The Real ID Act requires states to spend more than $100 million by May 2008, to issue federally approved driver's licenses or ID cards to those who live and work in the US. The Act is going to be very costly for taxpayers, plus the headaches and nightmares for state governments. The Act is so onerous that 600 organizations have expressed concern.
The Act's identity cards will be required not only if one wants to drive, but also if one seeks to visit a federal government building, collect Social Security, access a federal government service, or use the services of a bank or airline that is required, under federal low, to verify customer identity. In other words, it will be impossible to live in America without the ID. You will have to prove your name, DOB, Social Security number, and your principal residence verified by a utility or phone bill, etc. you cannot use a P. O. Box. That will be a problem for domestic violence victims, judges and police offices, but our Congress doesn't care about that. How about the homeless? Once in place all government agencies will share the data making it totally insecure. Needless to say, your name will be sold to third parties. Identity thieves will hit everyone. A virtual criminal bonanza. They'll be a digital photo and Fatherland Security wants RFID. As far as illegal aliens are concerned they'll drive without a license or insurance. If they have a major problem they'll just leave the country.
In real estate some of the hottest markets are experiencing a rapid buildup in home inventories as transaction volumes and average prices reach all-time highs. Fannie Mae says mortgage debt will expand 10.4% this year, after having doubled loans over the past seven years. The pace of growth is weakening, especially in San Diego and Las Vegas. This is the same pattern we saw in England a year ago, but Brits don't have the personal debt structure that Americans have.
Real Estate Investment Trusts (REIT'S) and stocks of companies that make sup-prime loans have been correcting from their highs, and in the building industry we see insiders selling large amounts of stock. Mortgage credit growth remains at extreme levels and that cannot continue indefinitely. Banks have been supplanted as a source of housing liquidity by the securities markets and the leveraged speculating community. The banks and mortgage companies make the loans and keep the best ones for themselves. They then offer the remainder to Fannie Mae and Freddie Mac, which keep the best of the rest for themselves and then they package, guarantee and sell the remainder in the securities markets to the leveraged speculating community. If we are correct, and the market has a large correction, Fannie and Freddie will end up with lots of non-performing mortgages. Both are close to insolvency. This would just push them over the edge.
Normally the demand for credit would have increased interest rates, as would higher inflation, a massive budget deficit and an unbelievable current account deficit. That hasn't happened because the Fed has increased the total amount of money and credit by more than 15% annually for the past five years, which is an unparalleled event in the history of our country's finances. The recent result has been second quarter housing inflation was 13.6% y-o-y, the fastest pace in over 25 years. We call this very imprudent money management. The massive amount of liquidity unleashed by the Fed is directly responsible for the unnaturally low yields on long dated paper, such as the 10 and 30-year Treasury notes and bonds. The situation is now so terse that banking regulators are talking tough and waving red flags. It's all for show and to cover themselves just like Sir Alan Greenspan's pronouncements of the past - simply window dressing. The regulators and the Fed sleep together financially so to speak. That is why the markets ignore reality. They know the Fed cannot stop creating money and credit because the minute they do the edifice will collapse. That is why all the important negative factors are not influencing markets and particularly the real estate market. The Fed raises overnight rates 1 3/4% but at the same time neutralizes the rate effect by creating 15% more money and credit. Thus, the increase in interest rates is a sham. This is why long-term interest and mortgage rates are not 1% or more higher and why the mortgage rates remain where they are continuing to fuel an insane housing market. Only the Fed can reign in this financial and monetary monstrosity and they are not about to do so. They will add liquidity until the system collapses, which it ultimately must do. The longer the excesses, the further the fall. There is no kind of regulation that can stop what is now inevitable. As long as Sir Alan continues his liquidity binge inflation will rise and the real estate mania will continue.
We won't belabor you further with the mixture of exotic mortgage arrangements. We'll simply say when all is said and done one-third or more will eventually default. The issues of growing inventory overhang and the lack of affordability are now weighing on the market. This is now an unbelievable $1 trillion of 2005 ABS issuance, 40% mortgage related. The Financial Times of London tells us CDO (Collateralized Debt Obligations) could top $800 billion, again with real estate loans comprising much of the underlying collateral. Private-label MBS issuance is booming and the market has an insatiable appetite for mortgage related securities and instruments. Wait until the liquidity dries up. Then if you want to sell it will be at deep discounts. Today in the final analysis the key to the mortgage market is the ability of lenders to be able to sell their mortgages. Once that ability is no longer there at reasonable prices we will have truly topped out.
Gasoline at $3.00 a gallon means $117.00 a week for gas if you drive 20,000 miles a year. If you make $15.00 an hour, $500 take-home pay a week, you lose almost 24% of your spendable weekly income on gasoline. At those levels it won't take long for driving to be curtailed or for debt to increase. Almost one-third of our current account deficit is due to oil prices. That is $300 billion a year going to oil producers, which in part has been caused by George and the neocon's wars for profit. Every $10.00 rise in the price of oil costs us 0.4% of GDP. We have thus far lost .75% of GDP between $50.00 and $65.00 oil. The oil problem isn't going to go away even if oil returns to $50.00.
It looks as if Halliburton has stolen at least $1.4 billion and there are two criminal investigations by the Justice Department into fraudulent billings relating to Iraq war contracts, each of them as explosive as the Valerie Plame CIA leak.
In the Halliburton matter there is no question Dick Cheney has been directly involved in Halliburton's special treatment. He continues to block investigations by the House and Senate committees. Most of Halliburton's operations have been fraudulent but as long as Cheney is getting a Halliburton paycheck nothing will happen.
The latest poll shows 54% disapprove of the war in Iraq and 44% support it. It wasn't that long ago those figures were reversed.
Free trade and globalization, if not soon stopped, will relegate the world back to feudalism, serfdom and to an economic dark age. This is not a guess - it is a guarantee. It will stop the progress of mankind that we have known since the Renaissance. We have had feudal empires since then but free trade and globalization have always failed. The latest example is the late British Empire. An empire, whose yoke we cast aside, by force of arms. The big winners are the elitist transnational conglomerate cartels. They produce goods under brand names and merchandise them throughout the world using the cheapest labor. That steals the jobs of their customers who eventually will be able to buy very little and be subjected to a much lower standard of living. In this process the elitist power and wealth grows. It curtails investment in America and Western Europe. The best way to describe free trade and globalization is national suicide.