Bill Bonner
Bill is the author, with Addison Wiggin, of New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning .Mutual Manipulation
Front page headline on Friday’s Wall Street Journal proclaimed a big up-tick worldwide in the manufacturing sector.
According to the paper, everybody is making more and more stuff. This helps assure that the recovery “has legs.”
Auto sales, too, came in stronger than expected in March. So it sounds like the recovery has wheels too.
What we want to know: does it have a brain? Who’s buying this stuff and where are they getting the money?
At least the economic model of the bubble era made sense. The producers produced. The consumers consumed. That worked great until the consumers ran out of money. Then, they had to borrow from the producers. And eventually, the whole thing blew up when it became clear that the spenders had borrowed and spent too much, while the producers had expanded and produced too much.
So far, so good. But now, the world economy needs a new model, right?
Housing Recovery -- On the Same Schedule As Godot
So far the markets have not seemed to notice, but there are not one…but two bulls in this china shop.
First, the US government is going broke.
Second, we’re at the beginning of a Great Correction.
As to the second item, here’s this update from Bloomberg:
Sales of new homes in the US unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market.Purchases decreased 2.2% to an annual pace of 308,000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.
The new-home market is vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6% this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the housing market as the administration takes steps to overhaul real-estate financing and regulation.
“It’s going to be a long, slow slog and the lagging sector will be new home sales because they have to compete with existing sales and foreclosures,” Bill Hampel, chief economist at the Credit Union National Association in Washington, said before the report. “New home sales probably have until the fourth quarter until they start recovering.”
What happens in the 4th quarter that makes the housing market recover? A sudden influx of immigrants? A sudden increase in employment?
