EconomyWatch
Food, shelter, money: scarce necessities
Food and shelter, and money to provide for both, are basic necessities. Unfortunately, escalating numbers of Americans are having difficulty finding all of the above.
Over 5 million homeowners are now either in foreclosure or are seriously delinquent. Consequently, as overstretched homeowners are forced out the door, repossessions, short sales, and abandoned properties are clogging markets.
Thus it should be no surprise that sales of new homes plunged in July to the slowest pace on record—even though it once again fooled analyst consensus. Sales were down a sharp 12.4 percent from the previous month. It was the worst turnout for buyers since 1963—and in 1963 America’s population was about 60 percent what it is today.
For anyone suggesting that the economy is recovering, they should note that May, June and July have been the worst on record for new home sales! And in July, new home sales were down in every region of the U.S.
Analyst David Rosenberg, who has accurately chronicled America’s housing decline, said, “If the truth be told, if we are talking about reversing all the bubble appreciation that began a decade ago, then we are talking about another 15 percent downside from here. The excess inventory data alone tell us that this has a realistic chance of occurring” (msn Money, August 26; emphasis ours throughout).
According to Rosenberg, the high-end market is under particularly extreme pressure. “In fact, it is becoming non-existent,” he said. In July, not a single house priced above $750,000 was sold across the U.S.—not a single one. Only 1,000 houses priced over $500,000 were sold.
Falling home sales is an indication that economic problems are intensifying.
But perhaps the one factor underscoring how bad the economy really is is the fact that all home sales are plummeting despite record-low mortgage rates. A person with good credit could obtain a 30-year fixed-rate mortgage for 4.5 percent in July.
But if most people are not buying houses, some people at least are trying to buy safety. For the first time since the Cold War, doomsday shelters are making a comeback, reported USA Today. As the economy collapses, builders of fortified bunkers are constructing underground facilities at the fastest pace in 30 years.
Why all the demand? In the words of the Investor’s Business Daily, “Fear and uncertainty stalk the land” (July 30). There is a sense of helplessness—that events are spiraling out of control, and that there is nothing anyone can do about it.
And it is not just average people on the street who feel this way, either. At between $400,000 to $41 million a pop, it is the rich, powerful and influential who are buying their own personal escape plans—shelters that can hold anywhere from 10 to 2,000 people from one to five years with power, food, water and filtered air.
Shelter owners had better keep locations secret because, according to the U.S. Department of Agriculture, the number of Americans on food stamps is skyrocketing—despite claims from government departments that the recession ended during the last quarter of 2009.
There are now a record 40.8 million people receiving food stamps in the country. That equates to roughly one in every eight Americans. There are now 19 percent more Americans receiving food subsidies than there were at this time last year. And participation has set new records for 18 months in a row.
Meanwhile, Congress has decided to cut food stamp funding and instead use the money to help pay teacher salaries.
In July, the U.S. Bureau of Labor Statistics reported that the unemployment rate continues to hover close to a 27-year high. That month the economy lost 131,000 more jobs. Approximately 150,000 new jobs per month need to be created just to accommodate the growing population.
That’s potentially a lot of hungry people with time on their hands who might love to find a well-stocked survival bunker.
And if trends in China continue, Americans might need those survival shelters sooner rather than later. China cut its holdings of U.S. debt in June by the largest amount ever. Since July of last year, China had reduced its holdings of U.S. debt by $100 billion—or 11 percent. This might normally have set off a stampede out of the dollar, but in this case, the faltering global economy has ironically created demand for U.S. securities from institutional investors and hedge funds.
The problem for America is that hedge funds are notoriously fickle. If they ever pull away from the dollar, it might leave the Federal Reserve as the only major buyer of U.S. government debt. If that were to happen, not only would the value of the dollar plunge (taking down the value of people’s savings with it), but the credibility of the dollar itself could come under increasing scrutiny.
Food, shelter and money. People have a whole lot less of each these days. And going forward people should prepare to do with a lot less too.
