Commercial Real Estate Crash Will Take Down 2,000 Banks

We are not going to go into the lured details regarding residential and commercial real estate, but we are going to give you some highlights. We began telling subscribers to sell real estate in June of 2005, long before anyone else. We picked the top just as we did in September 1988 at the top.

Residential real estate won’t hit bottom until 2013 and who knows how long it will bump along the bottom. At the end of the year we have a whole new generation of sub prime and ALT-A mortgages coming due for reset. In addition there are the pick and pay loans that are in trouble, and 52% of problems lie, if you can believe it, in prime loans. Residential real estate countrywide is off 32% with a number of areas off 50% or more. In the next two years that national figure will show losses of 45% to 50%, and the former 30 hot city markets will be off 50% to 70%. We predicted this in November of 2004. All the savings of America for three generations of Americans will be lost, and these same Americans will be saddled with horrendous amounts of debt spawned by our Wall Street controlled Treasury and the Federal Reserve. These are the bankers who have robbed you and will continue to rob you until you are destitute and enslaved.

Over the next four years $1.5 trillion or more in commercial real estate loans will come due. About 50% are in deep trouble. From the top in 2007 their values are off 35% to 40%, so they only have 30% to 35% to go. Losses could be as high as $700 billion. The fallout will affect all banks big and small. The reality of losses will be devastating.

Lenders, mostly banks, already broke, are going to get hit very hard and many will go under. All debt in real estate is in serious trouble. That is why we believe more than 2,000 banks will go out of business over the next 1-1/2% to 2 years. That is why you should have no CDs and only three months expenses in the bank for operating and 6 months for businesses. That money should be in gold and silver related assets. 

The only word to describe what has been and is continuing to happen in real estate is catastrophic. By way of comparison the losses in the Lehman collapse were piddling. If you include the derivatives it was about $775 billion. In real estate we are talking trillions. The result was that stock markets lost between 10% and 50% of their value after Lehman collapsed. Irrespective of stimulus, government and Fed loans and bogus earnings, once the effect of losses are realized, the Dow will again test 6,500 to 6,600 and in all likelihood break that level and fall to 4,000 to 4,500, with probably some way to go on the downside. The Lehman and Bear Stearns affairs forced the Treasury and the Fed to feed $12.7 trillion directly into the system with a total commitment of $23.7 trillion says our US inspector general. Not only did the US provide a rescue but so did members of the G-20, all of which are presently trying to withdraw the stimulus that kept deflationary depression at bay. The financial elites, particularly of London and NYC, have been temporarily saved, but that game is not over yet. The withdrawal of trillions of dollars from the world economy will collapse it and the Illuminists are well aware of that. The goal has always been the pauperization of the multitudes worldwide in order to implement world government and the new world order. The enslavement of mankind. That is what this is all about and you had best come to grips with what they intend to do. These people have bankrupted almost every country in the world in this deliberate process. That is why sovereign debt is the next area they have zeroed in on as one of the last main cogs of stability to be destroyed along with the devaluation of most currencies.

That brings us to the deliberate destruction of Greece. No one involved didn’t know that Greece and Italy presented bogus numbers to qualify for the eurozone some ten years ago, but they all looked the other way. Greece has been the leader in the global shipping industry and so has suffered as global trade has fallen. It has killed their balance of payments. The drop in tourism has also badly hit their economy. This is their part of the price to be paid for the phony war on terrorism. The elitists found Greece to be easy prey along with hedge funds and the likes of Goldman, Morgan and Citi. Their moves set up the initial stages for what will be the deflationary takedown of the world economy financially and economically.

Greece’s debt to GDP is estimated to be 120%, far worse than Russia’s debt when they defaulted 12 years ago – some $430 billion. German banks hold a great deal of the debt for not only Greece, but for Spain, Ireland and Portugal, some $700 billion worth. As you know all of these countries are in trouble financially, as well as England, which will sell more than $300 billion in bonds this year, all of which will be monetized. This will create more British inflation to be added to the current 3.5% official inflation now in place. Real inflation is double that and it is going to get much worse. It is no wonder British interest rates are 1% higher than German rates. Last year the Bank of England monetized almost all the liquidity they injected into the British market. As the year wears on liquidity will get tighter as borrowed liquidity is to be returned to lenders. For all eurozone banks that number is about $600 billion, which came from the Fed, although they won’t admit it. This is one of the main reasons Ron Paul wants to audit the Fed. That is to expose the Fed’s illegal role in US foreign policy. The weakness in the pound, as we pointed out in previous issues, along with the dollar and other currencies, has lost 2/3’s of its purchasing power, as we pointed out again and again for 6-1/2 years.  That measurement is versus gold. How much longer do you believe others will hold pound, euro and US dollar paper, not long? Dollar Forex holdings have dropped from 64.5% to 60 ¾% in just the last year. Global monetary and fiscal problems worsen every day and there is no end in sight. We know there is something very big underway when Warren Buffett, who’s firm recently paid a $100 million fine for accounting fraud is dragged out frequently to tell the people things are going to get lots worse. Charlie Munger said the same thing last week as further warnings are fed to the public. 

Germany is playing a key role in all of this, particularly in Europe. Germany never saw a bubble in its stock market nor in its housing market. Germans have been frugal doing what any sane society should have done. They never had cheap credit, soaring salaries or big government goodies like those countries on the edge; Greece, Spain, Ireland, Portugal and Italy. It must be said though that part of German success was exporting to theses bubble countries. The cry now from purchased economists is Germany must buy in order for the rest of Europe to economically survive. Others are envious of Germany’s trade surplus, which is the second largest in the world after Saudi Arabia. That surplus is what is used by the rest of the eurozone nations to stay solvent. Definitely a 2-edged sword. Is it any wonder 67% of Germans have for 11 years wanted to dump the euro. Germany was forced to take on Greece and Italy knowing they did not qualify and Ireland was subsidized into the zone and should have never been allowed to join. Germany is being penalized holding down salaries to the point of stagnation and cost cutting, whereas the other players simply ran economically and fiscally wild. Germany will not join the culture of debt and cannot be expected to pay for others profligacy.

In a recent poll German banks said they will not buy more Greek sovereign debt. Greeks are demonstrating in the streets because the party is over and they want it to continue forever. Greece’s problems are somewhat similar to those of the states in the US. An economic depression, large budget deficits and giant falls in revenues. Costs have to be cut and people have to be laid off. Like in Greece, California, New York, Pennsylvania, New Jersey and other states are running out of money. Greece wants Germany to help and now 67 years after the war wants its gold returned, some $70 billion. Germany couldn’t deliver the gold if it wanted too, because the US refuses to return their gold, probably because they secretly sold it to suppress gold prices. At the same time the states in the US are selling municipal bonds like mad to stay afloat with yields of only 3%. The problem is we have an unsound credit system. Last year the Fed bought 80% of Treasury debt and monetized it. In addition, they bought $1.2 trillion in MBS and Agencies at least half of which was monetized. The system in the eurozone and in the US is impaired and nothing is being done to fix it. It’s one band-aid after another. All these nations can think of is reflation. The wrong path and example still exists. Trillions in deficits as far as the eye can see to underpin the stock and bond markets and make it appear that there is economic recovery, when in fact the world is going deeper into the hole. The stability of asset prices, incomes and corporate cash flow and revenues for government are a mirage. It is a classic Ponzi scheme.

Mr. Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments. “Greece itself would not be an issue for this company, nor would any other country,” said Mr. Dimon. “We don’t really foresee the European Union coming apart.” The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.

Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.

Last summer, California issued $3bn of IOU’s to creditors including residents owed tax refunds as a way of staving off a cash crisis.

“I can’t write checks without money; that’s against the law. My main goal is to keep the state afloat, but I won’t be able to do it without the help of new legislation,” said Mr. Chiang.

At least eleven 15-year-old children were discovered to be working last year in three factories which supply Apple.

The company did not name the offending factories, or say where they were based, but the majority of its goods are assembled in China.

  Apple also has factories working for it in Taiwan, Singapore, the Philippines, Malaysia, Thailand, the Czech Republic and the United States.

Apple said the child workers are now no longer being used, or are no longer underage. “In each of the three facilities, we required a review of all employment records for the year as well as a complete analysis of the hiring process to clarify how underage people had been able to gain employment,” Apple said, in an annual report on its suppliers.

Apple has been repeatedly criticised for using factories that abuse workers and where conditions are poor. Last week, it emerged that 62 workers at a factory that manufactures products for Apple and Nokia had been poisoned by n-hexane, a toxic chemical that can cause muscular degeneration and blur eyesight. Apple has not commented on the problems at the plant, which is run by Wintek, in the Chinese city of Suzhou.

A spokesman for Wintek said that “almost all” of the affected workers were back at work, but that some remained in hospital. Wintek said n-hexane was commonly used in the technology industry, and that problems had arisen because some areas of the factory were not ventilated properly.

Last year, an employee at Foxconn, the Taiwanese company that is one of Apple’s biggest suppliers, committed suicide after being accused of stealing a prototype for the iPhone.

Sun Danyong, 25, was a university graduate working in the logistics department when the prototype went missing. An investigation revealed that the factory’s security staff had beaten him, and he subsequently jumped to his death from the 12th floor of his apartment building.

Foxconn runs a number of super-factories in the south of China, some of which employ as many as 300,000 workers and form self-contained cities, complete with banks, post offices and basketball courts.

It has been accused, however, of treating its employees extremely harshly. China Labor Watch, a New York-based NGO, accused Foxconn of having an “inhumane and militant” management, which neglects basic human rights. Foxconn’s management were not available for comment.

In its report, Apple revealed the sweatshop conditions inside the factories it uses. Apple admitted that at least 55 of the 102 factories that produce its goods were ignoring Apple’s rule that staff cannot work more than 60 hours a week.

The technology company’s own guidelines are already in breach of China’s widely-ignored labour law, which sets out a maximum 49-hour week for workers.

A multibillion-dollar “virtual fence” along the southwestern border promised for completion in 2009 to protect the U.S. from terrorists, violent drug smugglers and a flood of illegal immigrants is a long way from becoming a reality, with government officials unable to say when, how or whether it will ever be completed.

More than three years after launching a major border security initiative and forking over more than $1 billion to the Boeing Co., the project’s major contractor, Homeland Security Department officials are re-evaluating the high-tech component of the plan in the wake of a series of critical Government Accountability Office (GAO) reports warning lawmakers that the expensive undertaking is deeply flawed.

The program now places the Obama administration in a quandary, foretold by lawmakers who witnessed Boeing and Homeland Security publicly mischaracterize the nature of the contract, according to GAO, after government officials, watchdogs and contractors privately discovered that it was destined to fail.

“Regrettably, the partnership between [Homeland Security] and Boeing has produced far more missed deadlines and excuses than results,” Rep. Bennie Thompson, Mississippi Democrat and chairman of the House Homeland Security Committee, said in September 2008. “It will become the 44th president’s problem.”

Since February 2007, according to a review of federal records by The Washington Times, GAO has been telling Congress and Homeland Security that its high-tech border protection system needed better oversight and accountability, and that it lacked realistic measures of cost, timing and benefits.

Early on, GAO found that Boeing had failed to show how the $1.1 billion high-tech system would meet the objectives of the Secure Border Initiative (SBI), a comprehensive, multiyear, $4 billion Homeland Security proposal to secure the 2,000-mile U.S.-Mexico border, and urged revisions to the company’s lucrative contract.

Despite such warnings, based on GAO’s detailed evaluations of the root causes of major problems, the goals of the high-tech project, dubbed “SBInet,” were not realized and deadlines were pushed back. In September, GAO reported to Congress that the virtual fence scheduled for completion in 2009 will not be ready until at least 2016 — if it goes forward at all.

Meantime, the Obama administration has announced significant budget cuts for U.S. Customs and Border Protection (CBP) programs that depend on costly manpower, fencing, infrastructure and technology. While Homeland Security has described the virtual fence project as a critical element of increased border security, the administration has requested $574 million for the program for fiscal 2011 — a cut of nearly 30 percent compared with the $800 million that Congress approved in fiscal 2010.

“How can Congress even contemplate the administration’s substantial cuts to SBInet when the investment plans and oversight reports required by law have been completely ignored?” Rep. Harold Rogers, Kentucky Republican and a member of the House Appropriations subcommittee on homeland security, said last week.

Mr. Rogers is not the only one asking questions. The GAO has asked repeatedly how much more the government is willing to spend on a failed initiative.

FOR ENTREPRENEURS: 

Credit unions are non-profit cooperatives owned by members, such as employees or community residents. They have picked up some of the slack as banks burned by bad loans in the financial crisis tightened standards and pulled back on lending.

Banks’ outstanding loans to small businesses fell 3.9% in the year ended June 30. Such credit union loans rose 11% to $36 billion the first nine months of 2009, says the Credit Union National Association (CUNA).

Just how dangerous is California’s budget crisis?

Extremely dangerous, according to two recent evaluations of California’s debt by financial industry insiders.

California’s debt is seen by investors as riskier than Kazakhstan’s, according to Bloomberg News. Five-year credit default swaps tied to California’s debt, which are a key measure of the market’s belief in the likelihood of default, are actually trading at 100 basis points above those of Kazakhstan. In other words, the market believes a developing country of just 15.7 million people is actually less likely to default on its debt than California, which makes up the eighth-largest economy in the world.

Here’s Bloomberg News:

Kazakhstan and California, the lowest-rated U.S. state, share a Baa1 ranking, three steps above non-investment grade, from Moody’s Investors Service. California was given a BBB by Fitch Ratings and A- by Standard & Poor’s, four levels above non-investment grade. Both companies rate Kazakhstan lower, at BBB-, one step above high-risk, high-yield junk.

And last week, Jamie Dimon, the CEO of JPMorgan, the nation’s second largest bank, warned that California’s $20 billion budget gap could pose a bigger risk than the Greek debt crisis. Here’s Dimon: “Greece itself would not be an issue for this company, nor would any other country. We don’t really foresee the European Union coming apart.”

In January, Standard & Poor’s cut California’s debt rating amid concerns that the state was not doing enough to bolster its budgetary woes. Reporting on the downgrade, Reuters pointed out that there are several countries with debt trading at levels above California’s: “The cost to insure California’s debt with credit default swaps is now higher than debt of developing countries, such as Kazakhstan, Lebanon and Uruguay. It costs $277,000 per year for five years to insure $10 million in California debt, compared with $172,000 for Kazakh debt.”

A big reason for the disparity: Banks “have huge losses in their portfolio and our business loans are rock solid,” says CUNA CEO Dan Mica. Credit unions lend only to members and avoided the risky home and commercial loans that clobbered banks.

They say they’d make a bigger contribution if Congress passes a bill that would raise a cap on their business loans, now 12.25% of assets, to 25%. It would free an extra $25 billion or so in loans over three years, CUNA economist Bill Hampel says. While credit unions hold only 5% of all small-business loans, CUNA says the added funds would generate nearly 100,000 jobs the first year.

But economist Keith Leggett of the American Bankers Association says the cap is aimed at keeping credit unions from shifting lending from modest-income consumers to businesses. Raising it, he adds, would worsen a pricing edge credit unions enjoy because of their tax-exempt status.

Mica argues credit unions pose no threat. Hampel says easing the cap won’t hurt consumers: New loans would come from money now in other investments.

Credit union officials hope to hitch the cap increase to a small-business lending bill top Democrats plan to unveil this week.

St. Mary’s Bank Credit Union of Manchester, N.H., has $75 million in business loans and $15 million pending. CEO Ron Covey says the cap means he can’t fund $4.8 million in loans.

Three banks rejected Kristen and Nick Arzner for a $250,000 loan to open a restaurant in Corvallis, Ore. But OSU Federal credit union OK’d it. “They worked with us,” says Kristen, 27. [If this is allowed we will see lots of credit unions go under. The economy is headed into deep trouble late this year.]