Deriving Value

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1quadrillion
Creative Commons License photo credit: fsgm

Renegade Economists Show 81

as broadcast on www.3cr.org.au on Wed March 18th
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Our NZ colleague Bob Keall from Resource Rentals for Revenue NZ discusses our purpose, with a few strong words on negative gearing amongst others. We also focus on the derivatives market and the shadow banking system. This is a technically shortened podcast due to a re-booting of the 3CR hard drive. Sorry the first 9 minutes are lost where we tee off on the FHOG and warn renters to stay renting, don’t buy to prop up the speculators.

RENT DON’T BUY!

Show Notes

Govt urged to extend first home grant

The federal government must consider alternative measures to support the housing market if it feels extending the deadline of the increased first home owners grant is not warranted, a mortgage broker says.

Demand for home loans by first time home buyers has jumped to record levels since the grant was increased in October.

Loan Market Group executive director John Kolenda says that unless the offer is extended for a further six months to maintain the “vibrancy” in the market, there is a risk of a severe downturn once the boosted grant expires.

Buyers Wanted

The HIA, which represents home builders, is lobbying for the Federal Government to buy excess stock.

Auction Clearance Rates:

RENT DONT BUY – young people getting ripped off

U.S. Economy: Housing Starts Unexpectedly Increased in February

Building permits, a sign of future construction, rose less than starts, indicating construction may again slow. Developers are still contending with record foreclosures that depress prices and profits, and put pressure on the Federal Reserve, which meets today and tomorrow, and the Obama administration to solve the credit crisis.

US housing construction surges unexpectedly in battered market

While the surge in new construction was a welcome sign for the nation’s battered housing market, analysts cited by CNNMoney.com warned that the increase could be short lived.

‘With new home sales still falling and the months’ supply at a record, there is no reason for homebuilding to rise,’ wrote Ian Sheperdson, chief US economist at High Frequency Economics in a research note. ‘This is a temporary rebound, not a recovery.’

In the West, where the housing market was overbuilt in the boom years and where there is a glut of foreclosed homes, starts declined nearly 25 percent versus the previous month, the report said.

AIG Bonuses Unleash Political Pounding, Threats of Higher Taxes

The political heat generated by the disclosure of $165 million in AIG bonuses that were to be paid March 15

President Barack Obama yesterday chastised the insurer for awarding the bonuses to staff of the derivatives unit blamed for the firm’s near collapse in September, and

DERIVATIVES:

The Size of Derivatives Bubble = $190K Per Person on Planet

…the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion.

Derivatives – wiki

The main types of derivatives are forwards, futures, options, and swaps.

IMF poised to print billions of dollars in ‘global quantitative easing’

IMF ‘global quantitative easing’
IMF planning to print money… Special Drawing Rights

Banks want G20 to set up pricey bad bank

TALF to Prime Derivatives

$1 trillion for Bernanke’s TALF and another trillion for Geithner’s so called “Public-Private Partnership”. That’s $2 trillion down a derivatives sinkhole just to preserve the illusion that the banks are still solvent.

When the WSJ says that dealers need to “be protected in situations where the collateral or the client made mistakes or wound up ineligible”, what they mean to say is that they expect the Fed to make up for any losses on securities which are explicitly banned from the program. This is no small matter, since the Fed cannot legally buy any asset that is less than triple A, and yet, everyone knows the TALF will end up being a dumping ground for all kinds of toxic waste.

So who will pay when financial institutions sell double A or lower securities that they KNOW are ineligible for the program? As it stands now, the taxpayer, because the Fed caved in to industry pressure. In other words, the interests of the people who put up a measly 5 percent of the original investment will take precedent over those who put up 95 percent. This is the kind of sleazy dealmaking that is going on behind the scenes of this bailout fiasco.

gee wizz all that in 3 mins? Well not really, we culled from the above many other important issues we wanted to mention, and didn’t get to eh US construction rates.

Music

Georgia Anna Muldrow & Dudley Perkins – The Message Uni Versa
Steinski & Double Dee – Honeymoon Is Over
The Wailin’ Jenny’s – One Voice

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