HISTORY REPEATS ITSELF:  The neoliberals under Regan following their deregulation mantra cost our nation over $500 billion (including interest on the bailouts) though the failures of mainly Savings and Loans Banks.  Now the neoliberals under Bush will be costing the U.S. economy over $500 billion in bad debts built upon deregulation of bank loans in the housing market.   

What 2008 has in store:  looking at key factors

From Huffington post at http://www.huffingtonpost.com/hale-stewart/what-to-watch-for-economi_b_78779.html

What to Watch for Economically in Early 2008

By Hale “Bonddad” Stewart, 12/30/7

In my last article I highlighted the problems the economy faces going forward. I mentioned the deteriorating housing market, commodity inflation hemming the Federal Reserve in, weakening employment and decreasing corporate profits. Below I will highlight what to watch for going forward to see how the overall economy is doing.

Housing

From the housing market, keep a close eye on several statistics.

1.) Overall inventory and months of inventory available for sale. Right now the absolute inventory available for sale is at incredibly high levels. I call it a super-glut. Simply put, there are a ton of homes on the market. As this number increases, expect more downward pressure on home prices. In addition, keep a close eye on months of inventory available for sale. This is how the existing sales pace of existing homes is measured. Right now that number is over 10 months, which is a ton of homes.

In addition, keep your eye tuned into foreclosures. The main issue with real estate right now is inventory. Anything that adds to inventory is bad and anything that subtracts from inventory is good. Foreclosures are also at high levels indicating the absolute amount of homes available for sale is increasing, adding further downward pressure on home prices.

Finally, watch for information related to the credit markets. There are two things to watch for.

2.) Writedowns. Most estimates that I have seen say total writedowns will fall between $300 and $500 billion. According to a recent Bloomberg article, that total amount of writedowns is now just below $100 billion. Assuming the low end of the estimated amount of writedowns is accurate, we still have another $200 billion of writedowns to go. The first $100 billion in writedowns has taken six months. Assuming the same pace of disclosure going forward, we have at least a year left of negative announcements from the financial sector.

3.) The credit crunch. Every Thursday, the Federal Reserve issues a report on the short-term credit markets. The report is available from their website. These are becoming increasingly important numbers.

My hope for 2008 is that by the end of the year housing and the credit markets will at least be stabilized.

Federal Reserve

The main issue here is commodity inflation. Agricultural and oil prices are in the middle of three year and one year rallies, respectively. These developments are starting to get the attention of the Federal Reserve. At the last FOMC meeting, the Fed lowered interest rates 25 basis points when the market was expecting 50. To aid liquidity, the Fed began an open market operation. In my opinion, the Fed opted for this second option to help the credit markets because of inflation; they couldn't risk lowering interest rates further without adding to the possibility of increasing inflationary pressures.

Consumer

The final Christmas sales numbers will be very important. They should be released at several levels. Watch the big retailers -- Wal-Mart and Target being incredibly important. Also watch the numbers coming from the Census Bureau.

Also keep an eye on gasoline and food prices. These have gotten a lot of exposure lately because economists are arguing that higher commodity prices are starting to lower discretionary spending.

Corporate Profits

The first quarter numbers will be coming out soon. Last quarter was the first time in about five years that corporate profits were lower from the previous quarter. If this happens again -- that is, if corporate profits again disappoint -- than traders on Wall Street may become less inclined to bid-up shares. If the market drops, consumer confidence will take a hit, which will in turn probably decrease consumer spending.

U.S. Dollar

See if the dollar is still in down-fall against the Euro, yen, and the Canadian dollar.  This will not only cause the price of gas to rise but all other imported items.  It is falling because of lack of confidence in the U.S. economy, mainly because of its huge debt load.  To sell T-bills (to replace the ones that have matured) either interest rates must go up or the dollar go down.  The slow down in the economy results normally in the feds lowering interest rates.  But because of rising prices, this path will not be taken--jk. 

Stewarts last article appeared on the web in Daily Kos at  http://www.dailykos.com/story/2007/12/26/115240/90/19/421013.  

SOME IMPORTANT DATA:

The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP. That represented more than 4 percent of the total outstanding principal balances owed to the trusts on credit cards that were issued by banks such as Bank of America and Capital One and for retailers like Home Depot and Wal-Mart.  Defaults rose 18% to $961 in October according to filing made to the SEC.  Some of the nations biggest lenders are reporting a rise in delinquent accounts of 50% or more compared to that of a year ago.

Since October 2006, prices in 10 cities fell 6.7% -- a record drop. The prior largest decline was 6.3% in April 1991.  Foreclosures for 08 are estimated at 1.2 million.  There were 201,950 foreclosures filings in November, down 10% from October.  

Big Businesses are like heroin addicts in that they petition the government to legalize heroin, subsidize their purchase of needles, and permit them to right off their drug expenses as medical treatment for their drug habit.  Only in the case of business it is profits and their principle lobbying is for the deregulation of the market place; pork barrel and other government contracts; and lower taxes.  They avoid taxes by moving their corporate headquarters to a tax-heaven country.  Though political donations they have “persuaded” our government to shift the tax burden.   Out of the 275 largest corporations in the US, 82 paid no taxes (some also received a refund) in one of the years from 2001 to 2003 (stats from http://www.corpwatch.org).  Recreational drug users need to emulate big business--jk. 

Must watch:

Parts of Europe (such ask Netherlands and Denmark) use small local electricity generation plants, which permits the use of the byproduct heat for heating.  In one example they use all he CO2 generated to supply 4,000 hectares of green houses.   The combined heating and energy production (CHP) is a proven technology that lowers the energy consumption for electricty and heating by over 50%.   British (BBC) documentary on this http://www.youtube.com/watch?v=klooRS-Jjyo&mode=related&search

Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."