Tag Archives: Merkel

Tsipras Sold Out – Who Cares? The Global Economy Is Still Collapsing

The Greece situation was “fixed” once the the United States IMF began to flex its muscles openly.  Former Assistant Treasurer, Paul Craig Roberts – who can speak from a position of authority on these matters – explained to the world why this was the case a week ago:  Greece And The EU Situation.

So Tsipras, like every modern political leader in every western country, took a big bag of cash from the U.S., and capitulated to the EU’s demands.

Who cares?  Anyone with two brain cells to rub together could have figured this one out.  If Greece fell, it would have triggered the nuclear daisy chain of credit default swaps, of which Deutsche Band, Citigroup and JP Morgan are the largest bag-holders.

Furthermore, how does this change the fact that the global economy – including and especially the U.S. – is collapsing?  Seriously.   Greece is getting stuffed with more debt that it will never be able to repay in exchange for some key national assets that the EU will own once Greece defaults again.  At best this just puts out the fuse which will inevitably light the global debt and derivatives time bomb for a while longer.

In fact, the last several weeks of Greek drama have done nothing more than provide a great cover for ongoing and obvious economic deterioration occurring.  The numbers are especially prevalent in the U.S.:

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The graph above shows the year over year change in retail sales.  Despite $3.6 trillion in monetary stimulus, the Fed has been unable to stimulate a boom in retail spending.  This reflects that fact that the real median household income of lower now than it was in 2007.

The percentage of Americans who are counted as part of the labor force is at its lowest level since 1977, when the majority of households were still one-income families.  So much for Obama’s self-congratulatory job boom.  Obama wouldn’t know a real job if Henry Kissinger shoved it up is ass.

As for auto sales, it’s taken a record level of debt issuance and, more troubling, a record level of subprime auto loans, in order to stimulate a mini-bubble in auto sales.  This has only succeeded in getting auto sales to bounce back to their 2004 levels.  But where will the next round of debt-stuffing come from, as the average loan term now extends well beyond 7 years?

The housing market is next.  I know first-hand that home listings in Denver are starting to spike up in good ‘ole 2007 parabolic fashion, especially in the over $750k segment.   I receive “price change” alerts in my email several times a day for homes listed in central Denver in every price segment.  In the “McMansion” suburban neighborhoods, many areas have several listings per block now.  It’s quite stunning.

I know from reports from readers in other large MSA’s that they are seeing a similar occurrence in their area.  In fact, the Dr. Housing Bubble blog is now reporting the home inventory is up 70% from 2013 in three major inland counties:  Dr. Housing Bubble Blog

Point of note:  Colorado and SoCal led the last housing bubble implosion.  We may see a continued bounce in home sales for June, which will be reported soon.  But most of the data that go into the June sales reports – both existing and new homes – are lagged and ultimately reflect contracts that were signed in April in May, when mortgage rates were 100 basis points lower.

Despite the fact the Fed has directed $1.8 trillion of its $3.6 trillion QE directly into the housing market via direct mortgage purchases, home sales volume for both new and existing homes is less than 50% of the housing bubble peak.  The only result accomplished by the Fed has been to ignite rampant home price inflation, which has pushed a lot of suckers into chasing homes that they will have been able to have buy a year from now at a substantial discount.  These newly minted homeowners and stuck flippers will find themselves significantly underwater in their mortgage.

As you can see, the Greek drama has served the purpose of providing a redirection from the ongoing economic collapse.  In fact, lost in this absurdity of the past week’s Kabuki theatre are other points of trouble quickly rearing their ugly heads…What ever happened with Puerto Rico’s impending debt collapse?…