Less than three weeks ago, when the PBOC proceeded with its latest "surprise" rate cut, we showed a chart that should scare everyone who is hoping that China will avoid a hard-landing would prefer would never have been revealed: the annual collapse in Chinese home prices is now so sharp and so widespread, that it has surpassed the housing collapse in the aftermath of the Lehman collapse." Overnight things went from bad to worse, when China's National Bureau of Statistics reported that contrary to hopes for a modest rebound, China's average new home prices fell at the fastest pace on record in February from a year earlier.
The 2008 worldwide financial crisis was produced due to excessively easy monetary policy, which caused the largest debt driven mal-investment in housing, automobiles, and Chinese produced crap in world history. The consequences of this debt bacchanalia should have been the orderly liquidation of the Wall Street entities that created the crisis, the writing off of trillions in bad debt, corporate and personal bankruptcies of businesses and people who borrowed recklessly, a sharp steep economic decline to cleanse the excesses, and politicians who immediately began the process of reducing budgets and addressing long term unfunded unpayable liability promises. Instead, the psychotic oligarchs did not want to lose any of their power, wealth or control over the proletariat. They have done the exact opposite of what needed to be done.
TINA and the complacent belief in free lunches strip the resiliency from a system and leave it vulnerable to collapse...
Overview of the major events in the week ahead.
As home sales drop and home prices surge, the shifting sands of the housing market are accelerating in a seemingly inequality-expanding manner. As first-time homebuyers struggle to qualify for mortgages in a market that’s shrinking after the housing collapse, Bloomberg reports that lenders are providing more multi-million dollar loans to Americans who (in their opinion) pose less risk. Home loans from $1-5 million were the fastest growing part of the jumbo market in January with the number of loans surging to the highest since 2007.
While the world's attention is glued to events in Greece, the real action continues to evolve quietly thousands of kilometers east, in China, where the near record surge in new loans remains unable to offset the dramatic slowdown in shadow banking issuance. And while China's bubble-chasing, animal spirits have recently reoriented themselves from real estate to the stock market, it is the real estate that holds the bulk of China's wealth. The problem here is that as China reported overnight, new-home prices in the world's most populous country just recorded their biggest annual decline ever!
Today the financial system is even more leveraged than in 2007… backstopped by even less high quality collateral. And this time around, most industrialized sovereign nations themselves are bankrupt, meaning that when the bond bubble pops, the selling panic and liquidations will be even more extreme.
Needless to say, Greece is only the poster child. The McKinsey numbers above suggest that “peak debt” is becoming a universal condition, and that today’s Keynesian central bankers and policy apparatchiks are only pushing on a giant and dangerous global string. So now we get to ground zero of the global Ponzi. That is the monumental pile of construction and debt that is otherwise known on Wall Street as the miracle of “red capitalism”. In truth, however, China is not an economic miracle at all; its just a case of the above abandoned Athens stadium writ large.
In a stunningly honest reflection on itself (and its peer group of professional prognosticating panderers), The Federal Reserve's San Francisco research group finds that - just as we have pointed out again and again - that since 2007, FOMC participants have been persistently too optimistic about future U.S. economic growth. Real GDP growth forecasts have typically started high, but then are revised down over time as the incoming data continue to disappoint. Possible explanations for this pattern include missed warning signals about the buildup of imbalances before the crisis, overestimation of the efficacy of monetary policy following a balance-sheet recession, and the natural tendency of forecasters to extrapolate from recent data. The persistent bias in the track records of professional forecasters apply not only to forecasts of growth, but also of inflation and unemployment.
Forget rate hikes… an entire generation of investors and money managers (anyone under the age of 55) has been investing in an era in which risk has generally gotten cheaper and cheaper. What happens when the bond bubble bursts?
"Prospects For A Home Run In 2015 Aren’t Good" - November Case-Shiller Confirms Ongoing Housing Market SlowdownSubmitted by Tyler Durden on 01/27/2015 10:40 -0400
In a day of furious disappointments, the Case-Shiller housing report, albeit looking at the ancient economic picture as of November, confirmed what most had known: that the growth in housing prices slowed down yet again on not only a Year over Year basis, which rose just 4.31%, the lowest annual increase since October 2012 but also dropped by -0.22% decline on a monthly basis, which may not sound like much, but was the worst monthly drop since February 2012!
We are now far advanced into the third central bank generated bubble of the last two decades, but our monetary politburo has taken no notice whatsoever of its self-evident leading wave. Namely, the massive malinvestments and debt mania in the shale patch.
When no lesser establishmentarian than Obama's former chief economist Jared Bernstein called for an end to the US Dollar's reserve status, it raised a few eyebrows, but as the WSJ recently noted, the voices discussing how the burden of being the world's reserve currency harms America, more than just Vladimir Putin is paying attention. While some argue that “no other global currency is ready to replace the U.S. dollar.” That is true of other paper and credit currencies, but the world’s monetary authorities still hold nearly 900 million ounces of gold, which is enough to restore, at the appropriate parity, the classical gold standard: the least imperfect monetary system of history.
Case Shiller Reports "Broad-Based Slowdown For Home Prices", First Monthly Decrease Since November 2013Submitted by Tyler Durden on 11/25/2014 10:21 -0400
While the just revised Q3 GDP surprised everyone to the upside, the Case Shiller index for September which was also reported moments ago, showed yet another month of what it called a "Broad-based Slowdown for Home Prices." The bad news: the 20-City Composite gained 4.9% year-over-year, compared to 5.6% in August. However, this was modestly above the 4.6% expected. However, what was more troubling is that on a sequential basis, the Top 20 Composite MSA posted a modest -0.03% decline, the first sequential drop since February. And from the report itself: "The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston."