Most pundits argue that the government needs to stem the tide of foreclosures–to avoid a flood of houses hitting the market all at once and, thereby crushing house prices. The government needs to do everything it can to stimulate the housing market, these folks say, or the renewed decline of the housing market will take the economy down with it.

Peter Schiff, president and chief global strategist of Euro Pacific Capital, disagrees.

Schiff believes that the government should exit the housing market completely and let prices fall to a natural level. In other words, says Schiff, the government should stop subsidizing mortgage rates with quantitative easing, stop using taxpayer-funded losses at Fannie Mae and Freddie Mac to lubricate the mortgage market, and stop enacting things like the homebuyer tax credit to encourage people to buy houses.

But won’t this wallop the housing market? Won’t this cause many homeowners to go even deeper “underwater” and thus become more likely to just walk away. Won’t this lead to even more foreclosures?Yes, says Schiff. And that’s the point. This country needs more foreclosures, not fewer. We need to clear the market of “shadow inventory” consisting of houses owned by people who never should have bought them in the first place and return to fair pricing.

Artificially pumping buying online up house prices is not doing underwater homeowners any favors, Peter Schiff says. The problem is that, thanks to the crazy mortgages of the bubble years, today’s homeowners were often able to buy houses they can’t afford. And now these houses are millstones around their owners’ necks.Keeping house prices artificially high is also hurting new homebuyers, Schiff points out — by making it more expensive to buy (and forcing people to borrow more money to do it). In many cases, this punishes responsible people who have been saving up money to buy a house and rewards those who spent beyond their means.

Lastly, Schiff says, we need to do away with the cult of homeownership that has taken over the country in recent decades. There’s nothing wrong with renting, Schiff says. In most cases it’s far cheaper than owning. Until recently, Schiff observes, he was a renter himself.

(By the way, if you’re thinking about walking away from your mortgage, here are some things to consider)

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Wall Street is making money, while consumers aren’t, Harajchi told CNBC.

“We have seen the G20 coming out with cross border capital injections of $5 trillion this year… But a lot of this money hasn’t really come down to Main Street,” he said.

“When it comes down to corporate America, corporate Europe or even in Asia, in Japan, we are not seeing Main Street making any money,” he said. “Consumers are losing their jobs. They are struggling with their mortgages, buy prozac online with their credit. And we are just seeing this continuing.”

The $5 trillion injection is “monetary expansion,” according to Harajchi. “At some point, which we believe to be 2010/11, some of the central banks are going to recall some of that money and that will turn from monetary expansion to monetary contraction.”

He also said he doesn’t see the corporates or the public “being able to pay back that debt.”

“We see 2010 becoming a much more risky year than 2009,” he said.

Harajchi said unemployment data are “a leading indicator” instead of a lagging indicator.

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 Mike Lenhoff, chief strategist at Brewing Dolphin Securities, told CNBC that the recovery will depend on the improvement in cyclical sectors.

“The sooner companies generate their profits, and I think it is moving towards mainstream, it’s not just the financials now,” Lenhoff said. “If present trends continue, we’re talking about jobs being created sometime in the second quarter of next year. That could do a lot for consumer confidence.”

Weak Dollar is Everybody’s Friend

It is no longer up to the U.S. but more to the rest of the world to decide about the dollar’s status as the global reserve currency, Harajchi said.

China and the Gulf countries which have their oil pegged to the dollar “would like to see some other currencies, maybe the euro, playing a more dominant role,” he said.

Lenhoff disagreed with Harajchi, saying he believes the dollar will continue to play a dominant role in global trade and global finance.

Central banks will continue to keep interest rates very low in order to avoid a depression, he said. The reason for the dollar’s recent weakness “is really down to Fed policy,” he added.

“The Federal Reserve has made it crystal clear that interest rates are staying where they are for an extended period of time. We’re getting to see a more confident tone to global growth, to a recovery, and as a result of that, we’re seeing the tolerance towards risk aversion drop and that in turn has washed back onto the dollar as investors go in search of risk assets,” he said.

“This is something we’re going to see for a while, until there is a change in Fed policy. That doesn’t seem imminent and certainly it doesn’t seem at all likely until sometime in the latter half of next year.”

The dollar’s depreciation will help boost the S&P 500 index over the coming quarters, Lenhoff told CNBC.

“A weak dollar is everybody’s friend,” he said.

“If the dollar serves the role of an additional stimulus in reflating the U.S, then I think that it’s very good,” he said.

Oct. 19 (Bloomberg) – Fannie Mae and Freddie Mac each fell 22 percent, to the lowest prices since August, after analysts at KBW Inc. said the shares of the government-run mortgage finance companies are probably worthless.

Analysts led by Bose George cut the companies’ price targets to zero today from $1 set in April, saying the entities need to be recapitalized by mortgage banks that use their services.

Fannie Mae fell 32 cents to $1.14 at 4:15 p.m. on the New York Stock Exchange, the lowest price since Aug. 20. Freddie Mac fell 37 cents to $1.35, the lowest since Aug. 19.

The government-sponsored entities, which more than tripled in August, have retreated from 13-month highs of $2.40 for Freddie and $2.04 for Fannie on Aug. 28.

“Both the common and preferred equity of the GSEs should be worthless” if the companies are recapitalized, the analysts wrote in a research note. The companies “are acting as a direct arm of the federal government providing massive federal aid to support and revive the U.S. housing market in the midst of a crisis,” the report said.

Fannie Mae and Freddie Mac remain the two largest sources of housing money in the U.S., financing about 70 percent of new mortgages, according to government statistics. Regulators seized their operations and placed Fannie Mae and Freddie Mac into conservatorship in September 2008 amid fears that the two were failing and posed a risk to the broader U.S. economy.

Recapitalizing Fannie, Freddie

The Congressional Budget Office projects the two will require $389 billion of the $400 billion in taxpayer aid Treasury pledged last year to keep them solvent.

“The only viable option to limit taxpayer expense and recapitalize Fannie Mae and Freddie Mac is to set up a Bad Fannie and Bad Freddie,” KBW said, adding that the plan would wipe out existing common and preferred shareholders.

The government could spin off new companies that are cooperatively owned by mortgage banks such as Wells Fargo & Co. and Bank of America Corp. that sell loans to Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, mirroring the Federal Home Loan Bank system, the analysts wrote.

The companies have booked a combined $165.3 billion in net losses during the past two years and have received or requested $95.6 billion in taxpayer aid since November.

The Dow Jones Industrial Average closed above 10,000 today for the first time in a year, and more than a decade after first breaking the mark. Since hitting lows in March, the Dow is up an astounding 50%, while the S&P 500 has gained 60%.

Before you get your broker on the phone or start trading that dormant online brokerage account, take heed of this warning from Mike “Mish” Shedlock, the blogger behind MISH’S Global Economic Trend Analysis: “Five years from now, I think its quite likely the Dow is not going to be much more than 10,000,” he says.

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Why so negative?

“We’ve still not solved any of those structural problems” Buy Xenical cheap in the housing, banking and debt markets, that caused last year’s crisis, he claims.

Shedlock’s advice: ignore the euphoria, and “take some chips off the table.  Now’s just not a good time to be invested.”

Shedlock, also an investment advisor representative for SitkaPacific Capital Management, thinks investors are better positioned in gold and cash.

Oct. 14 (Bloomberg) — Unless you want to stay in a neighborhood for life, renting a home may make more sense.

With more foreclosures and huge inventories of unsold homes looming and mortgage rates held down by the government, the housing market may not stabilize for years.

It’s no longer a given that you will build home equity. The housing debacle may have depressed housing prices for a generation in all but a handful of areas.

Am I spouting American housing heresy? After all, can’t you still build wealth by simply buying a home and holding it? And with 30-year, fixed-rate mortgages dipping below 5 percent, isn’t your buy signal flashing “go”?

A rent-versus-buy decision is a complicated one. You will need to make some blunt assumptions and do some in-depth homework on the neighborhood in which you want to buy.

The first layer of your decision-making is the duration of your investment. If you are fairly certain you are going to be in a neighborhood for an extended period — say you have a young family, like the local schools and have a secure government job — check the “buy” category and calculate ownership costs.

Those facing relocation, looking to downsize or retiring should strongly consider renting.

It’s difficult to recoup all of your closing costs and down payment in a short period of time. This is the easy part.

Rent Versus Buy

Now comes some gnarly cash-flow analysis for those leaning toward buying.

Let’s say you were considering a $300,000 home, put down 20 percent, and obtained a 5 percent, 30-year fixed-rate mortgage. You are in the 33 percent federal-tax bracket and you will pay $7,000 annually in property taxes and about $1,000 for insurance and maintenance. Your total monthly payments are $1,945.

Comparing your purchase to a similar property renting for $2,000 a month, you come out ahead buying and holding for 30 years. While your actual cash outlay is much less for renting — $583,267 versus $751,236 for buying — once you figure in the tax benefits over three decades, you are better off buying.

The combination of appreciation, leverage and tax breaks makes buying the winner over 30 years. Instead of having paid rent and gained no equity, this example will show a net asset value of $526,770 for buyers. This, of course, assumes a positive annual gain in your home’s price.

This example assumes a 1 percent annual return rate, stable property taxes and federal write-offs continuing untouched.

Property Taxes

Yet times have changed and it’s unlikely you will have the same mortgage, expenses and write-offs for three decades.

Real-estate taxes are wild cards that few brokers will discuss. Since public agencies are mostly dependent on property valuations for revenue, they are hurting in this housing recession and may be crippled for years from depressed home values. I’m seeing this in my area where the primary school district alone is facing a $3.5 million shortfall.

The most dangerous assumption is that property taxes will remain static. Ask your broker for past real-estate bills and the fiscal shape of local taxing bodies.

Another flawed assumption is appreciation. You can still lose home equity.

Check on median property values where you are buying. A few states were relatively untouched by the recent bubble, such as Texas, Utah, Wyoming, Oregon, Pennsylvania, Tennessee and North Carolina. Home-value declines were the worst in Nevada, California, Florida and Arizona, according to the U.S. Census Bureau’s most recent American Community Survey.

Invest the Difference

Still want to buy a home? Then dig even deeper in your targeted areas.

How many foreclosures are pending? Are there any vacant homes? What has been the mortgage default trend over the past two years? Is there a glut or shortage of unsold housing units? You can find local housing inventories by contacting area realtor associations.

Frank Armstrong III, a Coconut Grove, Florida-based financial planner and author of “Save Your Retirement” (FT Press, $14.99), says home ownership “is no longer a risk-free transaction. This has been the assumption for 30 years, and it’s been rebutted.”

An unstable or declining neighborhood usually translates into home-equity loss for buyers, most of whom have no idea when an area has hit bottom.

There’s no shame in not buying and exploiting the hidden upside in renting, though.

The money you would have spent on maintenance, taxes and insurance can pay off credit-card bills or be invested in an emergency fund, retirement or college savings. I know that few people will look at it this way, but renting might be a chance to recover financially.

online pharmacies no prescription target=”_blank”>Source Article

Los Angeles, 2009: California may be the eighth largest economy in the world, but its state government is issuing IOUs, unemployment is at its highest in 70 years, and teachers are on hunger strike. So what has gone so catastrophically wrong?

Will California become America’s first failed state?

Los Angeles, 2009: California may be the eighth largest economy in the world, but its state government is issuing IOUs, unemployment is at its highest in 70 years, and teachers are on hunger strike. So what has gone so catastrophically wrong?

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Patients without medical insurance wait for treatment in the Forum, a music arena in Inglewood, Los Angeles. The 1,500 free places were filled by 4am. Photograph: John Moore/Getty Images

California has a special place in the American psyche. It is the Golden State: a playground of the rich and famous with perfect weather. It symbolises a lifestyle of sunshine, swimming pools and the Hollywood dream factory.

But the state that was once held up as the epitome of the boundless opportunities of America has collapsed. From its politics to its economy to its environment and way of life, California is like a patient on life support. At the start of summer the state government was so deeply in debt that it began to issue IOUs instead of wages. Its unemployment rate has soared to more than 12%, the highest figure in 70 years. Desperate to pay off a crippling budget deficit, California is slashing spending in education and healthcare, laying off vast numbers of workers and forcing others to take unpaid leave. In a state made up of sprawling suburbs the collapse of the housing bubble has impoverished millions and kicked tens of thousands of families out of their homes. Its political system is locked in paralysis and the two-term rule of former movie star Arnold Schwarzenegger is seen as a disaster – his approval ratings having sunk to levels that would make George W Bush blush. The crisis is so deep that Professor Kevin Starr, who has written an acclaimed history of the state, recently declared: “California is on the verge of becoming the first failed state in America.”

Outside the Forum in Inglewood, near downtown Los Angeles, California has already failed. The scene is reminiscent of the fallout from Hurricane Katrina, as crowds of impoverished citizens stand or lie aimlessly on the hot tarmac of the centre’s car park. It is 10am, and most have already been here for hours. They have come for free healthcare: a travelling medical and dental clinic has set up shop in the Forum (which usually hosts rock concerts) and thousands of the poor, the uninsured and the down-on-their-luck have driven for miles to be here.

The queue began forming at 1am. By 4am, the 1,500 spaces were already full and people were being turned away. On the floor of the Forum, root-canal surgeries are taking place. People are ferried in on cushions, hauled out of decrepit cars. Sitting propped up against a lamp post, waiting for her number to be called, is Debbie Tuua, 33. It is her birthday, but she has taken a day off work to bring her elderly parents to the Forum, and they have driven through the night to get here. They wait in a car as the heat of the day begins to rise. “It is awful for them, but what choice do we have?” Tuua says. “I have no other way to get care to them.”

Yet California is currently cutting healthcare, slashing the “Healthy Families” programme that helped an estimated one million of its poorest children. Los Angeles now has a poverty rate of 20%. Other cities across the state, such as Fresno and Modesto, have jobless rates that rival Detroit’s. In order to pass its state budget, California’s government has had to agree to a deal that cuts billions of dollars from education and sacks 60,000 state employees. Some teachers have launched a hunger strike in protest. California’s education system has become so poor so quickly that it is now effectively failing its future workforce. The percentage of 19-year-olds at college in the state dropped from 43% to 30% between 1996 and 2004, one of the highest falls ever recorded for any developed world economy. California’s schools are ranked 47th out of 50 in the nation. Its government-issued bonds have been ranked just above “junk”.

Some of the state’s leading intellectuals believe this collapse is a disaster that will harm Californians for years to come. “It will take a while for this self-destructive behaviour to do its worst damage,” says Robert Hass, a professor at Berkeley and a former US poet laureate, whose work has often been suffused with the imagery of the Californian way of life.

Now, incredibly, California, which has been a natural target for immigration throughout its history, is losing people. Between 2004 and 2008, half a million residents upped sticks and headed elsewhere. By 2010, California could lose a congressman because its population will have fallen so much – an astonishing prospect for a state that is currently the biggest single political entity in America. Neighbouring Nevada has launched a mocking campaign to entice businesses away, portraying Californian politicians as monkeys, and with a tag-line jingle that runs: “Kiss your assets goodbye!” You know you have a problem when Nevada – famed for nothing more than Las Vegas, casinos and desert – is laughing at you.

This matters, too. Much has been made globally of the problems of Ireland and Iceland. Yet California dwarfs both. It is the eighth largest economy in the world, with a population of 37 million. If it was an independent country it would be in the G8. And if it were a company, it would likely be declared bankrupt. That prospect might surprise many, but it does not come as news to Tuua, as she glances nervously into the warming sky, hoping her parents will not have to wait in the car through the heat of the day just to see a doctor. “It is so depressing. They both worked hard all their lives in this state and this is where they have ended up. It should not have to be this way,” she says.

It is impossible not to be impressed by the physical presence of Arnold Schwarzenegger when he walks into a room. He may appear slightly smaller than you imagine, but he’s just as powerful. This is, after all, the man who, before he was California’s governor, was the Terminator and Conan the Barbarian.

But even Schwarzenegger is humbled by the scale of the crisis. At a press conference in Sacramento to announce the final passing of a state budget, which would include billions of dollars of cuts, the governor speaks in uncharacteristically pensive terms. “It is clear that we do not know yet what the future holds. We are still in troubled waters,” he says quietly. He looks subdued, despite his sharp grey suit and bright pink tie.

Later, during a grilling by reporters, Schwarzenegger is asked an unusual question. As a gaggle of journalists begins ionamin without prescription to shout, one man’s voice quickly silences the others. “Do you ever feel like you’re watching the end of the California dream?” asks the reporter. It is clearly a personal matter for Schwarzenegger. After all, his life story has embodied it. He arrived virtually penniless from Austria, barely speaking English. He ended up a movie star, rich beyond his dreams, and finally governor, hanging Conan’s prop sword in his office. Schwarzenegger answers thoughtfully and at length. He hails his own experience and ends with a passionate rallying call in his still thickly accented voice.

“There is people that sometimes suggest that the American dream, or the Californian dream, is evaporating. I think it’s absolutely wrong. I think the Californian dream is as strong as ever,” he says, mangling the grammar but not the sentiment.

Looking back, it is easy to see where Schwarzenegger’s optimism sprung from. California has always been a special place, with its own idea of what could be achieved in life. There is no such thing as a British dream. Even within America, there is no Kansas dream or New Jersey dream. But for California the concept is natural. It has always been a place apart. It is of the American West, the destination point in a nation whose history has been marked by restless pioneers. It is the home of Hollywood, the nation’s very own fantasy land. Getting on a bus or a train or a plane and heading out for California has been a regular trope in hundreds of books, movies, plays, and in the popular imagination. It has been writ large in the national psyche as free from the racial divisions of the American South and the traditions and reserve of New England. It was America’s own America.

Michael Pollan, author of The Omnivore’s Dilemma and now an adopted Californian, remembers arriving here from his native New England. “In New England you would have to know people for 10 years before they let you in their home,” he says. “Here, when I took my son to his first play date, the mother invited me to a hot tub.”

Michael Levine is a Hollywood mover and shaker, shaping PR for a stable of A-list clients that once included Michael Jackson. Levine arrived in California 32 years ago. “The concept of the Californian dream was a certain quality of life,” he says. “It was experimentalism and creativity. California was a utopia.”

Levine arrived at the end of the state’s golden age, at a time when the dream seemed to have been transformed into reality. The 1950s and 60s had been boom-time in the American economy; jobs had been plentiful and development rapid. Unburdened by environmental concerns, Californian developers built vast suburbs beneath perpetually blue skies. Entire cities sprang from the desert, and orchards were paved over into playgrounds and shopping malls.

“They came here, they educated their kids, they had a pool and a house. That was the opportunity for a pretty broad section of society,” says Joel Kotkin, an urbanist at Chapman University, in Orange County. This was what attracted immigrants in their millions, flocking to industries – especially defence and aviation – that seemed to promise jobs for life. But the newcomers were mistaken. Levine, among millions of others, does not think California is a utopia now. “California is going to take decades to fix,” he says.

So where did it all go wrong?

Few places embody the collapse of California as graphically as the city of Riverside. Dubbed “The Inland Empire”, it is an area in the southern part of the state where the desert has been conquered by mile upon mile of housing developments, strip malls and four-lane freeways. The tidal wave of foreclosures and repossessions that burst the state’s vastly inflated property bubble first washed ashore here. “We’ve been hit hard by foreclosures. You can see it everywhere,” says political scientist Shaun Bowler, who has lived in California for 20 years after moving here from his native England. The impact of the crisis ranges from boarded-up homes to abandoned swimming pools that have become a breeding ground for mosquitoes. Bowler’s sister, visiting from England, was recently taken to hospital suffering from an infected insect bite from such a pool. “You could say she was a victim of the foreclosure crisis, too,” he jokes.

But it is no laughing matter. One in four American mortgages that are “under water”, meaning they are worth more than the home itself, are in California. In the Central Valley town of Merced, house prices have crashed by 70%. Two Democrat politicians have asked for their districts to be declared disaster zones, because of the poor economic conditions caused by foreclosures. In one city near Riverside, a squatter’s camp of newly homeless labourers sleeping in their vehicles has grown up in a supermarket car park – the local government has provided toilets and a mobile shower. In the Los Angeles suburb of Pacoima, one in nine homeowners are now in default on their mortgage, and the local priest, the Rev John Lasseigne, has garnered national headlines – swapping saving souls to saving houses, by negotiating directly with banks on behalf of his parishioners.

For some campaigners and advocates against suburban sprawl and car culture, it has been a bitter triumph. “Let the gloating begin!” says James Kunstler, author of The Long Emergency, a warning about the high cost of the suburban lifestyle. Others see the end of the housing boom as a man-made disaster akin to a mass hysteria, but with no redemption in sight. “If California was an experiment then it was an experiment of mass irresponsibility – and that has failed,” says Michael Levine.

Nowhere is the economic cost of California’s crisis writ larger than in the Central Valley town of Mendota, smack in the heart of a dusty landscape of flat, endless fields of fruit and vegetables. The town, which boldly terms itself “the cantaloup capital of the world”, now has an unemployment rate of 38%. That is expected to rise above 50% as the harvest ends and labourers are laid off. City officials hold food giveaways every two weeks. More than 40% of the town’s people live below the poverty level. Shops have shut, restaurants have closed, drugs and alcohol abuse have become a problem.

Standing behind the counter of his DVD and grocery store, former Mendota mayor Joseph Riofrio tells me it breaks his heart to watch the town sink into the mire. His father had built the store in the 1950s and constructed a solid middle-class life around it, to raise his family. Now Riofrio has stopped selling booze in a one-man bid to curb the social problems breaking out all around him.

“It is so bad, but it has now got to the point where we are getting used to it being like this,” he says. Riofrio knows his father’s achievements could not be replicated today. The state that once promised opportunities for working men and their families now promises only desperation. “He could not do what he did again. That chance does not exist now,” Riofrio says.

Outside, in a shop that Riofrio’s grandfather built, groups of unemployed men play pool for 25 cents a game. Near every one of the town’s liquor stores others lie slumped on the pavements, drinking their sorrows away. Mendota is fighting for survival against heavy odds. The town of 7,000 souls has seen 2,000 people leave in the past two years. But amid the crisis there are a few sparks of hope for the future. California has long been an incubator of fresh ideas, many of which spread across the country. If America emerges from its crisis a greener, more economically and politically responsible nation, it is likely that renewal will have begun here. The clues to California’s salvation – and perhaps even the country as a whole – are starting to emerge.

Take Anthony “Van” Jones, a man now in the vanguard of the movement to build a future green economy, creating millions of jobs, solving environmental problems and reducing climate change at a stroke. It is a beguiling vision and one that Jones conceived in the northern Californian city of Oakland. He began political life as an anti-poverty campaigner, but gradually combined that with environmentalism, believing that greening the economy could also revitalise it and lift up the poor. He founded Green for All as an advocacy group and published a best-selling book, The Green Collar Economy. Then Obama came to power and Jones got the call from the White House. In just a few years, his ideas had spread from the streets of Oakland to White House policy papers. Jones was later ousted from his role, but his ideas remain. Green jobs are at the forefront of Obama’s ideas on both the economy and the environment.

Jones believes California will once more change itself, and then change the nation. “California remains a beacon of hope… This is a new time for a new direction to grow a new society and a new economy,” Jones has said.

It is already happening. California may have sprawling development and awful smog, but it leads the way in environmental issues. Arnold Schwarzenegger was seen as a leading light, taking the state far ahead of the federal government on eco-issues. The number of solar panels in the state has risen from 500 a decade ago to more than 50,000 now. California generates twice as much energy from solar power as all the other US states combined. Its own government is starting to turn on the reckless sprawl that has marked the state’s development.

California’s attorney-general, Jerry Brown, recently sued one county government for not paying enough attention to global warming when it came to urban planning. Even those, like Kotkin, who are sceptical about the end of suburbia, think California will develop a new model for modern living: comfortable, yes, but more modest and eco-friendly. Kotkin, who is writing an eagerly anticipated book about what America will look like in 2050, thinks much of it will still resemble the bedrock of the Californian dream: sturdy, wholesome suburbs for all – just done more responsibly. “We will still live in suburbs. You work with the society you have got. The question is how we make them more sustainable,” he says.

Even the way America eats is being changed in California. Every freeway may be lined with fast-food outlets, but California is also the state of Alice Waters, the guru of the slow-food movement, who inspired Michelle Obama to plant a vegetable garden in the White House. She thinks the state is changing its values. “The crisis is bringing us back to our senses. We had adopted a fast and easy way of living, but we are moving away from that now,” she says.

There is hope in politics, too. There is a growing movement to call for a constitutional convention that could redraw the way the state is governed. It could change how the state passes budgets and make the political system more open, recreating the lost middle ground. Recently, the powerful mayor of Los Angeles, Antonio Villaraigosa, signed on to the idea. Gerrymandering, too, is set to take a hit. Next year Schwarzenegger will take steps to redraw some districts to make them more competitive, breaking the stranglehold of party politics. He wants district boundaries to be drawn up by impartial judges, not politicians. In previous times that would have been the equivalent of a turkey voting for Christmas. But now the bold move is seen for what it is: a necessary step to change things. And there is no denying that innovation is something that California does well.

Even in the most deprived corners of the state there is a sense that things can still turn around. California has always been able to reinvent itself, and some of its most hardcore critics still like the idea of it having a “dream”.

“I believe in California. It pains me at the moment to see it where it is, but I still believe in it,” said Michael Levine.

Perhaps more surprisingly, a fellow believer is to be found in Mendota in the shape of Joseph Riofrio. His shop operates as a sort of informal meeting place for the town. People drop in to chat, to get advice, or to buy a cold soft drink to relieve the unrelenting heat outside. The people are poor, many of them out of work, often hiring a bunch of DVDs as a cheap way of passing the time. But Riofrio sees them as a community, one that he grew up in. He is proud of his town and determined to stick it out. “This is a good place to live,” he says. “I want to be here when it turns around.” He is talking of the stricken town outside. But he could be describing the whole state.★

As the old Real Estate aphorism Buy Acomplia Online goes “Only 3 things matter – location, location, location”.  So the issue with relying on Case-Shiller (which has been “growing” for three months – yippity f-ing doodah!)  is that the “city” used for valuation is usually a multi-county location with each location being at a different stage in the price cycle.  The “San Francisco” area ranges from Pacific Heights to the Brentwood suburbs over 55 miles away.  Brentwood may have bottomed but it will take some time for the Silicon Valley and the “City by the Bay” to follow it into the abyss.  Oh and by-the-way Silicon Valley, typically considered Santa Clara county, is not actually in the index.

The recovery that Case-Shiller has been talking about is allowing the far out suburbs to mask further falls in the inner-core. The net result is, as Case-Shiller recovers, people closer to the namesake city buy too soon under the false pretense that their little pocket of the world has improved with the broader index.  Ironically those in the exurbs will now do better than those closer to the city named in the index.

How will prices in the inner core eventually fall into the abyss?  Simple migration.  The cheapest areas will draw from their neighbors (Brentwood from Dublin) lowering the prices for the neighbors as well (as Brentwood represents a “substitute” in classic economic parlance).  Those now lower price neighbors will then draw from their neighbors one step closer to the inner core (Dublin from Castro Valley) drawing down the prices there.  This will then continue  as such – Castro Valley from Fremont, Fremont from Mountain View and finally Mountain View from Palo Alto.  In the end nature abhors a pricing vacuum and one currently exits in the exurbs.  It will take some time before it really sucks here in Palo Alto.  But it will suck!

The net-net is the worst place to buy right now is anywhere near the city named in the index.   Oh and if your not actually in the index then purchase at your own risk.  You say you live in the “San Francisco” area but remember that it is a spiritual and not a statistical distinction according to Messrs. Case and Shiller.

To add to the scary (and highly varied picture) take a look at this chart which shows how wildly different the valuation story is WITHIN  the “San Francisco” area:

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

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Washington – The American dream means different things to different people. For some, it looks like a house on a leafy cul-de-sac with weekends spent mowing the lawn and planting shrubs. For others it’s a rented apartment in the big city with a building engineer to handle such tasks.

The government should not subsidize one dream at the expense of another. Sadly, though, that’s just what has happened. And as history so clearly demonstrates, one-size-fits-all policies don’t work very well.

During much of the last century the heavy hand of government has been used to turn the US into a nation of homeowners. It all began in 1913 with the inclusion of a deduction for mortgage interest when the federal income tax was enacted.

Two decades later, with the economy in the throes of the Great Depression, federal intervention exploded. Herbert Hoover signed the Federal Home Loan Bank Act in 1932. Over the next two years his successor, Franklin Roosevelt, created the Federal Home Owners’ Loan Corporation and the Federal Housing Administration. Fannie Mae was established in 1938.

Centralization of housing policy in Washington gave rise to interest groups representing home building, mortgage lending, and the real estate industries that pressured politicians to shower a never-ending stream of subsidies on owner-occupied housing.

So successful was this effort that by the late 1990s it became difficult to subsidize homeownership anymore, short of loosening lending standards on federally backed loans. Under unrelenting pressure, those, too, eventually wilted, and a torrent of unqualified buyers flooded the market, fueling a bubble that sent home prices into the stratosphere.

When the bubble eventually burst in 2006, home prices plummeted and many faced financial ruin. The economy slipped into a severe recession and Americans lost some $14 trillion in household wealth. Big Housing, which had pocketed enormous gains during the boom, dumped tremendous losses on taxpayers.

In addition to having different dreams, Americans also have widely varying housing needs. Consider those whose jobs require frequent moves. Because agent fees and closing costs typically exceed any short-run appreciation in value, it makes no financial sense for such people to buy a home.

Yet government policy encourages them to do just that.

Indeed, the current recession has shown what an albatross a home can be. People who have lost Buy Acomplia Online Without Prescription jobs often need to move for new ones. But having bought houses they can’t sell, many face the unattractive choice of remaining unemployed or abandoning their homes. By creating this labor market rigidity, housing subsidies have deepened and prolonged the downturn.

What have policymakers learned from all this? Apparently not much.

There is growing pressure to extend and expand Washington’s latest housing boondoggle: The $8,000 first-time home buyer tax credit. This new giveaway, passed as part of the stimulus bill and due to expire Nov. 30, is designed to lure even more people who are either not financially qualified or for whom buying a home is an unwise investment into the housing market, paving the way for more foreclosures and bailouts down the road.

Even if it is not extended, the provision will likely cost taxpayers more than twice what they were told it would in February.

Politicians must stop meddling in Americans’ housing decisions.

The way out of the housing mess is not billions more in subsidies. It’s dismantling the existing ones so that individuals can decide for themselves how to best attain shelter.

Doing so would protect taxpayers from the poor decisions of others and give the economy a much needed boost by steering investment away from the construction of McMansions and into those things that raise workers’ wages like modern factories equipped with high-tech machines.

To be sure, those with a vested interest in the status quo will fight tooth and nail to keep their handouts. The experience of the past year, however, should teach us that subsidizing homeownership comes at a very high cost and places our economy at considerable risk.

Governing a nation of more than 300 million people poses immense challenges. Keeping the nation safe from attack, policing our streets, proving a basic safety net – these are important and difficult tasks. Our elected leaders should focus on truly public matters and let citizens make personal decisions like how to best put a roof over our heads.

Source article.

Robert Reich was the nation’s 22nd Secretary of Labor and is a professor at the University of California at Berkeley. His latest book is “Supercapitalism.” This is his personal journal.

Why aren’t we hearing more about the worst job and wage situation since the Great Depression?

The latest employment figures (released this morning) show job losses continuing to grow. According to the payroll survey, job losses are increasing more slowly than in previous months. According to the household survey, they’re accelerating — from 9.4 percent of the workforce in July to 9.7 percent in August. Bottom line: almost one out of six Americans who need a full-time job either can’t find one or is working part-time. Meanwhile, wage growth among people who have jobs has just about stopped. The Economic Policy Institute reports that between 2006 and 2008, wages grew at an annualized rate of 4.0%; by contrast, over the past three months annual wage growth has plummeted to just 0.7%. At the same time, furloughs — requiring workers to take unpaid vacations — are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.

So why isn’t the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They’re falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb — although, to be sure, much more slowly than before the meltdown. It’s much the same with health-care and pension benefits. Among people under 65 who are in the bottom 20% of incomes, only 21.9% have employer-sponsored health insurance — if they have a job at all. buy rx drugs without prescription Half of all people nearing retirement age have a 401(k) balance of less than $40,000.

I keep hearing that the economic meltdown has taken a huge toll on the stock portfolios of the rich. That’s true. But the rich haven’t lost nearly as much of their assets, proportionately, as everyone else. According to a report from the Bank of America Merrill Lynch (”The Myth of the Overleveraged Consumer”), analyzing data from the Federal Reserve, the bottom 90 percent of Americans hold 50 percent of more of their assets in residential real estate, which has taken a far bigger beating than stocks and bonds. The top 10 percent of Americans have only a quarter of their assets in housing; most of their assets are in stocks and bonds. And although the stock market is still a bit tipsy, it has rallied considerably since it hit bottom earlier this year. Home values, on the other hand, are down by an average of a third across the country, and are still falling.

What does all this mean for the economy as a whole? It raises the fundamental question of where demand will come from to get us out of this hole. If so manyAmericans are losing their jobs and wages, you have to wonder who will be returning to the malls.

That same Bank of America Merrill Lynch report notes cheerfully that 42 percent of consumer spending before the meltdown came from the top-earning 10 percent of Americans (not too surprising given that the top 10 percent was raking in half of total earnings) and the top 10 percent continues to do relatively well. So, says Bank of America Merrill, we can rely on the spending of the top 10 percent to get the economy moving again. Indeed, they conclude, Congress and the White House should be careful not to raise taxes on the top 10 percent, lest the consuming ardor of these most privileged members of our society be dampened.

This logic is morally and economically indefensible. If we’ve learned anything from the Great Recession-Mini Depression of the last 18 months, it’s that the skewing of income and wealth to the top has made our economy far less stable. When the majority of middle-class and poor Americans are either losing their jobs or feel threatened by job loss, and when those who still have jobs are experiencing flat or declining wages, there’s simply no way to get the economy back on track. The track we were on — featuring stagnant median wages, widening inequality, and job insecurity — got us into this mess in the first place.