Wednesday, August 6, 2008
Fannie and Freddie, 2 new government agencies
Freddie Mac reported financial results today that were not abysmal, they were necrotic. Freddie is dead; Fannie, too. There is no hope for anything but a full government takeover/bailout/nationalization/whatever.
Buying a home in one of our most populous states will be financial and economic FOLLY for MANY years. Buying a home in California, New York, Florida, Michigan, Mass. - you know, the high tax states with serious socialist tendencies and a state employee payroll that could choke a horse and a pension/retiree healthcare liability that will drown any that don't choke - makes you a TAX TARGET. A State can charge sales tax on rent, but if it gets too high, the renter can quite easily vote with their feet and move. A homeowner will be STUCK, often unable to sell and at the mercy of the local taxing authority. These city/county/state governments have made some serious promises, and they will need to crank the whip on YOUR back in order to extract the money necessary to meet these obligations, obligations that have been piling up for years and years with local governments making ever bigger promises and taking on ever larger liabilities to pass on to future governments and future TAX TARGETS.
"Don't do it, Rambo!!" You are better off sitting this one out as a renter in many high tax states, ex-urbs suburbs, etc... Buy productive farm land in low tax states. You don't have to be a slave.
The U.S. Dept. of Energy's EIA made their weekly status report on U.S. petroleum production, inventories, imports, etc...
Now look down to Table 1. Notice "Total products supplied" has fallen 3.6% for the first 213 days of this year versus the same 213 days last year? Now look one line down to "Total Net Imports" - down 7.3% for the same period. Prices have doubled since the first 213 days of last year, but imports are down.... HMMM....
What else would Jeffrey Brown's Export Land Model look like as applied to the U.S.? And what will the U.S. economy look like next year, if imports fall ANOTHER 7%? What will the price have to rise to in order to ration this falling supply within the market (not talking about government rationing. That is rationing by "inconvenience". I am talking rationing by PRICE.)?
And how does G.M. and Ford survive a couple more 7% import declines? They don't. Americans will not NEED one single more internal combustion engine in order to finish off the declining fuel supply. Some may WANT one, but that wanted vehicle will out live its fuel supply. Same with the mortgages on those houses the mortgagor won't be able to get to with the car he doesn't have fuel for in the future, which brings us back to Fannie, Freddie and the rest of the banking system.
If you really want to know, all you gotta do is read that file every week. If that decline rate remains constant or accelerates, things are going to get really weird, really fast.
Mentatt (at) yahoo (d0t) com
Posted by The Short Story Man at 7:18 PM