Economy May Be Headed Into Free Fall Again

Many borrowers, particularly since late 2010, thought they were buying at the bottom of a housing market that had already suffered steep declines, but have been caught out by a continued fall in prices in wide swaths of America. - source link below

First things first.  Remember this big dog and pony show Bernanke went on a couple weeks ago to pontificate on how open the Fed is about how it conducts its operations now?  Well it turns out that is just another well-crafted cover-story for the truth.  Those of us who follow and understand the truth know that Bernanke is about as full of shit as they come.

Now comes this:  When Bank of America took over Merrill Lynch, it was largely thought by those who analyzed the numbers - as opposed to gobbling up the garbage spooned out by the Fed, politicians and media - that Merrill Lynch was in trouble similar to Lehman before Lehman collapsed and that the deal was a "shot-gun" marriage brokered by the Fed and smoothed over by the injection of $20 billion in Taxpayer bailout money to Bank of America.  Recall that John Thain, who left Goldman to become the CEO of Merrill Lynch for about 20 seconds before BAC absorbed Merrill.  Thain was given a $15 million signing bonus and spent $1.2 million refurbishing the CEO office. 

It turned out that after the merger was completed, Merrill reported billions in losses that were not disclosed before the shareholder vote on the deal.  Apparently there many phone calls that included then CEO of BAC, Ken Lewis, and Bernanke and Thain.  There's a shareholder lawsuit on this matter and it turns out that the shareholders would like question Bernanke about conversations he had with Lewis prior to the closing of the merger.  The Fed and Bernanke are vigorously fighting this subpoena:  LINK

Quite frankly, I think Taxpayers should be just as interested in this fraud as BAC shareholders. Anyone who still places faith and trust in the Fed, and specifically in Bernanke, is either hopefully naive or hopelessly ignorant.

On to the economy.  Today the personal income and spending report by the Government was released.  It showed a slight increase in personal income.  Per this keen analysis by zerohedge, if you strip out the increase in Government transfer payments (welfare, social security), personal income declined, personal spending declined and the savings rate bumped a slight amount, but is still substantially below the March 2011 savings rate:  LINK

In addition, the Chicago Purchasing Managers Index showed a big plunge in March from its February reading and the headline number is the worst it's been since November 2009.  Also, the Dallas Fed released its manufacturing survey, which plunged into a negative reading, -3.4 from its prior reading of 10.8, dropping to its lowest reading in 7 months.  You can see the action HERE

Finally, I happened to run across an item reported on CNBC's website last Thursday in which Reuters reported a Corelogic survey that showed "(m)ore than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth..."  Here's the LINK.

Not sure how those who are promoting a bottom/recovery going on in the housing market would like to respond to that data.  Corelogic is not an industry-motivated promotional association, so the numbers are likely to be pretty accurate.

To be sure, there are some very select areas around the country that are showing a slight bounce in the overall health of the housing market in those areas.  However, I believe that even in those areas the "bounce" will be ephemeral.

Put everything above into the same context and you have an economy that is starting into a free fall.  Why does it not seem that way? 1) The mainstream media is regurgitating the b.s. that is fed to it by Wall Street and the Government, similar to the way Obama reads from his teleprompter (TOTUS - Teleprompter of the United States);  2) over 50% of all Americans receive some form of Government transfer payment, of which roughly 47 cents on every dollar is borrowed by the Treasury in order to make that payment.  The Taxpayers of this country are providing one massive safety net that is making the true economic conditions seem less severe.  

This can't go on ad infinitum.  At some point the U.S. debt creation machine will hit a wall.  For sure a blow up in Europe in Spain or Italy will fingered as the culprit.  But the Truth is that the United States is in worse condition than any individual European country and the EU collectively.  It is what it is - just better pray that history's guidebook for how these situations end up does not happen this time...