The mainstream media loves promoting its housing recovery narrative. In this article, the reporter writes, “Housing has experienced an incredible recovery.” Apparently, an incredible recovery means 2010 sales levels, which are less than one-third the pace at the market’s peak.
The chief economist for a sell-side firm bases her thriving housing market prediction on rising mortgage activity going forward. We have a chart for that:
As you can see, mortgage activity is actually falling. The truth is that the housing market will not revive until employment and income rise. In other words, people who actually wish to live in houses must reenter a market overrun by exuberant flippers with their pockets stuffed full of Uncle Ben’s money.
All you need to know about the Aussie can be summed up in this handy chart:
Chinese manufacturing is contracting, and in lockstep, China’s demand for raw materials. China is purchasing less Aussies, and this shortfall in demand is driving the currency lower. This trend will continue for the immediate future broken up by occasional rallies.
Government intervention creates a vicious circle. The purpose of offering cheap loans is to make higher education accessible to all, but this is not the end result of student loan programs. The hot money created by government subsidies actually increases the cost of college, so in the long run the program runs counter to its purpose:
The chart also details what hot money from government subsidies is doing to another popular economic sector that is subject to Beltway reforms (the orange line).
The ECB lowered its GDP performance estimate for the Eurozone from -0.5% to -0.6%, and Draghi forecasts a return to growth by the end of the year. Of course, the return to growth keeps getting pushed back by ECB forecasters from their initial prediction of the 1st quarter in the fall, to the summer in their 1st quarter forecast and to year end today. Notice a pattern? The ECB will continue to predict growth commencing six months from the date of the prediction until the day the euro breaks. In the meantime, GDP will contract, unemployment will rise and prosperity will remain just around the corner.
Hanlon’s razor is, “Never attribute to malice that which is adequately explained by stupidity.” On the plus side, the IMF was not cooking the books and actually believed that it was issuing usable economic forecasts for the Greek bailouts. On the minus side, IMF economists are dangerously incompetent. Despite missing to the downside time after time, they continued to rely on the same defective models. This mea culpa and change in philosophy is a day late and a drachma short for the people of Greece.
The German opposition, the SPD, is attempting to make hay out of the fact that the Greeks will require debt forgiveness after German elections. While this is true and German voters will be outraged when this goes down in the winter, the SPD supports this policy, too. In fact, the Socialists will be more than happy to expend even more money to keep the euro together. This is the type of stupid move that the challenger makes on his way to losing an election to an incumbent.