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Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada ( He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among... More
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  • U.S. Banks bulldozing NEW homes

    Here is a question for anyone who actually believes the propaganda that the U.S. “recession” is ending, and that the U.S. housing market is “stabilizing... why are U.S. banks bulldozing new homes?

    Rather than wasting your time by getting a chorus of “no comment” from the U.S. financial crime syndicate, let me answer that question for you: banks are bulldozing homes because it is the only way to begin to reduce the largest inventory of unsold homes in human history.

    At the risk of completely boring regular readers, for more than a year I have specified the necessary ingredients for the U.S. housing market to actually begin to “stabilize”: first, overvalued U.S. homes must fall another 30-50% in price; second, the U.S. government must spend trillions of dollars in paying-down U.S. mortgages (to restore positive equity to 10 million (or so) U.S. homeowners); and third, the U.S. must bulldoze at least one million homes.

    The longer the U.S. government waits, the steeper the price it must pay. Originally, the U.S. government might have been able to get by with 'only' $1 trillion, to pay down U.S. mortgages. Today, that tab is more like $3 trillion (to pay-down U.S. mortgages by roughly 20%). Originally, the U.S. could have probably gotten by with bulldozing 'only' one million homes, today that number is probably at least 2 million units.

    A commentary from early February provides some of the horrific numbers facing the U.S. sector (“19 million VACANT homes in the U.S. in 2008!!!”), and an estimate on the number of years before a “bottom” in this market is possible.

    A more recent commentary (“Demolition of Abandoned U.S. homes has already begun”) pointed out how Flint, Michigan is demonstrating what lies ahead for countless U.S. towns and cities – by planning the complete demolition of entire neighbourhoods, including all local businesses. Large portions of this once-thriving town are already nearly deserted – and are overrun with “squatters” and criminals. Meanwhile, plunging tax revenues leave the city with no money to provide proper government services for these areas (such as necessary policing).

    Today, a new component of the destruction of U.S. homes was uncovered by a local, California news station: U.S. banks are beginning to have brand-new homes bulldozed. To be specific, some of these homes were not completely finished – leaving U.S. banksters with yet another problem.

    First, the U.S. banks lack the money to finish construction of these homes. Second, U.S. banks have kept 2/3 of their inventory of foreclosed homes off the market. Dumping all this real estate onto the market would cause the sickening collapse in U.S. home prices to accelerate even faster. Third, there are simply no possible buyers for most of these homes.

    To put pressure on the U.S. financial crime syndicate to deal with an economic catastrophe of their own making, most towns and municipalities have begun levying increasing fines on U.S. banksters who refuse to either sell or maintain these properties. BNN reported this morning that Indigo, California has made it a criminal offense for banksters to willfully engage in such neglect.

    Given all of these horrific parameters, U.S. banks have calculated that they will lose less money by bulldozing new homes than by maintaining them, holding them until a foreclosure sale eventually occurs, and then taking a huge write-down.

    Consider the arithmetic here. Most of these new housing units that U.S. banks are foreclosing have “book values” of several hundred thousand dollars. The empty lots they will be left with have practically no resale value. With twenty million empty homes in the U.S., who would be foolish enough to want to build anything on these lots?

    Thus we are left with a situation where U.S. banks see their best option as taking virtually a 100% loss on these homes. U.S. banks will have to endure these 100% losses on at least a million or so U.S. homes. In addition, the U.S. financial crime syndicate is still sitting with trillions of dollars of leveraged-bets (with the average leverage being 30:1) on homes such as these.

    Depending on the nature of these leveraged bets, some of the losses for U.S. banks could exceed 100%. In other words, not only is their “asset” worthless, but (in the case of “assets” like credit default swaps) the holders of these “assets” may be liable for additional pay-outs.

    Does anyone still believe that the U.S. housing market is beginning to “stabilize”? Does anyone still believe that Wall Street fraud-factories are now making “profits”?

    May 04 11:35 PM | Link | Comment!
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  • Fixed-income investments are totally insane in the current environment, and we can't hold all our wealth in gold and silver bullion.
    May 5, 2009
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