Putting a Halt to the Hikes?
The Daily Reckoning – Weekend Edition
August 5-6, 2006
Baltimore, Maryland
by Kate “Short Fuse” Incontrera
VIEWS FROM THE FUSE: PUTTING A HALT TO THE HIKES?
“Bubbles happen when you don’t read about them,” quipped Steve Forbes at the Agora Wealth Symposium that took place last week in Vancouver.
The point he was trying to make was that the bubble in housing that we’ve discussed ad nauseam in these pages doesn’t exist. He also asserted that he sees the U.S. economy as “strong”…but looking at today’s headlines on PrudentBear.com, one wonders from what papers Mr. Forbes is getting his information. Here are a few of the headlines:
“U.S. Adds Fewer Jobs Than Forecast; Unemployment Rate Rises to 4.8 Percent”
“Hamptons Real Estate Sales Slow as Rising Rates Sideline Buyers”
“San Diego mortgage defaults double”
“A Slowdown in a Sensitive Sector May Bode Ill for Stocks, or Worse”
We often point out that in these strange economic times we’ve been facing, the rich are getting richer – but unfortunately, the average person is not rich. The average person is having a difficult time filling up their car, going out to dinner – even paying everyday bills. If our economy is so strong, why haven’t average American incomes, adjusted for inflation, gone anywhere for the last thirty years?
Bloomberg reports: “Employers in the U.S. added fewer jobs than expected in July and the unemployment rate rose for the first time since February, showing the labor market is losing strength as the economy slows. The average gain in payrolls for the second quarter, 112,000 was the lowest since the third quarter of 2003.”
Many experts are predicting that Friday’s jobs data is just the information the Fed needs to pause their rate hiking campaign. Pimco’s Bill Gross goes as far to wager that the unemployment rate is the indicator Bernanke is looking for to put a halt to hikes all together…but we’ll have to wait until the Tuesday Fed meeting to know for sure.
Meanwhile, another indicator that the economy is nowhere near as strong as many would like to believe, is the housing market. From all over the nation come reports that houses are just sitting on the market – homes that would have been snatched up in a matter of days last year, or the year before. The highest interest rates seen in four years has a lot to do with this – even sapping the confidence of America’s rich and famous in the Hamptons.
These buyers “typically spurn mortgages and pay cash for their waterfront mansions, said Judi Desiderio, owner of Town & Country Real Estate in East Hampton.”
However, “people are concerned that house prices will fall as demand wanes, she said.”
“‘Wall Street bonuses traditionally fuel our market, but so far this year we haven’t seen a lot of that money spent on real estate,’ Desiderio said. ‘Everyone is talking about a bubble bursting as interest rates go up, so they’re waiting on the sidelines to see what happens.'”
After the buying mania of the last few years, how many more people really need a home? We’ve always thought that the seemingly never-ending supply of homebuyers would run out sooner or later – either that, or people would wise up and hold back to see where the market will go. It looks like housing market is getting a little bit of both.
Short Fuse
The Daily Reckoning
— Daily Reckoning Book of the Week —
Iran: The Coming Crisis: Radical Islam, Oil, and the Nuclear Threat
(Paperback)
by Mark Hitchcock
The Past, Present, and Future – Exposed
The events wracking the Middle East today are confusing to even the most avid news buff. Now all the answers to your questions are offered in just one resource. Divided into five main sections, Iran: The Coming Crisis contains the most up-to-date, thorough information available and is complete with maps, charts, and timelines for visual assistance. Iran’s past, present, and future are exposed – the country’s quest for nuclear weapons and support of Palestinian terror groups, its ability to “play the oil card,” and Iranian president Mahmoud Ahmadinejad’s apocalyptic beliefs that motivate his actions.
It’s a crisis unlike any the world has ever faced.
THIS WEEK in THE DAILY RECKONING: Did you miss the Agora Wealth Symposium in Vancouver? No worries, roving reporter Rick Barnard shares what insights he took away from the conference in “This is the End”, below…
Consuming Passions 08/04/06
by Bill Bonner
“The world may go to hell, if it wishes. This summer, at least, we will work on our own folly…a gypsy wagon.”
A Credit Machine Running Amok 08/03/06
by Dr. Kurt Richebächer
“The U.S. economy has become virtually immune to recession. It is widely seen as just a bursting of strength due to ingrained ‘flexibility’ and ‘dynamism.'”
National Bankruptcy, Part II 08/02/06
by Byron King
“One of the most famous indentured servants in American history was a young man named Benjamin Franklin, whose later views on avoiding and staying out of debt were very much formed and informed by his early indentured experiences.”
National Bankruptcy, Part I 08/01/06
by Byron King
“Since at least Roman times, and maybe before, a bankruptcy process has been the means by which a society could balance the need to eliminate or moderate a debtor’s debt with the protection of the creditors.”
This is the End 07/31/06
by Rick Barnard
“All in all, it’s been an exciting and informative couple of days. I spoke to several attendees who declared this one of the best financial conferences they’ve ever attended.”
FLOTSAM AND JETSAM: Israel says that nothing but the complete destruction of Hezbollah will do for them, but they may have to settle for less. For one thing, it might require the complete destruction of Hezbollah’s landlord, Lebanon, which is something that world opinion won’t swallow. James Kunstler explains below…
An American Jihad?
by James Howard Kunstler
But while we’re at it, what actually is this world opinion? The nation-players and teams they belong to have various motives for adopting their positions. The Europeans are content to deplore the Israeli response to Hezbollah violence for several reasons. One, they are terrified of their own Muslim immigrant populations and don’t want any smash-up riots or subway bombings. Second, they want to appear sympathetic to the oil exporting nations (including Iran) in order to continue enjoying a regular stream of oil imports without paying extra costs, which they are content to shift onto Israel and the United States – namely, the cost of engaging the aggressive emnity of a restive and belligerent Islam. Third, the Europeans want to capture the geopolitical moral high ground once occupied by US after the collapse of communism.
And while we’re at it, why is Islam in such a dark mood? Not just because the Palestinians are agrieved at the Israelis. I think the violent intemperance of Jihad is the expression of an ecological crisis: too many people suddenly occupying a region of the world that could not support them without the artificial nutrient of oil – plus the fact that this region has reached its point of all-time maximum oil production, with the awful prospect of having less and less oil from now on and absolutely no other resources to support these overgrown populations when that oil is gone.
I think these circumstance have driven Islam, well, nuts. Jihad is carried out almost entirely by young men and the Islamic oil nations have a vast supply of young men with no other job opportunities except service in Jihad. Their despair at the prospects of their societies must be great, and easily converted into aggressive rage. Plus, they are given huge inducements to believe that this employment is a holy mission, and fabulous promises of deferred pay in the form of early retirement to paradise and the consort of lusty virgins. As Peak Oil becomes more of a reality in the Middle East, I think these societies will only act crazier.
Where are Russia and China on this? Well, Russia benefits whenever the glare of Islam is diverted from Russia’s vast, fractious southern border with dozens of Islamic states and quasi-states, like Chechnya, poised to make trouble. Since Russia is one of the world’s top oil producers (though past peak itself), and is sitting on quite a bit of natural gas, too, it doesn’t have to worry about a cut-off of energy supplies from elsewhere. Russia would also like to recapture the geopolitical influence it enjoyed back in the Soviet days, and anything that weakens American authority and power in the Eastern Hemisphere leaves a vacuum that Russia can reoccupy.
China benefits from Islamic antipathy to the West because the less oil is available to the West, the more there will be for oil-poor China. The problem for them, of course, is that an energy-strapped, impoverished America would no longer be buying all those Chinese-made salad shooters at the Wal-Mart.
An interesting sidelight to all this is the emergence here in the United States of a virulent strain of antisemitism. A lot of it has shown up in the “Comments” section of my mirror site (Kunstler’s blog on Typepad). It seems to me, that it’s mostly emanating from what remains of the U.S. political left, who have either run out of homegrown downtrodden groups to champion, or been disappointed with the results of their previous efforts.
Lately, the frustrating impotence of the left to formulate a coherent opposition to Bush-style conservative Republicanism has led them into a craziness not unlike the craziness of Jihadist Islam. If all the Bush Republicans were suddenly vacuumed out of North America by a righteous cosmic force, the American left would probably start an American Jihad of their own against a host of imagined “class enemies” in the remaining population.
I hasten to add that I am myself an opponent of American culture and polity in many of their current manifestations – everything from Nascar to US Department of Agriculture subsidies, and plenty in between – and yet I do not regard any victory of Islamic Jihad, whether in Iraq or Jordon or the subway tunnels of London or the skyscrapers of Manhattan, to be necessarily a good thing for the world.
Nobody knows where the conflict in the Middle East is headed now. My own guess is that in the weeks to come Iran will find new ways to enlarge and aggravate the situation there. A problem at the heart of things not much discussed in the public arena is the fact that a virtually limitless supply of potent small arms and rockets is available from Iran to anyone who wants the stuff. This has implications for any effort to disarm Hezbollah or Hamas or al Qaeda or sixteen guys in a suburb of Dusseldorf.
It remains to be seen whether Iran will try to produce more potent weapons. The West would be foolish to let that happen, but this dirty job, too, may be left to Israel and the United States. I suspect that Iran will foment an oil crisis before that happens by shutting down the Straits of Hormuz by some means. When that happens, Mr. Ahmadinejad can put his head between his knees and kiss his ass goodbye.
Editor’s Note: James Kunstler has worked as a reporter and feature writer for a number of newspapers, and finally as a staff writer for Rolling Stone Magazine. In 1975, he dropped out to write books on a full-time basis.
His latest nonfiction book, “The Long Emergency,” describes the changes that American society faces in the 21st century. Discerning an imminent future of protracted socioeconomic crisis, Kunstler foresees the progressive dilapidation of subdivisions and strip malls, the depopulation of the American Southwest, and, amid a world at war over oil, military invasions of the West Coast; when the convulsion subsides, Americans will live in smaller places and eat locally grown food.
You can purchase your own copy here:
You can get more from James Howard Kunstler – including his artwork, information about his other novels, and his blog – at his Web site:
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