If you read the articles from the attached links, you would come to the conclusion that the fall in pending home sales took people by surprise. A person who relies solely on the mainstream media for its news and analysis would have been surprised, because it relies on industry shills for the bulk of its reporting about the housing market. As recently as last month, NAR economist Lawrence Yun was claiming that the rise in mortgage rates would not adversely affect sales because rates these rates were historically low and the labor market was improving.
Nominal rates are historically low, but real rates, accounting for inflation, are not. Furthermore, the labor market is not improving. Wages continue to decrease, and part-time work is displacing full-time jobs with benefits. Stating that rates would not affect the level of future housing transactions was merely cheerleading, not economic analysis.
Today’s Chart of Truth illustrates the relationship between rates and sales. I’ll leave you to figure out the future direction of sales based on rising interest rates.
The EM rout continues. None of these central banks seem to have a grip on the situation. India is busy moving deckchairs, and I could not tell you what Brazil, Indonesia and Turkey are doing to arrest the capital flight. India is in the worst shape, because its citizens are not stupid. They have been busy buying as much gold as possible to escape the rupee’s swoon.
As long as Syria remains in the red zone, further emerging market distress is likely, and no one knows what will happen there next.
The Fed’s money printing has done little to stimulate the labor market but has created asset bubbles across the world from which the TBTF and the rich are profiting nicely. Wall Street is doing fine, while Main Street struggles.
After all of that money printing, the Fed is telling us that the economy is strong enough to stand on its own. While this seems like crazy talk, to those influencing monetary policy this narrative seems accurate. The net worth and salaries of top Fed officials places them squarely within the wealthiest 7% of the U.S. That income group is doing so well that it raises the averages and medians of the country distorting the true view of the “recovery.”
The bottom 93% is experiencing a very different economy, particularly since this group derives most of its wealth from its toil:
Which brings us to the reason why the Fed will continue printing until a crisis forces it to change tack: too many rich and powerful people depend on their current level of wealth based on the suppressed rates and almost daily injections of money of the Fed’s current policy.
The Fed will not change its policy, because it will lead to a market panic making all of those rich and powerful people just powerful. If the market tanks, it will be the proverbial black swan doing its magic.
Occasionally, the mainstream media will print an opinion piece laying bare the facts surrounding the Eurocrisis, but its forte is still the Eurozone recovery piece. These articles generally quote financial industry shills discussing the noise, stock markets, bond yields and cherry-picked data devoid of context, rather than the signal:
The European workforce has been shrinking almost continuously since 2008, while sovereign debt has been increasing:
The financial markets recovered without a corresponding economic recvery. As long as robust growth evades the Continent, the specter of a breakup will haunt the Eurozone.
One difference between the third world and the West is that the people from third world countries are more likely to migrate to greater economic opportunities. So, if Spaniards are leaving Spain for greater opportunities in Morocco, what does that make Spain?