KeNo's Housing and Economic Portal: Friday January 21 Housing and Economic stories

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TOP STORIES:

EU plans for bondholder haircuts unsettles debt markets - (www.telegraph.co.uk) Michel Barnier, the single market commissioner, will publish a “consultation paper” outlining ways to shield taxpayers from banking crises. It is the first stage of what will almost certainly become a binding law. “We are pursuing the idea of a debt write-down or conversion to help stabilise a failing bank and reduce the need for public funds,” said an EU source. Fears that this could evolve into a crusade against bondholders set off fresh jitters on EMU debt markets yesterday, pushing yields on 10-year Greek bonds to a record 12.59pc. Portugal managed to sell €500m (£425m) of debt at a crucial auction but had to pay 3.67pc on six-month bills, double the rate in September. “It is an unsustainable dynamic,” said Lena Komileva from Tullett Prebon. Credit Default Swaps on Irish bonds jumped 16 points to 620 after Switzerland’s central bank said it would no longer accept Irish debt as collateral. The Commission paper refers only to bank debt, unlike Germany’s proposals for sovereign “haircuts”. Mr Barnier hopes to restrict burden-sharing to future debt only, fearing that a catch-all approach risks setting off a fresh EMU crisis.

The Crisis That Isn’t Going Away - (www.nytimes.com) Europe’s sovereign debt crisis is back — if it ever went away. Less than a month after bailing out Ireland, and after a holiday lull in the markets that may have looked mistakenly like calming, the European Union is again struggling to persuade investors that it has the cash and the will to address the root cause of its travails: a growing debt burden that is strangling governments and their banks. On Friday, the yield on Portuguese 10-year bonds hit a recent high of 7.1 percent, the cost of insuring the debt of banks in Italy and Spain rose sharply, and the euro hit a three-month low against the dollar. Driving the recent market weakness was a report by the European Commission that proposed that holders of senior bank debt be required to take a loss when a bank fails. European authorities took pains to say that the rules would not apply to the more than 1 trillion euros ($1.3 trillion) in current bank and sovereign debt in the 17-member euro zone. But investors were not biting. They chose instead to interpret the report as a signal that they would be forced to take losses on their obligations.

Government Uses Our Tax Dollars To Push Mortgage Debt - (www.patrick.net) Why should our tax dollars be used against our own citizens, trying to trap them in mortgage debt? Check out this propaganda page from the department of Housing and Urban Development (HUD) at http://www.hud.gov/offices/hsg/sfh/buying/buyhm.cfm. 100 Questions & Answers About Buying A New Home:

Dear Future Homeowner: They start out assuming everyone should buy a house. That’s just wrong, because millions of people save money every month by renting the same thing more cheaply. They should be showing a rent-vs-buy calculator, but it’s not there because they just want you to buy no matter how bad it is for you. A home is a financial asset and more: it’s a place to live and raise children; it’s a plan for the future; it’s an investment in your community. That’s why we at the U.S. Department of Housing and Urban Development want all Americans to have an opportunity to enjoy the benefits of owning a home. And we are especially proud of our work to help first-time homebuyers: thanks to our special programs, more than 81% of FHA-insured loans went to first-time homebuyers during 2000. It’s also a death trap for your finances, but they don’t mention that. They talk about benefits but not the dangers. Nor do they mention that those FHA-insured loans had absolutely no benefit to buyers, because the extra lending simply caused prices to rise, forcing buyers to spend more. That extra debt did benefit banks though. Funny how that benefit was not mentioned…

Federal Reserve Really Purchasing Over 60% of 2011's Fiscal Deficit? - (gonzalolira.blogspot.com) The other day, in my post “The Lull Before the Storm”, I mentioned that for fiscal year 2011, the Federal Reserve would be purchasing over 60% of the Federal government deficit. In other words, the Fed would be dancing the Monetization Waltz, just like Latin American countries used to back in the 1970’s: Proof positive that America is indeed a banana republic—only with nukes. A lot of people didn’t believe me—or wanted me to check my figures. Or wanted to know if I was having an acid flashback from those aformentioned 1970’s. A lot of people couldn’t believe it.

US will soon be more unequal than Brazil - (www.opinionator.blogs.nytimes.com) The city of Rio de Janeiro is infamous for the fact that one can look out from a precarious shack on a hill in a miserable favela and see practically into the window of a luxury high-rise condominium. Parts of Brazil look like southern California. Parts of it look like Haiti. Many countries display great wealth side by side with great poverty. But until recently, Brazil was the most unequal country in the world. Today, however, Brazil’s level of economic inequality is dropping at a faster rate than that of almost any other country. Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians. Poverty has fallen during that time from 22 percent of the population to 7 percent. Contrast this with the United States, where from 1980 to 2005, more than four-fifths of the increase in Americans’ income went to the top 1 percent of earners. (see this great series in Slate by Timothy Noah on American inequality) Productivity among low and middle-income American workers increased, but their incomes did not. If current trends continue, the United States may soon be more unequal than Brazil.