Pittsburgh protesters demand G20 do more for jobs
Forbes
“We’re not going to accept a jobless recovery,” said Larry Adams, a postal worker who came from Jersey City, New Jersey, for the protest. …
Operation Rollback: Wal-Mart’s World of Business
A Shareholder-Not Just a "Stakeholder", A State of Distress, Back to the basics, Book Reviews, Important Skills - No Apprentice Programs, Market Strategies, Our phony middle class, Patience is a virtue...Delusion is a vice, Strategizing Suppy Chain Links, The End of American Capitalism As We Know It? - Discuss, The Importance of Strategic Planning, The Inherent Disorder of Empires, The Sorry State Of American Manufacturing, Unemployment Catastrophe, Unindicted Co-Conspiritors, US Trade Imbalance, Wage Deflation, Watch The China Market, We Are All Cooked, We Have Become Beggars To The World
1 Response »
Sep 182009
The expansion of international “supply chains” from Asian factories to American consumers has certainly created global trade imbalances and international currency flows that are not necessarily sustainable over the long run. A readjustment of the world economy, not a slackening demand for inexpensive consumer products, strikes me as the greatest threat to the Wal-Mart business model. And, for its part, the chain is already adapting to new circumstances. In recent years, Wal-Mart has expanded well beyond the borders of North America into Europe, Mexico and Asia. It imports factory goods from China and also operates its own retail stores there. But the stores look very different from their American counterparts. In Kunming, near the border with Myanmar, Wal-Mart rents space inside its store to independent vendors, who pay $1.20 per day to hawk Yunnan coffee, tobacco bongs filled with local rice wine and condiments made from eggplant, soybeans and ginger. The atmosphere is “festival-like, even chaotic,” as vendors shout out their wares, sometimes through loudspeakers or while pounding on drums, and customers crowd a stall to fish pears out of a solution of sugar, salt and licorice root–”a Wal-Mart store sans Wal-Martism,” according to sociologist Eileen Otis. Another Chinese employee explains his loyalty to the company by suggesting that Sam Walton was, in fact, a student of Chairman Mao who “adopted the revolutionary strategy of ‘the countryside encircling the city.’&nthinsp;” And so the revolution continues.
How Wal-Mart’s Ruthlessness Led to Its Undoing – Jefferson Decker, Nation
Jul 022009
To read “Our Lot: How Real Estate Came to Own Us” is to relive, in painful, anecdotal detail, the real estate bust that brought our economy low. Through Alyssa Katz, a journalism professor at New York University and the former editor of the magazine City Limits, we remeet the exploited homeowners and the naive investors, and we cringe again at the blundering politicians and opportunistic lenders.
But “Our Lot” is also a reminder that our memories are short, and that the same mix of hope, greed, good intentions and bad policy has been inflating and popping real estate bubbles since the days of LBJ. Behind it all is a conviction shared by nearly all Americans, be they Democrats or Republicans, Wall Streeters or the ARMed and desperate masses, that home ownership is a good thing — good for the neighborhood, the country and the average citizen holding the deed and the debt. “Our Lot’s” long view is perhaps most unnerving for the doubt it casts on that timeworn belief. Salon interviewed Katz by phone.
Isn’t homeownership actually good for you? I thought it was the panacea for almost all social ills, it drove the crime rate down, educational achievement up, and so on.
Yes, well, homeownership is only as good as the amount of home you actually own, and I think the big problem in the last generation or so is that Americans have turned to more and more and more debt to reach for the American dream.
There’s a lot of great examples out there — the Nehemiah homes that transformed East New York in Brooklyn from a really devastated and dangerous place to someplace that’s still really poor and has a high crime rate but has an opportunity to really grow and have a stable bunch of families really invested in building a home there. So all that’s great. Certainly there’s a lot of evidence that homeowners do tend to stay in one place for longer, their kids perform better in school. They tended to be more involved in local politics, community affairs, and block cleanups. The problem is, it’s very hard to separate out the effects of homeownership itself from the fact that people who have a certain economic or social standing are more likely statistically to be homeowners in the first place.
Does this mean that we shouldn’t actively encourage homeownership, using government money or government policy?
I think there’s nothing wrong with using government money, policy, pressure, all those tools to make homeownership more of a possibility than it would otherwise be in the marketplace, simply because the market left to its own devices discriminates aggressively. It rewards people who already have wealth, who have already had a leg up economically, and it’s great to give other people the opportunity as well.
The problem is that homeownership is the only housing policy that this country has ever shown any commitment to. Renters are treated miserably.
And that’s one big distinction you see between the U.S. and European countries that also had very loosely regulated mortgage-security markets and have had problems there. I think one reason you’re not seeing mass foreclosures on quite the scale that you had in the U.S. is that for large proportions of the population in many European countries, including the Netherlands, Germany, France, Switzerland, renting is supported through government policies that, for instance, protect tenants so that they don’t have to worry about getting kicked out at the end of the year.
Whereas in the U.S., homeownership was always the only option. And anyone who can afford to, or thought they could afford to, would choose that option. So that’s really the problem here.
Whose fault is the mess that we’re in now? And how far back do we need to go to start tracing the blame?
I think the message of my book, unfortunately, is that it’s to some degree everybody’s fault, including, I should say, liberal activists, with whom I’m extremely sympathetic, and think were right.
But what we really had was a collision of ideologies over this question of: How do we make it possible for everyone to be a homeowner? How do we eradicate this horrible legacy of discrimination, which had left the homeownership rate for whites much, much higher than that for blacks and Latinos? There was real work that needed to be done there. So I think we really have to go back to the 1970s, when we started to see pretty aggressive policy measures on the part of the federal government to try to level the playing field.
You talk about another real estate bubble in the early ’70s, when everybody who wanted one could get a mortgage. The wreckage that was left behind looks totally familiar.
Yes. Rather infamously, the federal housing administration, which is the government agency that insures mortgages — it’s what built Levittown and all those 1950s suburbs after the war — discriminated very aggressively, on the basis of what was thought to be sound statistical evidence, that the insurance fund would only be safe if it were to insure suburban and overwhelmingly white areas.
So what happened in ’67 and ’68 was that federal housing officials reversed that entirely. They proclaimed, initially just in the riot areas and then more broadly across cities, that FHA, the Federal Housing Administration, would now be open everywhere! And in fact, as I note in the book, the only circumstances under which HUD did not insure mortgages is if the house is literally falling down.
Real estate agents and loan brokers descended on inner cities, trying to find borrowers who would be unlikely to pay their mortgages back, because the real-estate speculator would get paid in full by the federal government, and paid more quickly and more generously, because of forgone interest that they would get compensated for. The sooner that borrower went into foreclosure the more generously that entrepreneur would get paid.
When was that mess cleaned up?
About ’73, ’74. There were tens if not hundreds of thousands of abandoned houses all over the country as a result of the FHA debacle, and it got a lot of attention at the time and was almost forgotten to history after that.
And then we have the Reagan presidency and — correct me if I’m wrong — but that’s when the securities market for mortgages really blossoms, right?
Absolutely. Mortgage-backed securities had existed since about 1970. They existed in the ’20s too, and that was part of why the Depression happened — they had been made illegal after that. But they came back as a government product in 1970. As I recount in the book, Lewis Ranieri of Salomon Brothers, which was trading in government-backed securities, thought, “Couldn’t we just do this ourselves? Why do we need to have Freddie Mac or Fannie Mae in the middle, why don’t we create these securities?”
In order to do that, they needed to rewrite all those laws that had been passed following the crash in 1929 and thereafter, which was as much a housing and real estate bubble crash as it was a stock market crash.
Who’s to Blame For the Housing Crash? – Mark Schone, Salon
By Kathleen M. Howley
June 29 (Bloomberg) — Driving through Riverside, California, Bruce Norris pointed to a half-dozen empty houses with “For Sale” signs stuck in untended lawns that he said investors might buy if banks would just extend some credit.
“People today look at us as the enemy,” said Norris, 57, head of Riverside-based Norris Group, which purchases and renovates homes to rent or sell. “That’s a big problem for housing because if we can’t get the financing we need, a lot of these properties are going to sit vacant.”
Four months after President Barack Obama pledged $275 billion to shore up home sales, the engine that powered every U.S. recovery since 1960 is stalled. Bankers’ reluctance to finance buyers who won’t live in properties is one barrier to a turnaround. Stricter qualifying rules and a rise in the cost of residential loans to 5.42 percent have impeded new mortgage lending, which is at a 13-year low. An inventory of 2.1 million unoccupied houses on the market, created by the fastest foreclosure pace in history, may be a drag on a revival.
The $8,000 first-time homebuyer tax credit in the U.S. economic stimulus package and a government program to subsidize some mortgage payments have had little effect, according to Eric Belsky, executive director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts.
“It hasn’t been much more than a see-sawing of data,” Belsky said in an interview. “Housing has led the U.S. economy out of every recession for at least 50 years, and for that to happen again more stimulus is going to be needed.”
Leading Indicator
The residential real estate market improved ahead of the end of the past seven contractions, with home construction starts beginning to climb an average of seven months before gross domestic product picked up and sales gaining about four months in advance, according to data compiled by David Berson, chief economist of PMI Group, a mortgage insurer in Walnut Creek, California.
Expenditures by homeowners — first on transaction fees, then on necessities and luxuries including furniture, gardening tools, kitchen renovations, basic upkeep and property taxes — kept the momentum going, Belsky said.
Existing U.S. home sales in May rose 2.4 percent to an annual rate of 4.77 million, lower than forecast, and the median price was down 16.8 percent from the same month in 2008, according to the Chicago-based National Realtors Association.
There’s little chance the turnover will increase enough this year to end the housing recession, said Andres Carbacho- Burgos, an economist with Moody’s Economy.com in West Chester, Pennsylvania.
‘Lousy Job Market’
“We have a lousy job market and an excess of around 1 million extra homes that has to be worked off,” he said in an interview. “The housing market is not going to hit bottom before mid-2010.”
Housing starts are at their lowest level since 1945, even with a 17 percent increase in May that pushed the annual rate to 532,000 from a 454,000 pace the prior month. So many properties are for sale — 3.8 million as of last month — that it would take 9.6 months to unload them at the current sales pace, according to the Realtors group. The inventory averaged 4.5 months in the six years from 2000 to 2005.
While there is pent-up demand that would eat away at the stock, “people are scared to spend the money because they’re worried about losing their jobs,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, in an interview.
6 Million Jobs
The unemployment rate, which reached a 26-year high of 9.4 percent in May, will probably exceed 10 percent this year, Obama said at a June 23 White House news conference.
“The American people have a right to feel like this is a tough time right now,” Obama said, calling it “pretty clear” payrolls will continue to shrink. About 6 million jobs have disappeared since January 2008, marking the biggest employment loss of any retrenchment since the Great Depression.
Personal bankruptcies rose 37 percent in May from a year earlier, according to the American Bankruptcy Institute, based in Alexandria, Virginia. Credit card defaults in the first quarter went to 7.79 percent from 4.83 percent a year ago, Federal Deposit Insurance Corp. data show. While the share of loans entering foreclosure moved to 1.37 percent, the highest ever, the first-quarter mortgage delinquency rate climbed to a record 9.12 percent, the Washington-based Mortgage Bankers Association said.
Housing in Peril as Financing Breakthrough Fails – Bloomberg
May 042009
Some of the wage cuts, like the givebacks by Chrysler workers, are the price of federal aid. Others, like the tentative agreement on a salary cut here at The Times, are the result of discussions between employers and their union employees. Still others reflect the brute fact of a weak labor market: workers don’t dare protest when their wages are cut, because they don’t think they can find other jobs.
Whatever the specifics, however, falling wages are a symptom of a sick economy. And they’re a symptom that can make the economy even sicker.
First things first: anecdotes about falling wages are proliferating, but how broad is the phenomenon? The answer is, very.
