Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-62826 Sun, 20 Aug 2017 18:15:32 GMT We're racing towards another private debt crisis - so why did no one see it coming? (UK) http://implode-explode.com/viewnews/2017-08-20_Wereracingtowardsanotherprivatedebtcrisissowhydidnooneseeitcomin.html Corporations are just raking in the profits and sitting on them. The household sector, on the other hand, is a rolling catastrophe. Austerity has meant falling wages, less government spending on social services (or anything else), and higher de facto taxes. This puts the squeeze on household budgets and people are forced to borrow. As a result, not only are households in overall deficit for the second time in British history, the situation is actually worse than it was in the years leading up to 2008.

And remember: it was a mortgage crisis that set off the 2008 crash, which almost destroyed the world economy and plunged millions into penury. Not a crisis in public debt. A crisis in private debt.

The situation is not much different in the states...

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iehi-feed-62821 Sat, 19 Aug 2017 22:38:26 GMT Doug Noland: Crisis of Confidence http://implode-explode.com/viewnews/2017-08-19_DougNolandCrisisofConfidence.html ...before we segue to the mess in Washington, there are as well major near-term uncertainties with respect to global monetary management. There were indications this week that both the ECB and Federal Reserve lack the confidence and consensus necessary to communicate a plan for unwinding what have been years of unprecedented monetary stimulus. It's not confidence inspiring.

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There should be little doubt that the boom and bust dynamics experienced over recent decades have taken a toll on our nation's social and economic fabric. And while many want to blame "globalization," I believe much that we label "globalization" would be more accurately understood as fallout from years of unfettered global finance. Could NAFTA have been so destabilizing to U.S. manufacturing without endless cheap finance flooding into Mexico (and EM more generally). How dominant would China be today without essentially limitless amounts of virtually free "money" to finance over-investment the likes of which the world has never experienced?

I strongly believe that unfettered finance has been instrumental in the long period of U.S. deindustrialization -- the transformation from a manufacturing powerhouse into an experiment in a consumption and services-based economic structure. Bubbling securities markets and booming Wall Street finance were integral to this fateful structural shift.

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iehi-feed-62820 Sat, 19 Aug 2017 19:22:25 GMT Ditech Parent Walter Investment Could Be Kicked Off NYSE http://implode-explode.com/viewnews/2017-08-19_DitechParentWalterInvestmentCouldBeKickedOffNYSE.html iehi-feed-62819 Sat, 19 Aug 2017 17:31:15 GMT New York State Buying 400 Mortgages http://implode-explode.com/viewnews/2017-08-19_NewYorkStateBuying400Mortgages.html iehi-feed-62796 Wed, 16 Aug 2017 16:13:05 GMT Dow 30,000, Not If Demographics Have Anything To Say About It http://implode-explode.com/viewnews/2017-08-16_Dow30000NotIfDemographicsHaveAnythingToSayAboutIt.html iehi-feed-62792 Wed, 16 Aug 2017 14:40:07 GMT Inequality and "The Rigged System": Democrats Search For a New Message http://implode-explode.com/viewnews/2017-08-16_InequalityandTheRiggedSystemDemocratsSearchForaNewMessage.html The financial crisis and ensuing recession scrambled Americans' fears and desires, leaving an electorate defined by some variety of anger: at stagnant paychecks, at bank bailouts and government spending, at police shootings of blacks and at women's lower wages; anger against a "rigged system." Unfortunately for the Democratic Party -- the party of government -- most voters tend to think government is doing the rigging.

The most inspiring campaigners, Senator Sanders on the left and Donald J. Trump on the right, did not convince voters of the wisdom of carefully honed policy prescriptions. They ran on an apocalyptic vision of America under siege, with clear enemies in sight. Mr. Trump, an interloper of scant ideological baggage who took over a Republican Party at least as clueless as Democrats about voters' preoccupations, offered the more powerful apocalypse.

The question for Democrats looking for a path out of the wilderness -- for Mr. Cowan and Senator Sanders; for Senator Warren and the Senate minority leader, Chuck Schumer, who hopes to woo voters by offering a "Better Deal" -- is whether they can appeal to voters still angry because their lives, their aspirations and their sense of self have been derailed over the last few years.

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To recapture the presidency, Democrats must recover the support of the middle class -- people in families earning $50,000 to $150,000, whose vote went to Mr. Trump. Three-quarters of voters in swing states are white, according to data from the Cook Political Report presented by Third Way. Mr. Trump won white voters by 21 percentage points.

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Joan C. Williams, a professor at the University of California Hastings College of the Law who this year published "White Working Class: Overcoming Class Cluelessness in America," a critique of liberals' inability to understand this constituency, argues Democrats can offer an inclusive platform that appeals to all Democratic constituencies, like the proposal presented by Senator Schumer focused on jobs.

... Professor Williams argues against a move to a Democratic center that is friendly toward Wall Street and favors trade agreements, "two of the reasons that the working class is so done with the Democratic Party."

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iehi-feed-62791 Wed, 16 Aug 2017 00:47:21 GMT Ten years after the crash, there's barely suppressed civil war in Britain http://implode-explode.com/viewnews/2017-08-15_TenyearsafterthecrashtheresbarelysuppressedcivilwarinBritain.html One truism of this era is that the average British worker earns less after inflation than they did when RBS nearly died. Most of us have seen not a recovery, but a ripping up of our social contract -- so that over 7 million Britons are now in precarious employment. But the highest earners are way ahead of where they were in 2008. Finance-sector bonuses are as generous as they were during the boom, while a bad year for the average FTSE boss is one in which he or she pulls in a mere £4.53m.

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The banks got bailed out. Their bosses still get paid out. The rest of us get austerity. Whatever technical reforms have followed on from the crash, the economic and business model that created it remains intact. We could have used the nationalised banks to direct credit to strategic industries and regions; instead, Labour and the Tories insisted on treating them as if they were still private sector industries. We could have used the crash to make Britain a far more equal and democratic society. Instead, the UK is still grossly unequal.

And so we remain reliant on debt -- aptly termed "the raw material for bubbles and crashes" by Daniel Mügge at the University of Amsterdam. According to the Bank for International Settlements, the UK is far deeper in the red now than it was when Northern Rock collapsed. Government debt has shot up under the Conservatives, but so too has household borrowing. Were the UK to crash again, its government no longer has the political capital nor the fiscal headroom to save the financial system. And with interest rates scraping along the bottom, the Bank of England has barely any firepower left. Ten years of political fudge and failed austerity has left Britain's state machinery tapped out.

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iehi-feed-62788 Wed, 16 Aug 2017 00:05:12 GMT Rogoff, Orwell and Kafka http://implode-explode.com/viewnews/2017-08-15_RogoffOrwellandKafka.html iehi-feed-62784 Tue, 15 Aug 2017 19:39:21 GMT Is FOMO (Fear of Missing Out) Driving Up Consumer Debt? http://implode-explode.com/viewnews/2017-08-15_IsFOMOFearofMissingOutDrivingUpConsumerDebt.html iehi-feed-62781 Tue, 15 Aug 2017 15:39:30 GMT Hartford, CT, With Its Finances in Disarray, Veers Toward Bankruptcy http://implode-explode.com/viewnews/2017-08-15_HartfordCTWithItsFinancesinDisarrayVeersTowardBankruptcy.html ... the state capital is teetering on the brink of bankruptcy, and the turbulence rocking Hartford has served as a stark reminder of the gulf between the affluent enclaves that drive Connecticut's wealth and its larger cities that have long grappled with high crime, underperforming schools and unsure financial footing.

The problems in Hartford are similar to some other cities across the United States that have sought relief through bankruptcy: its tax base and population have shrunk and its pension obligations and debts have piled up. City officials, who are confronting a budget deficit approaching $50 million, have already made deep cuts in services, sought concessions from labor unions representing public employees and have taken steps, such as hiring lawyers, to position the city to be able to file for bankruptcy.

At the same time, Hartford has looked to the state for help, only to find that financial situation is also in disarray. The state, which has a deficit of about $3.5 billion, started the fiscal year on July 1 without a budget after months of wrangling in the State Legislature and a resolution could be weeks away.

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Connecticut has the greatest degree of income inequality of any state, according to Daphne A. Kenyon, an economist who studies local taxation at the Lincoln Institute of Land Policy, a research institute in Cambridge, Mass. That, she said, has translated into an extreme in "haves" and "have-nots" among its municipalities.

Cities and towns in Connecticut rely to an unusual degree on property taxes to finance their operations, a system that works well for more affluent communities, like Greenwich and Darien. But it is proving disastrous for a city like Hartford, which has one of the highest property tax rates in the state, but still cannot raise enough money to pay for basic government operations. Last year, state grants and assistance covered about half of the city's $566 million budget.

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Beyond the city's core, blocks are dotted with blighted buildings, some appearing to be overtaken by nature. Residents complain of parks that are poorly maintained and have expressed concern over violent crime. The Police Department is significantly understaffed, officials said, having lost more than 100 officers in recent years. The city's library system recently announced the closure of three of its branches and other cuts have threatened community events, like parades and festivals.

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Hartford also has a fundamental tax problem: It is home to government buildings and other properties it has no power to tax, making up just over half the real estate in the city. Connecticut accounts for that by promising to compensate the capital for the forgone property taxes, but in practice, the flow of money has been unreliable. The mayor described the city as being in a situation that forces an urban center to operate with a tax base similar to that of a suburb. "And it's a structure not built to work," Mr. Bronin said.

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In July, Moody's Investors Service downgraded Hartford's debt after the city disclosed that it had hired a law firm to advise it on a possible debt restructuring. Both Moody's and Standard & Poor's now rate Hartford's debt in the junk range, signaling a greater likelihood of some sort of default on bond payments.... Some contend that filing for bankruptcy is inevitable and is the city's best option. But there is also a pervasive sense in the city, especially among public employee labor unions, that bankruptcy could have devastating consequences and should be vigorously avoided.

... Hartford would be the first state capital to file under Chapter 9 of the federal bankruptcy code. (Harrisburg, the Pennsylvania capital, tried to declare bankruptcy in 2011, but state lawmakers there passed a bill to thwart the case from proceeding.)

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iehi-feed-62778 Mon, 14 Aug 2017 16:47:29 GMT Fighting Unfair Student Loan Collection Practices http://implode-explode.com/viewnews/2017-08-14_FightingUnfairStudentLoanCollectionPractices.html iehi-feed-62764 Sun, 13 Aug 2017 04:35:47 GMT Battle of the Behemoths - Kunstler http://implode-explode.com/viewnews/2017-08-13_BattleoftheBehemothsKunstler.html iehi-feed-62763 Sat, 12 Aug 2017 18:15:35 GMT Secret United Monroe Deal Causes Mass Exodus From Hudson Valley Town http://implode-explode.com/viewnews/2017-08-12_SecretUnitedMonroeDealCausesMassExodusFromHudsonValleyTown.html iehi-feed-62761 Sat, 12 Aug 2017 15:32:18 GMT Baby boomers are refusing to sell and will age like a fine wine in their homes http://implode-explode.com/viewnews/2017-08-12_Babyboomersarerefusingtosellandwillagelikeafinewineintheirhomes.html iehi-feed-62743 Tue, 08 Aug 2017 20:10:34 GMT How China's billion savers embarked on a household debt binge http://implode-explode.com/viewnews/2017-08-08_HowChinasbillionsaversembarkedonahouseholddebtbinge.html Since [the 2008 crisis], China's massive money supply, urbanisation and a mortgage loan boom have resulted in a hefty rise in household debt, which is now equivalent to 44.4 per cent of national gross domestic product, triple the level in 2008, according to the Bank for International Settlements.

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Although China's household debt level is still low compared to the 79.5 per cent of GDP in the US and 62.5 per cent in Japan, it has risen too steeply to be safe, according to a research report by the Institute for Advanced Research at Shanghai University of Finance and Economics which was published last month and led by former central bank statistics chief Sheng Songcheng.

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"The speed of China's household debt accumulation ... has exceeded that of US household debt accumulation before the subprime crisis," it said, warning that the rapid growth would squeeze consumer spending and might lead to dangerous scenarios.

"As early as in 2020, the ratio of mortgage payments and disposable incomes in China will match the peak level in the US before the financial crisis," it concluded, adding that the rising debt burden would "restrict China's economic growth to some extent".

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iehi-feed-62741 Mon, 07 Aug 2017 20:44:39 GMT Student Loan Debt Statistics for 2017 Are Shocking http://implode-explode.com/viewnews/2017-08-07_StudentLoanDebtStatisticsfor2017AreShocking.html iehi-feed-62740 Mon, 07 Aug 2017 15:29:34 GMT Tenants Under Siege: Inside New York City's Housing Crisis http://implode-explode.com/viewnews/2017-08-07_TenantsUnderSiegeInsideNewYorkCitysHousingCrisis.html ... [NHC] rent-stabilized apartments are disappearing at an alarming rate: since 2007, at least 172,000 apartments have been deregulated. To give an example of how quickly affordable housing can vanish, between 2007 and 2014, 25 percent of the rent-stabilized apartments on the Upper West Side of Manhattan were deregulated.

A major reason for this is that once the monthly rent of an apartment exceeds $2,700, the owner may charge a new tenant whatever the market will bear--which, because of the exceptional pressures on New York real estate, may be thousands of dollars more. Not long ago a rent-stabilized building would sell for ten or at most twelve times its rent roll--the amount of money, before expenses, that it generates in a year. Today, it sells for perhaps thirty or forty times that amount, or ten times what the rent roll would be after regulated tenants have been dislodged. The clearing out of rent-stabilized tenants has become such a common real estate practice that it is added to a building's value even before the fact. Landlords have found enough loopholes in tenant protection laws to make widespread displacement a viable financial strategy. A building in Crown Heights with one hundred stabilized units and a rent roll of $1.2 million might now fetch $40 million or more--and every tenant must be forced out for the investment to be recouped.

The buyers at these prices are, more often than not, private equity funds that manage pools of investors' money: a typical participant in the Central Brooklyn market describes itself as an asset investment firm that specializes in the "repositioning" of multifamily buildings. The aggressive entry of hypercapitalized investors into the working- and lower-middle-class real estate market has struck Central Brooklyn--and the South Bronx, and East Harlem, and Washington Heights, and practically every New York neighborhood with a concentration of rent-stabilized buildings--like a thunderclap in the span of just a few years. They are a new type of owner in the outer boroughs, ones who can afford patient, relentless eviction proceedings and tenant buyouts in a way that most previous owners, who were often individual slumlords working with a different set of profit margins, could not.

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S's daughter, who was studying to become a dental hygienist, took on extra hours at a retail clothing chain where she worked [to afford a near-doubling in rent in their Crown Heights apartment]. But they still missed rent payments, and late fees were piling up, adding to the burden. S seemed locked in a nightmare when I saw her one morning begging for a fare at the Utica Avenue subway station so she could get to her job as a home nursing aide in Manhattan. She had become impoverished overnight, paying close to 70 percent of her income in rent, and saw no recourse other than to accept her new landlord's offer of $45,000 to move out and sign away any lingering legal claim she might have to renew her lease at the stabilized rate.

"I put up with these streets when you had to be half-crazy to go out to the bodega for a quart of milk after dark," said S. "I got rid of a rat infestation four years ago myself." She and other tenants once pooled money to install a new hot water heater when the old one broke down. "We watched over this street, we cleaned it up. Why should we have to leave?" S and her daughter were shuttling between various relatives and friends--paying for a couch here, a spare bed there--when I lost touch with them.

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iehi-feed-62739 Mon, 07 Aug 2017 15:08:02 GMT Albert Edwards: Central banks to blame for impending disaster http://implode-explode.com/viewnews/2017-08-07_AlbertEdwardsCentralbankstoblameforimpendingdisaster.html Notoriously bearish strategist Albert Edwards believes the [US and UK are] sitting on a ‘massive credit bubble that is primed to burst' as another recession looms.

The Société Générale global strategist said the recent sharp decline in household saving ratios (SR) in the UK and the US was last seen in 2007 just before the global financial crisis.

This week, the US saw a substantial downward revision to its SR, with 1.5% lopped off the estimates taking the ratio to 3.8%, a level which Edwards claimed was last seen prior to the recession.

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He said: ‘I'm genuinely getting tired of bashing the major central banks, but every day more evidence mounts that almost exactly the same debt excesses that caused the global financial crisis in 2008 are present today.

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Edwards previously said he believed the US corporate sector ‘borrowing binge' will take ‘centre stage in the next credit crisis', but now thinks the household sector will play a bigger part thanks to the latest SR data.

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iehi-feed-62737 Sun, 06 Aug 2017 14:16:46 GMT Trump Loving Racist Refuses To Sell His Home To Foreigners http://implode-explode.com/viewnews/2017-08-06_TrumpLovingRacistRefusesToSellHisHomeToForeigners.html iehi-feed-62736 Sat, 05 Aug 2017 04:03:07 GMT Trump weighs axing "untouchable" mortgage interest deduction http://implode-explode.com/viewnews/2017-08-05_Trumpweighsaxinguntouchablemortgageinterestdeduction.html As Matthew Desmond, author of "Evicted: Poverty and Profit in the American City," wrote in May, it's actually one of the main entitlement programs in the United States. "But by any fair standard," Desmond wrote in the New York Times, "the holy trinity of United States social policy should also include the mortgage-interest deduction -- an enormous benefit that has also become politically untouchable."

Many countries like Australia, Canada, and Britain don't have this deduction, which is ostensibly there to increase homeownership. Economists don't think this necessarily works, however, instead simply allowing for the purchase of larger houses and benefiting the wealthy. According to the Tax Policy Center, it's a very regressive policy, disproportionately helping boost the top 20% post-tax income.

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In April, the administration released its tax proposal, and while it indicated that it would "protect the homeownership and charitable gift tax deductions," the proposal sought to double the standard deduction, which would effectively mute the mortgage deduction benefit for many American homeowners--except the wealthiest.

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Despite being one of the most expensive tax breaks, costing the country--mostly the renters, who don't get the benefit--$77 billion in 2016, Trump and Treasury Secretary Steven Mnuchin will face massive blowback should they pursue this policy. And not just from homeowners--from renters too. After all, homeownership is consistently cited as a being a part of the American Dream, a dream many renters hope to realize someday.

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