIC, I showed that the FDIC was out of money. The normal mechanism for collecting and paying out of FDIC funds involves collecting premiums from banks and using those to pay out for claims.

In the “Helping Families Save Their Homes Act of 2009” (S. 896) Congress authorized the expansion of an existing $30 billion “line of credit” from the Treasury to $100 billion with a final cap of $500 billion, as long as a two-thirds majority of the Federal Reserve and the FDIC boards think it necessary.

On Tuesday (8/18/09), news came out that new home construction starts had “unexpectedly” fallen.

However, that number consists of two elements: single family houses and multi-family dwellings.

Taken together, as the number is always reported, home starts fell.

Given a few hours, Bloomberg managed to find the good news amongst the bad and altered its headline and article to read:

The gaming of our economic system and statistics is not the sole province of the government. Corporations have mastered the art as well.

Naturally, this is not much of a surprise, because with the government setting the tone for providing perpetually “better than expected” economic statistics, it stands to follow that corporations and Wall Street will gladly follow along.

Here are two separate examples from today to illustrate how the game is played. The game, for any new readers here, involves Wall Street analysts providing super-lowball estimates of earnings that a company can easily beat, and then trumpeting that result while conveniently glossing over the sordid details involving any worse-than-expected revenue shortfalls or accounting tricks used by the company to boost their earnings.