MacLeans asks: Can they pay it back? about American borrowing and decides, "no, and they're going to drag us down with them." Karl at Market Ticker, who has in the past talked about Mr. Greenspan and Mr. Bernanke's statements about the "accidental" housing bubble, has older articles showing that specific intent to float a housing bubble, in the wake of the technology bust and stock market collapse of 2001-2002.
This table on the credit market is quite interesting, and shows that private market credit shrank at an annualised rate of US$1.85T in the last quarter. That's a lot. CNN Money noted last week that large banks - TARP banks in particular - simply aren't lending. This is predictable, given the poor lending conditions, as is also revealed in Rochdale Securities expecting Bank of America loan losses to be "horrific" this year. Credit card losses at banks are also accelerating, with AMEX reporting 10% chargeoffs and Capital One showing 9.4%. Despite this, the supposed intent of the TARP is to stimulate lending - and save the banks at all costs, which is how Al Jazeera's resident economist Samah El-Shahat can describe the US as "a bank-owned state."
Meanwhile, banker pay is soaring, and Goldman Sachs is making record bonus payouts. "How to Rob the Treasury for Bonuses," in one easy lesson.
With all that in mind, you might find this Congressional testimony (and Karl's commentary on it) to be of interest. (He also posted a note on liquidity disappearing in T-bill auctions on Monday. Not related, except for being by the same guy.)
China has set a Buy Chinese policy for government procurement. There is also talk of export subsidy. This is a problematic manoeuvre and is already raising trade tensions. Terence Doherty, writing at Zero Hedge, thinks China is facing an economic "catastrophie" in real estate and is acting accordingly. Mish has an article up on rising rates of idleness in both truck and rail land shipping in Canada, the US, and Mexico.
Last week, US factory production fell again, to a record-low 68.3% utilisation rate. USA Today reported that US workers face the worst job-hunting and layoff conditions since the Great Depression.
Detroit city limits median(!) home price is now US$6,000. US housing starts jumped in May, by 17%, on better weather (but don't remind anyone of that). More importantly, here is that "huge jump" in context. That tiny tick up in the red line on the far right is May. Homebuilder sentiment actually fell one point. However, existing home sales rose a little in May - mostly on foreclosure sales. Median sales price was down 16.8%.
Wholesale inflation was up less than expected in May. Simply put, there's no pricing power.
Yesterday morning, before the huge Monday sell-off in stocks, Bloomberg noted that insiders were selling more heavily than at any time in the previous two years. Insiders selling a rally is not bullish.