muses of the moment

August 31, 2011

Belarus as an example of hyperinflation

Filed under: Hyperinflation — totallygroovygirlfriday @ 4:20 pm

Click here for the continuing saga in Belarus as they deal with a hyper-inflationary crisis. In trying to control, the out of control inflation (or extreme devaluation of the currency), they raise refinancing rates (again) to 27%.

And meat is gone. Currency out of control auctions food to highest bidder. Click here.

Per Bloomberg: “Belarus’s supermarkets are running out of meat as Russians take advantage of a currency crisis that a devaluation and the world’s highest borrowing costs have failed to stem. “All meat has gone to Russia,” Alexander Andreyevich, an 82-year-old former tractor-plant worker, said Aug. 25 in Minsk, the capital.

And as Russians buy cheap commodities…..citizens of Belarus are finding it hard to get into any other currency to preserve wealth. Should have bought gold.

The only legal way for citizens to obtain foreign currency is by waiting at licensed exchange booths, where queues often exceed a hundred and the names of people who have left their details on previous visits are called daily.
And, of course, a black market has sprouted accepting payment in Russian Rubles or US Dollars.
Real time economics lesson for the globe.
But this can never happen in the US……whatever. If groovygirl had a nickel for every time someone said that something could not ever happen in the United States. Then-it happens.
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Housing is still unhealthy

Filed under: Housing Market, The Banking Crisis, Unemployment — totallygroovygirlfriday @ 1:12 am

Click here for the latest from Case Shiller. The chart tells the whole story. Banks are not lending. Even when they do start lending, they will only lend a 60% mortgage to employed people. If no one can get a loan, no one can buy a house. Period.

Prices will continue to decline to a level that people can afford and banks will support and people must have a job.

The Global Banking System is broken.

The foreclosures sitting on the sidelines, just draws out the housing train wreck, it doesn’t help anyone but bank balance sheets only in the short-term. As we saw last week, it doesn’t help banks’ cash flow at all. BAC needed an infusion from Warren Buffet for $5 billion. They also have sold assets to raise cash…just to keep from declaring bankruptcy.

Banks can monkey around with their balance sheets all they want, eventually, the cashflow problem will happen to every one of them. Until the debt problem is solved, banks will not lend to anyone to buy a house or anything else. The political will for debt restructure on any level is non-existent.

Heigh-Ho.

August 30, 2011

More social than techo

Filed under: Economic Crisis, Odds 'n ends, The Dollar Crisis, The Financial Crisis — totallygroovygirlfriday @ 1:53 am

Charles Hugh Smith put together a great post. Click here. He discusses the social aspect of the coming collapse and how social innovations will trump technology innovations. GG agrees. Good points. He also makes the point that conditioning a nation to rely on government, conditions a country to rely on government. When gov fails, that can be a major problem. A whole society just doesn’t unlearn relying on gov hand-outs in a week or a year. It takes a major restructuring and then education of how society works at a fundamental level. New technology can be used to communicate that education, but it is not the solution or the system.

August 29, 2011

Latest Release from Martin Armstrong dated August 27, 2011

Filed under: Gold and Silver Investing, Martin Armstrong, Precious metals — Tags: — totallygroovygirlfriday @ 10:58 am

Click here for Martin Armstrong’s latest letter entitled Gold, dated August 27, 2011 (1 page).

Gold held first key support at $1730. Waiting to see how first week in September unfolds. Gold could correct or build a sideways pattern.

The fundamentals for gold are still good as Europe will not solve its debt crisis anytime soon, and the US will not correct its debt problem anytime soon.

Irene

Filed under: Odds 'n ends — totallygroovygirlfriday @ 10:41 am

Well, the storm is over. Groovygirl hopes everyone is OK. We will see how the markets are today….slow or fast. Gold still holding above 1800.

August 27, 2011

the long cycle of real estate

Filed under: Good Debt Bad Debt, Housing Market, The Banking Crisis, The Federal Reserve, Unemployment — totallygroovygirlfriday @ 1:01 am

As Martin Armstrong has stated, real estate will decline to 1950’s inflation-adjusted prices by 2034. In other words, real estate will continue to go down from now until 2034, when it should hit a low and start to slowly come up again.

There are several reasons for this prediction. The first is Martin’s and the rest are groovygirl’s.

Real Estate values go up and down in long cycles.

In the United States around 1950, there began a long cycle in real estate. The uptrend began around 1950 and continued until 2007, where it hit a peak. It will decline until 2034. Then another long cycle will begin again. There are mini peaks and valleys within the long cycle, but this is the larger, over-all cycle. This cycle also includes commercial real estate, not just residential. The fact that this is a long cycle fools people into thinking housing prices always go up, because they have never been alive when housing prices were not going up.

The global banking system is broken by debt.

The long-term US housing market is driven not by cheap rates, contrary to what people think, although that can influence a few people. But the main influence is the ability to obtain a loan. US housing market is debt driven. If banks are not lending, which they aren’t, then the housing market must decline. When people can’t get large loans, housing prices drop to meet the loan amount that people can get (or amount of cash they can save). The media is not covering the story that banks are not leaning money for residential or commercial real estate purchases. So, unless you have tried to get a loan, you may not be aware of this issue. The banks are holding cash because they are insolvent from too many loans and securities going bad from the crash of 2008.

The banking industry is directly related to the real estate industry. If no one can get a loan, no one can buy a house and no one can sell a house. Period.

It is a cycle: real estate prices decline a little, banks’ balance sheets decline, so they stop lending. Housing declines further from lack of bank loans available, the cycle spirals downward. In order for both industries to “get well”, bad bank debt must be written off, not bailed out. The political will is not there for this to happen until after a really big global debt crisis. It is coming.

This process was sped up in 2007-2008 when people defaulted on loan payments and caused a cash flow problem, not just a balance sheet problem for banks and investors.

A Generational cycle.

The majority of baby boomers have their wealth in their homes. They plan to live in their homes, and then sell them to pay for long-term elderly care or regular living expenses. When a third if the population does this in the same period of time (from now until 2030), it affects the price of housing. Too many sellers, thinking they can get a high price for their house, and too few buyers that can’t even get a loan. Housing market is stagnate and then drops as desperate boomers sell for any price for cash to live. In that situation, boomers with a paid off mortgage and buyers with cash are in the best position.

In addition, the younger generation will start to wonder why the boomers put all their years of savings into a house that when sold, stole part or all of their equity. They will see this and vow not to make the same mistake. This attitude will continue well past 2034, as the cycle resets, when young people should be buying houses at the low of the new cycle to sell at the next high.

Unemployment.

Even if the banks were lending, unemployment is really around 22%. Banks do not lend money to unemployed people. Unemployment must decline before banks will lend. The economy is not getting better, it is getting worse, and unemployment will continue to get worse as well. So, no loans.

90% mortgages.

A short-term problem is the housing boom in 2003 and 2005. Many people bought houses at the height of the market (highest price) with 10% cash down and a 90% mortgage. Even a small decrease in the value of their home and they are upside down on their house. They stop making payments. There is an estimation that there are one to two million homes that should be in foreclosure that are not, because if the banks took the loss, they would be officially bankrupt. And if those houses flooded the market, it would cause a decline in prices. The decline in prices will still happen, it will just take longer if the empty houses are left off the market.

With this in mind, all the sales from around 2000 to 2010 have the potential of home owners just walking away once they realize that we are in a 26 year decline in real estate prices (which began in 2007) and they will never have equity, only debt, in their home. Some people are finding this out now, because they are unemployed or have higher monthly payments due to adjustable rate mortgages readjusting. But soon, regular homeowners will realize they paid way too much for their house and wonder why they are paying the bank money every month on a losing investment (no matter how low the payment). At this time, it is about the same amount as paying rent as long as you don’t do a major maintenance to your house. That will change before 2034.

Even when banks begin lending again, it will not be 90% loans. It will be 70% or 60% or 50%. People will need years to save up for a 50% down payment on a house. Until the economy gets better, a 50% down payment is completely unattainable.

But groovygirl, some houses are selling, some people are getting loans. Yes, that is true, but it is only those loans backed by the government and it is a fraction of what it was.

All these factors working together and feeding off each other will keep the real estate market in a long decline and no hope for a uptrend in the near future. Your house is not an investment any more. Groovygirl is not saying to never buy a house. She is pointing out these things because the housing market has changed for the long-term. Use these changes to your advantage in any future purchases of real estate.

 

August 26, 2011

Latest Release from Martin Armstrong dated August 25, 2011

Click here for Martin Armstrong’s latest release entitled Plunging Gold, Crouching Stocks, dated August 25, 2011 (5 pages).

Martin promised us yesterday to expand on his 1-page Gold letter, so here is the follow-up detail. A lot of detail.

For gold, the explosion upward should happen after the 2015 ECM turning point. But move up and down before then. Check the link for detail. Remember Martin has called at least $5,000 by 2015 in other papers. Trade on this information at your own risk. Groovygirl only uses this information to buy physical gold to hold long-term.

For stocks, Martin predicts coming Panic Cycles and expects those to affect stocks (page 5).

Overall, Martin is not holding out for a solution to the Sovereign Debt Crisis in the near future, so volatility and panic will be the emotions of the days ahead.

Kirby

Filed under: Fiat Currency, Gold and Silver Investing, Precious metals, The Dollar Crisis — totallygroovygirlfriday @ 1:08 am

Excellent post via goldseek by Rob Kirby, an excellent analyst of these strange economic times. He explains the correlation between interest rates and gold.

Click here.

Once again Rob Kirby does an excellent job of explaining what is really going on with interest rates (long and short) and what that tells us about the future. In short, the currency is doomed.

August 25, 2011

Rolling Stone

Filed under: Bailout Nation, Bank bailout, Credit Derivatives, Economic Crisis — totallygroovygirlfriday @ 3:16 pm

GG still is amazed that the main national news outlet doing any type of investigative and truth-telling on this financial criminal mess (that has now been with us over 3 years and is still not solved) is Rolling Stone Magazine and Matt Taibbi. As sad as the lack of criminal prosecutions in this mess.

Click here for Matt’s Obama Goes All Out for Dirty Banker Deal. But Matt outs not just Obama, but all the suspects in the line up.

Greg Hunter asks “Where Are We?”

Filed under: Gold and Silver Investing, The Banking Crisis, The Financial Crisis — totallygroovygirlfriday @ 1:01 am

Greg Hunter’s latest post acknowledges Jim Willie, Martin Armstrong, and Uncle Harry. Some of groovygirl’s favorites.

Click here for Greg’s excellent post.

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