Euro/Yen and the US Equity Markets Bubble: A Monetary Phenomenon

Here is an interesting comparison which we believe has some validity in that the credit and asset bubble
was significantly a Yen and Dollar, and possibly a Renminbi, monetary phenomenon.

The broadly manipulated currency markets in a fiat regime are the tail wagging the dog of the world economy.

The ultimate question might be who, if anyone, is doing the wagging?

Just to keep it interesting, and to drive home the point that these relationships are rarely simple and straightforward,
this chart shows the sharp decline in the euro/dollar cross with the decline of US financial assets.
We think we have previously shown a tight correlation between US asset values held by European banks and the eurodollar.
There may also be some 'flight to home currency' phenomenon amongst US investors.

One in Ten US Mortgages Are in Trouble

This problem will not be resolved by making more credit (debt) available.

The sustainable resolution will come with an increased in median hourly wages, and a rising payroll number.

Programs that do not contribute to this end are temporary patches at best, designed to forestall default.

We need to carefully consider those things that must be reduced in size, and those things that are infrastructure necessary to the generation of jobs and real wages.


Bloomberg
Mortgage Delinquencies, Foreclosures Rise to Record
By Kathleen M. Howley

Dec. 5 (Bloomberg) -- One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said...

The Grapes of Graft

There seems to be a rush to help those who take a shower in the morning before going to work,
and not those who take a shower in the evening after a day's work.

The Grapes of Wrath

Bloomberg
California May Pay With IOUs for Second Time Since Depression
By Michael B. Marois and William Selway

Dec. 5 (Bloomberg) -- California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

In a letter to legislative leaders Dec. 2, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California, which approved its budget less than three months ago, may run out of cash by March, state officials say.

Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

California is reeling more than any other state from budget woes that pushed the nation’s governors to seek help from Congress. States say federal money is needed to ease the pain from spending cuts and tax increases that would be a further blow to an economy in the throes of a recession.

The warrants would be given to landscapers, carpet cleaners, construction firms, food services companies and other state vendors. They would pay an interest rate of as much as 5 percent, based on state law. California last issued the IOUs in 1992 when lawmakers and then-Governor Pete Wilson deadlocked on a budget for 61 days past the start of the fiscal year...