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from globalresearch:

Introduction 

While there is much talk of a recovery on the horizon, commentators are forgetting some crucial aspects of the financial crisis. The crisis is not simply composed of one bubble, the housing real estate bubble, which has already burst. The crisis has many bubbles, all of which dwarf the housing bubble burst of 2008. Indicators show that the next possible burst is the commercial real estate bubble. However, the main event on the horizon is the “bailout bubble” and the general world debt bubble, which will plunge the world into a Great Depression the likes of which have never before been seen. 

Housing Crash Still Not Over 

The housing real estate market, despite numbers indicating an upward trend, is still in trouble, as, “Houses are taking months to sell. Many buyers are having trouble getting financing as lenders and appraisers struggle to figure out what houses are really worth in the wake of the collapse.” Further, “the overall market remains very soft […] aside from speculators and first-time buyers.” Dean Baker, co-director of the Center for Economic and Policy Research in Washington said, “It would be wrong to imagine that we have hit a turning point in the market,” as “There is still an enormous oversupply of housing, which means that the direction of house prices will almost certainly continue to be downward.” Foreclosures are still rising in many states “such as Nevada, Georgia and Utah, and economists say rising unemployment may push foreclosures higher into next year.” Clearly, the housing crisis is still not at an end. 

The Commercial Real Estate Bubble 

In May, Bloomberg quoted Deutsche Bank CEO Josef Ackermann as saying, “It’s either the beginning of the end or the end of the beginning.” Bloomberg further pointed out that, “A piece of the puzzle that must be calculated into any determination of the depth of our economic doldrums is the condition of commercial real estate — the shopping malls, hotels, and office buildings that tend to go along with real- estate expansions.” Residential investment went down 28.9 % from 2006 to 2007, and at the same time, nonresidential investment grew 24.9%, thus, commercial real estate was “serving as a buffer against the declining housing market.” 

Commercial real estate lags behind housing trends, and so too, will the crisis, as “commercial construction projects are losing their appeal.” Further, “there are lots of reasons to suspect that commercial real estate was subject to some of the loose lending practices that afflicted the residential market. The Office of the Comptroller of the Currency’s Survey of Credit Underwriting Practices found that whereas in 2003 just 2 percent of banks were easing their underwriting standards on commercial construction loans, by 2006 almost a third of them were relaxing.” In May it was reported that, “Almost 80 percent of domestic banks are tightening their lending standards for commercial real-estate loans,” and that, “we may face double-bubble trouble for real estate and the economy.” 

In late July of 2009, it was reported that, “Commercial real estate’s decline is a significant issue facing the economy because it may result in more losses for the financial industry than residential real estate.  This category includes apartment buildings, hotels, office towers, and shopping malls.” Worth noting is that, “As the economy has struggled, developers and landlords have had to rely on a helping hand from the US Federal Reserve in order to try to get credit flowing so that they can refinance existing buildings or even to complete partially constructed projects.” So again, the Fed is delaying the inevitable by providing more liquidity to an already inflated bubble. As the Financial Post pointed out, “From Vancouver to Manhattan, we are seeing rising office vacancies and declines in office rents.” 

In April of 2009, it was reported that, “Office vacancies in U.S. downtowns increased to 12.5 percent in the first quarter, the highest in three years, as companies cut jobs and new buildings came onto the market,” and, “Downtown office vacancies nationwide could come close to 15 percent by the end of this year, approaching the 10-year high of 15.5 percent in 2003.” 

In the same month it was reported that, “Strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade, as a spending slump forces retailers to trim down to stay afloat.” In the first quarter of 2009, retail tenants “have vacated 8.7 million square feet of commercial space,” which “exceeds the 8.6 million square feet of retail space that was vacated in all of 2008.” Further, as CNN reported, “vacancy rates at malls rose 9.5% in the first quarter, outpacing the 8.9% vacancy rate registered in all of 2008.” Of significance for those that think and claim the crisis will be over by 2010, “mall vacancies [are expected] to exceed historical levels through 2011,” as for retailers, “it’s only going to get worse.”[5] Two days after the previous report, “General Growth Properties Inc, the second-largest U.S. mall owner, declared bankruptcy on [April 16] in the biggest real estate failure in U.S. history.” . . . . . . .

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from Solari:

What we are watching price out through the political process is life vs. death. More specifically, the financial value of the life and death of various groups and ages of people vs. the life and death of large banks and corporations.

In a market economy, if a person’s skills become outdated, the theory is that they will be encouraged by their need to generate income to learn new skills or change.

If a large bank or corporation can no longer generate revenues to cover its operations, likewise the theory says that it will change. Management will invent new products and services, cut expenses, renegotiate with creditors through bankruptcy or shut down.

However, in a bubble, the people and the corporations and banks all avoid change by going to the government and coming up with thousands of ways to keep their operations afloat using government funds so they do not have to change– government programs, subsidies, contracts, credit, guarantees, regulations and so forth. This is why I start my case study on how the system really works with that old New Jersey street saying – “Make a law, make a business.”

Changing the laws, however, does not change the real world where fundamental productivity continues to count. So over the last twelve months, after many bubbles, there was not enough for everyone. So we made a decision to shift most, if not all, of our remaining resources to the large banks and corporations.

What this means is that if people do not need the products and services of the banks and corporations, rather than let them die, we are going to use government and central banks to simply take money from people to keep a bank or corporation alive without customers or markets.

So the institutions created to serve markets are deemed to have lives of their own that justify subsidizing them even if the markets are gone. Government can guarantee markets even when customers have no money to buy goods and services and taxpayers can not afford to pay taxes.

Big banks and corporations are guaranteed life. In addition, there is no prison or death penalty for big banks and corporations as a result of their bad behavior, including when it causes the death of people. So their life is infinite.

To pay for this we must take resources from people — with taxes, with fees, with inflation, with lower benefits and with legal and economic warfare. If they do not go along, we can send them to prison or inflict the death penalty.

Hence, an overview of a series of policies is emerging from Wall Street and Washington which is crystal clear.

People will die so that corporations and banks without retail markets, customers or purpose can live richly, although not anywhere near as richly as the invisible forces that hide behind them.

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from The Independent:

Catastrophic shortfalls threaten economic recovery, says world’s top energy economist

The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated. 

 But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an “oil crunch” within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.  

In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010. . . . . .

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from The Daily Telegraph:

Economic output shrank by 5.6pc in the 12 months to the middle of the year, according to official figures which shattered hopes that the recovery has already begun.

The Office for National Statistics said that Britain’s gross domestic product (GDP) contracted by 0.8pc in the second quarter, following the unprecedented 2.4pc fall in the first three months of the year. Economists had expected GDP – the broadest measure of the country’s economic performance – to shrink by 0.3pc.

According to calculations by Martin Weale of the National Institute for Economic and Social Research the profile of the current recession is now almost identical to the decline in Britain’s output between 1929 and 1931. The 5.6pc contraction over the past year almost matches the 5.8pc fall in the year preceding the second quarter of 1931, during which Credit Anstalt in Austria collapsed, triggering a second wave of economic seizure across Europe.

The recession is far deeper and more severe than those of the early 1980s and 1990s, Mr Weale added. . . . .

read the full article here.

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from MSN:

Really, how hard is it to find a job? Was June’s horrid numbers, in which 467,000 people lost their jobs compared to 345,000 in May, a one-time fluke? Or does it mean that all those Wall Street economists who believe the economic recovery is starting are dead wrong?

Not to scare you, but the situation is actually worse than it seems. Over the years, the government has changed the way it counts the unemployed. An example of this is the criticized Birth-Death Model which was added in 2000. The model is designed to account for the birth and death of businesses and the resultant lag in survey data. Unfortunately, the model doesn’t work that well during economic contractions (like we have now) and consistently overstates the number of jobs being created each month.

John Williams of Shadow Government Statistics specializes in removing these questionable tweaks to the government’s statistical data to better align current numbers with the methodology used to gather historical data. After reviewing the data, Williams believes that “the June jobs loss likely exceeded 700,000.” David Rosenberg of Gluskin Sheff notes that the fall in the number of hours worked in June (to a record low of 33 per week) is equivalent to a loss of more than 800,000 jobs.

There are similar issues with the way the unemployment rate is measured. The headline rate only jumped from 9.4% to 9.5% because of a drop in the number of people in the workforce. The more inclusive “U-6″ measure of unemployment, which includes discouraged workers, jumped from 16.4% to 16.5%. But even this doesn’t adequately capture the situation on the ground: Back in the Clinton Administration, the definition of discouraged worker was changed to only include those that had given up looking for work because there were no jobs to be had within the last year.

By adding these folks back in, William’s SGS-Alternate Unemployment Measure rose to a jaw-dropping 20.6%. Separately, the Center for Labor Market Studies in Boston puts U.S. unemployment at 18.2%. Any way you cut the numbers, the situation is very bad. According to David Rosenberg, one-in-three among the unemployed have been looking for a job for more than six months and still can’t find one.

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from the Daily Telegraph:

In a 2003 paper, Thomas Laubach, the US Federal Reserve’s senior economist, calculated the impact on long-term interest rates of rising fiscal deficits and soaring national debt. Applying his assumptions to the recent spike in the US fiscal deficit and national debt, long-term interests rates will double from their current 3.5pc.

The impact would be devastating by making it punitively expensive to finance national borrowings and leading to what Tim Congdon, founder of Lombard Street Research, called a “debt explosion”. Mr Laubach’s study has implications for the UK, too, as public debt is soaring. A US crisis would have implications for the rest of the world, in any case.

Using historical examples for his paper, New Evidence on the Interest Rate Effects of Budget Deficits and Debt, Mr Laubach came to the conclusion that “a percentage point increase in the projected deficit-to-GDP ratio raises the 10-year bond rate expected to prevail five years into the future by 20 to 40 basis points, a typical estimate is about 25 basis points”.

The US deficit has blown out from 3pc to 13.5pc in the past year but long-term rates are largely unchanged. Assuming Mr Laubach’s “typical estimate”, long-term rates have to climb 2.5 percentage points.

He added: “Similarly, a percentage point increase in the projected debt-to-GDP ratio raises future interest rates by about 4 to 5 basis points.” Economists are predicting a wide range of ratios but Mr Congdon said it was “not unreasonable” to assume debt doubling to 140pc. At that level, Mr Laubach’s calculations would see long-term rates rise by 3.5 percentage points.

The study is damning because Mr Laubach was the Fed’s economist at the time, going on to become its senior economist between 2005 and 2008, when he stepped down. As a result, the doubling in rates is the US central bank’s own prediction.

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“The World’s Economy is tracking or doing worse than during the Great Depression”

from VOX:

This is an update of the authors’ 6 April 2009 column comparing today’s global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion — today’s crisis is at least as bad as the Great Depression.

Editor’s note: The 6 April 2009 Vox column by Barry Eichengreen and Kevin O’Rourke shattered all Vox readership records, with 30,000 views in less than 48 hours and over 100,000 within the week. The authors will update the charts as new data emerges; this updated column is the first, presenting monthly data up to April 2009. (The updates and much more will eventually appear in a paper the authors are writing a paper for Economic Policy.)

New findings:

  • World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.
  • World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.
  • There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.
  • The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.
  • Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.

The facts for Chile, Belgium, Czechoslovakia, Poland and Sweden are displayed below; note the rebound in Eastern Europe. . . . .

read the full article here.

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from The L.A. Times:

The spores arrived from Kenya on dried, infected leaves ensconced in layers of envelopes.

Working inside a bio-secure greenhouse outfitted with motion detectors and surveillance cameras, government scientists at the Cereal Disease Laboratory in St. Paul, Minn., suspended the fungal spores in a light mineral oil and sprayed them onto thousands of healthy wheat plants. After two weeks, the stalks were covered with deadly reddish blisters characteristic of the scourge known as Ug99.

Nearly all the plants were goners.

Crop scientists fear the Ug99 fungus could wipe out more than 80% of worldwide wheat crops as it spreads from eastern Africa. It has already jumped the Red Sea and traveled as far as Iran. Experts say it is poised to enter the breadbasket of northern India and Pakistan, and the wind will inevitably carry it to Russia, China and even North America — if it doesn’t hitch a ride with people first.

“It’s a time bomb,” said Jim Peterson, a professor of wheat breeding and genetics at Oregon State University in Corvallis. “It moves in the air, it can move in clothing on an airplane. We know it’s going to be here. It’s a matter of how long it’s going to take.”

Though most Americans have never heard of it, Ug99 — a type of fungus called stem rust because it produces reddish-brown flakes on plant stalks — is the No. 1 threat to the world’s most widely grown crop.

The International Maize and Wheat Improvement Center in Mexico estimates that 19% of the world’s wheat, which provides food for 1 billion people in Asia and Africa, is in imminent danger. American plant breeders say $10 billion worth of wheat would be destroyed if the fungus suddenly made its way to U.S. fields.

Fear that the fungus will cause widespread damage has caused short-term price spikes on world wheat markets. Famine has been averted thus far, but experts say it’s only a matter of time.

“A significant humanitarian crisis is inevitable,” said Rick Ward, the coordinator of the Durable Rust Resistance in Wheat project at Cornell University in Ithaca, N.Y.

The solution is to develop new wheat varieties that are immune to Ug99. That’s much easier said than done.

After several years of feverish work, scientists have identified a mere half-dozen genes that are immediately useful for protecting wheat from Ug99. Incorporating them into crops using conventional breeding techniques is a nine- to 12-year process that has only just begun. And that process will have to be repeated for each of the thousands of wheat varieties that is specially adapted to a particular region and climate.

“All the seed needs to change in the next few years,” said Ronnie Coffman, a plant breeder who heads the Durable Rust Resistance in Wheat project. “It’s really an enormous undertaking.” . . . .

read the full story here.

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“However, after denying the Christian label, CCF then argued it was indeed a Christian group because of the “good works” it does for children”

so  “good works” means your a Christian”? Hmmm . . .  another case of a group thinking it knows more than God himself!

Ephesians 2:8-9:

“For by grace you have been saved through faith, and that not of yourselves; it is the gift of God, not of works, lest anyone should boast.”

from One News Now:

Last month the Christian Children’s Fund announced it is adopting a new strategy to continue its work in aiding the world’s impoverished children. Along with the new strategy comes a name change — specifically, removal of the word “Christian” from its title.  

The new name, ChildFund International, was approved at the Christian Children’s Fund (CCF) Board of Director’s meeting on April 21 and will take effect July 1. As AlertNet.org reports, CCF hopes to continue easing the “burden of poverty for children and their families” under the new, “globally unified” branding.
 
CEO Anne Lynam Goddard, who became president of CCF in 2006, says the board examined the traditions of the ministry over the past 70 years and wanted to revamp the image to continue serving others over the next 70 years, since an estimated 53 million additional people will be forced into poverty because of the current economic crisis.
 
CCF boasts helping more than 15.2 million children and families in 31 countries since its inception. It has provided nearly $3 billion in aid to poor families, mainly through monthly child sponsorships. Goddard notes the philanthropy’s goals of helping ensure a child’s health and growth from birth to young adulthood will continue so that the children will one day become world-changers themselves.
 
However, the adoption of the new name ChildFund International is not the first rebranding the ministry has undergone. CCF, founded in 1938, was first christened China Children’s Fund but changed to Christian Children’s Fund after its work expanded outside of China.
 
In recent years, CCF has received criticism as many ask whether the group has actually lived up to its “Christian” name. The name change likely comes as no surprise to the people at MinistryWatch, a group that “profile[s] public charities, church and parachurch ministries.” In 2004, MinistryWatch questioned whether having the title Christian Children’s Fund was misleading to Christian donors. and prompted an investigation of the philanthropy.

According to a May 2004 Donor Alert, their research concluded that CCF calls itself a “non-sectarian” group and does not have a statement of faith, nor is it a member of the Evangelical Council for Financial Accountability. CCF admits they are “not an evangelical organization in that [they] do not teach religion as part of [their] program activity and [they] do not try to convert beneficiaries as part of [their] program efforts.”
 
However, after denying the Christian label, CCF then argued it was indeed a Christian group because of the “good works” it does for children. However, MinistryWatch believes CCF’s work is closer to “community development” than ministry because donated funds are spent on an entire community instead of going directly to help the child being sponsored.
 
MinistryWatch also concluded Christians may be bothered that CCF partners with “traditional healers” in Third World nations, which MinistryWatch believes can be construed as “occult practices.” Additionally, CCF employees are not required to be professing Christians.
 
MinistryWatch released the alert nearly five years ago, urging CCF supporters and donors to reconsider donating to other ministries that have clear Christian messages, claiming that a true Christian ministry hopes to “bring those that they serve into a relationship with their Lord and Savior, Jesus Christ.”
 
Goddard, however, asserts the most significant change comes from within a community. “As we change a childhood, we change the world,” she says.

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from moneyweek:

A lot of people have been asking me: ‘What’s next?’

Sentiment everywhere is improving. In fact, I was astonished to hear such bullish talk from the likes of Anthony Bolton and Crispin Odey this last week. Their records and experience dwarf mine, but I see an intermediate top coming in the stock markets more or less now. In fact, I think we may have made it on Monday.

What’s more, I am observing a worrying trend in the bond market, both for US Long Bond (the 30-year US Treasury) and for UK gilts. Even now, after months of attention due to the Bank of England’s quantitative easing plans, I suspect that few people – or politicians for that matter – are really that interested in government bonds. But, believe me, the last thing we need right now is a collapse in the bond market.

Unfortunately, it could be just around the corner…

But perhaps more worrying are concerns over the bond market. The Federal Reserve has been buying into the US government bond market with the aim of lowering interest rates across the economy. But despite its plan – announced in March – to buy $300bn worth of T-bonds to keep rates down, long bond yields have actually gone up (yields rise as prices fall). Could this trend of rising prices, which has been in place since the early 1980s, finally be over? . . . . . .

The massive provision of credit or ‘liquidity’ from the US government has helped this recent stock rally. But if government’s own long-term borrowing costs go up, so – in the long run – will rates across the rest of the economy. This could add to the pressures on the US housing market, just as it seemed to be stabilising. Add to this mix the problems that may still lie ahead in credit cards, corporate loans and the commercial property market, and you can see that the problems of the banks, and the wider economy, are far from over.

Are higher interest rates just around the corner?

A collapsing bond market means higher interest rates. At the moment those in debt are not suffering too badly – those with tracker rate mortgages, for example, are sitting pretty at the moment. But higher rates will decimate anyone with any debt, be they individuals, companies or governments. They are the last thing the economy needs just now.

Now the Fed is still able to borrow in the shorter term at low rates, so this may not have an immediate impact. But the drop in bond prices in the last five months is an early warning sign that markets will only prop up even the world’s largest economies for so long.

Those who want to short the long bond might consider the US-listed exchange-traded fund, TBT. But with the bond market already having made a big move down, I do not see now as a good entry point. Keep an eye on this market though and await a pull back before entering.

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