Best of the Week
Most Popular
1.U.S. Housing Bull Market Over? House Prices Trend Forecast Current State - Nadeem_Walayat
2.The Coming U.S. Economic Collapse Will Trigger a Revolution - Harry_Dent
3. Stock Market Crash a Historical Pattern? - Wim_Grommen
4.Global Panic - U.S. Federal Government Stockpiling Ammo – Here’s What We’re Going to Do - Shah Gilani
5.AI, Robotics, and the Future of Jobs - Aaron Smith
6.This is Your Economic Recovery With and Without Drugs - James_Quinn
7.Gold and Silver Price Getting Set To Explode Higher - Austin_Galt
8.The Something for Nothing Society - Lifecycle of Bureaucracy - Ty_Andros
9.Another Interesting Stock Market Juncture - Tony_Caldaro
10.Inflation vs the Deflationary Straw Man - Gary_Tanashian
Last 5 days
Scottish Banks Salivating at the Prospects for an Independent Scotland of 6 Million Debt Slaves - 1st Sep 14
Small Man Europe Is Now In “Effective State Of War” With Russia - 31st Aug 14
The Unintended Blowback Of False Flags - 31st Aug 14
Tesco Supermarket Death Spiral Latest Profits Warning and Dividend Slashed - 31st Aug 14
Dow, Gold and Silver - A Last Stand, A Fake Out And A Surge - 31st Aug 14
If U.S. Consumers are so Confident Why aren't They Spending? - 31st Aug 14
Scotland Independence House Prices Crash, Deflationary Debt Death Spiral - 31st Aug 14
Obama’s “Catastrophic Defeat” in Ukraine - 30th Aug 14
Stock Market Inflection Point Approaching - 30th Aug 14
Gold And Silver - Elite's NWO Losing Traction. Expect More War - 30th Aug 14
Corporations Join Droves of Americans Renouncing US Citizenship - 30th Aug 14
Peter Schiff U.S. Housing Market, House Prices Bubble Warning - 30th Aug 14
Russia, Ukraine War - It’s Time to Play the “Gazprom Card” - 29th Aug 14
The One Tech Stock Investment You Should Never Sell - 29th Aug 14
Bitcoin Price $500 as Current Downside Barrier - 29th Aug 14
Don't Get Ruined by These 10 Popular Stock Market Investment Myths - 29th Aug 14
Low Cost Transcontinental Gold - 29th Aug 14
Gold Bullish Central Banks Should Give Money Directly To The People - Helicopter Janet? - 29th Aug 14
US House Prices Bull Market Over? Trend Forecast Video - 29th Aug 14
The Fed Meeting at Jackson Hole Exposed Yellen’s Greatest Weakness - 29th Aug 14
AAPL Apple Stock About To Get sMACked - 29th Aug 14
A History of Unlimited Money: Learn From It or Repeat Its Mistakes - 29th Aug 14
How You Can Play to Win When Market Makers Are Calling the Shots - 28th Aug 14
EU Gas Supply Is In Real And Imminent Danger - 28th Aug 14
Central Banks at the Root of Evil - 28th Aug 14
European Bond Market: Bubble of all Bubbles! - 28th Aug 14
Employers Aren’t Just Whining: The “Skills Gap” Is Real - 28th Aug 14
The ISIS Menace - Just What We Need, Another War - 27th Aug 14
The Risky Business of Methane-Rich “Fire Ice” - 27th Aug 14
CFR Recommends Policy Shift that is Very Bullish for Gold - 27th Aug 14
Ukraine Standoff Signals Global Power Shift - 27th Aug 14
Stock Market Panic Decline Begins - 27th Aug 14
The Monopoly of the Government Education Cartel - 27th Aug 14
How to Invest in Silver Today for Double-Digit Gains - 27th Aug 14
The Big Solar Energy Breakthrough We've Been Waiting For - 27th Aug 14
U.S. Empire’s Bumpy Ride - 27th Aug 14
Gold Market and the Interest Rate Trap - 27th Aug 14
Stock Market Staring Into the Great Abyss - 27th Aug 14
A Look at the Coming 30-year Inflation Cycle - 27th Aug 14
Forex Trading - Will USD/CHF Rally Above 0.9200? - 27th Aug 14
Europe’s Depressing Economy Dog Days of Summer - 27th Aug 14
How The Coming Silver Price Bubble Will Develop - 26th Aug 14
A Nation of Shopkeepers - Supply-Side (Voodoo) Economics? - 26th Aug 14
Stock Market Bear Tracks Abound In Wall Street - 26th Aug 14
65,000 U.S. Marines Hold up a Mirror to the Economy - 26th Aug 14
Bitcoin Market Provides Clues for Investors - 26th Aug 14
The Key to Trading Success - 26th Aug 14
Will The US Succeed in Breaking Russia to Maintain Dollar Hegemony?... - 26th Aug 14
Even Mainstream Academia Worried about Massive Bubbles in Markets - 26th Aug 14
Iraq and Syria Follow Lebanon's Precedent - 26th Aug 14
Colonization by Bankruptcy: The High-stakes Chess Match for Argentina - 26th Aug 14
Dow Stock Index On The Cusp - 26th Aug 14
Prohibition Laws and Agency Regulations - 26th Aug 14
Will Canadian Regulators be Able to Avoid Final Fatal TSX Venture Exchange (TSX-V) Crash? - 25th Aug 14
HUI Gold Mining Stocks Elliott Wave Projection - 25th Aug 14
Stock Market Uncertainty Resolved With New High - 25th Aug 14
Go Forth Multiply And Replenish The Earth - 25th Aug 14
Dollar Dumping: When Actions Speak Loudest - 25th Aug 14
A Plethora of Currency, Stocks and Precious Metals Chartology - 25th Aug 14
Why Isn’t Fed Monetary Pumping Helping the U.S. Economy? - 25th Aug 14
Myths About Money and Inflation - 25th Aug 14
The Fed Will Raise U.S. Interest Rates in March 2015 - 25th Aug 14
Gold Price Manipulation Still Alive - 25th Aug 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

The Economic Recovery Is Not Real Even Though Ben Bernanke is ‘Confident’

Economics / Recession 2008 - 2010 Apr 15, 2010 - 12:33 PM GMT

By: Mac_Slavo

Economics

Best Financial Markets Analysis ArticleFederal Reserve Chairman Mr. Ben The-Sub-Prime-Crisis-Is-Contained Bernanke says that he has confidence in the recovery:


Federal Reserve Chairman Ben Bernanke told Congress Wednesday that he has confidence the unfolding economic recovery will have staying power, although it won’t be strong enough to bring quick relief to high unemployment.

“Addressing the country’s fiscal problems will require difficult choices, but postponing them will only make them more difficult,” he warned.

On the economy, Bernanke seemed slightly more optimistic that the fledgling recovery will keep on going after massive government stimulus fades later this year. Incoming economic barometers suggest that growth in demand by consumers and businesses “will be sufficient to promote a moderate economic recovery in coming quarters,” he said.

Consumers are spending again after having cut back sharply during the recession. Going forward, consumer spending should be helped by a gradual pick up in jobs, a slow recovery in household wealth from recent lows and some improvement in the ability to get loans, Bernanke said.

Yes, it does seem consumers are spending again…. but where, exactly, is that money coming from?

Several analysts have suggested that consumer spending is being driven by money that should be going towards mortgage payments:

Here’s a provocative thought: what if ‘extend and pretend’ within our nation’s troubled mortgage markets is actually providing a lift to consumer spending? It’s not as far-fetched as the idea might initially sound, and it might help explain some interesting data we’ve seen as of late — and it also might explain why the statistical recovery we’re seeing now doesn’t really feel like a recovery to most Americans.

[source: Housing Wire]

We’re talking about roughly 7.4 million loans that are considered ‘non-current.’ That’s a lot of money hitting the economy that otherwise wouldn’t be if homeowners were making their monthly payments:

Even if you assume that just half of the current 7.4 million currently delinquent mortgages fit this sort of ’spending profile’ (that is, they are spending their mortgage) and you assume a $1,000 median monthly mortgage payment for most U.S. homeowners — you get a $3.7 billion boost per month to consumer spending. It’s certainly enough spending to matter in the overall scheme of things.

[Source: CNBC]

What about that improved ability to get loans that Mr. Benrnake says may be responsible for improved consumer spending?

Let’s take a look at the Consumer Credit Rate of Change chart, provided by Mr. Denninger at Market Ticker:

Looking at this chart you may see a small uptick in the January 2010 rate of change, so Bernanke is right about that - we are seeing more credit for the consumer. The problem is, for those who haven’t noticed, interest rates are going through the roof, and I, for one, am not interested in paying 30% interest rates that will saddle me with debt for the next 20 years, especially in an environment still plagued with uncertainty. If the banks get hit with another crisis (which they likely will) then chances are that those red and blue lines are going to head south yet again. Remember, this crisis was basically caused by a complete collapse of our credit markets, and we are probably not done cleansing out the over leveraged credit system just yet.

In regards to the recovery in household wealth, we caution our readers that we believe he is referring to the stock market and the gains you have seen in your 401k and IRA in the last 12 months. The stock market is currently valuing earnings that are simply conjecture. The GDP has not recovered significantly enough at this point to justify the value of most stocks and you may very well see your household wealth evaporate even more quickly than it has recovered in the last year.

Mr. Bernanke did point out that we still have some problems in housing:

Bernanke said weakness in the housing and commercial real-estate sectors is putting “significant restraints” on the pace of the economic recovery. And, the poor fiscal conditions of many state and local governments have led to continuing cutbacks in workers, another force that will hold back the recovery, he said.

What would happen to our recovery, pray tell, if the the housing and commercial real estate markets went into another free fall? Would that hamper it maybe a little bit?

In our view, this is exactly what is about to happen.

We direct our readers’ attention to the following graph, which we have published before when discussing the Second Wave of the Mortgage Meltdown:


You see that big Mount Everest looking peak in 2011, for which the climb is beginning right about now?

That all but guarantees that any household wealth and recovery in household value which you experienced in the last 12 months is about to be destroyed over the next 2 - 3 years.

Couple that with the fact that there are millions of delinquent mortgages sitting off the books, as evidenced by this recent activity from Bank of America, and you can probably guess what will happen to home values and this recovery.

What we have experienced thus far is merely an intermission, not a recovery.

By Mac Slavo

http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014