$536 Billion Worth of Household Assets Evaporated in February?

[flashl]

By: Paul_L_Kasriel

It sure is a good thing that $150 billion of checks from the IRS are in the mail to U.S. households because these same households experienced an evaporation in paper wealth in February to the tune of about $544 billion according to my admittedly back-of-the-envelope arithmetic. It was reported today that the Case-Shiller house price index for 20 major metropolitan areas fell 2.66% month-to-month in February. Applying that percentage decline in house prices to the fourthquarter value of $20,154.7 billion for household residential real estate from the Fed’s flow-offunds data yields a decline of $536 billion. Now, this is a very rough approximation for at least two reasons.

Firstly, the Case-Shiller price index is for only 20 metropolitan areas, not the whole country. So, the Case-Shiller index captures the decline in house prices in the Manhattan, New York area but not the Manhattan, Kansas area. Second, the value of residential real estate in the Fed’s flow-of-funds accounts is based on the OFHEO house price index. But even with these qualifications, I feel confident in saying that the value of households’ residential real estate assets fell in February by some multiple of the aggregate value of the checks households will receive as part of the Economic Stimulus Act of 2008.

2nd. Of course, the check from the IRS is cash in hand and the decline in the value of residential real estate is a “paper” loss. But when residential real estate values were going up, households were turning these “paper” gains into cash in hand by borrowing against the rising value of their houses. Back in 2006, households were extracting more than $500 billion of equity from their houses (see chart below), which was about 6% of their after-tax income. That home equity is now in full-scale retreat. Moreover, it is tougher to qualify for a mortgage or home equity loan with which to extract any remaining equity. This is one of the strong headwinds aggregate demand is experiencing now.


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[Double T]

1. America is in the first phase of its GREATEST DEPRESSION................

there will be no way out of this disaster until the controls are taken away from the criminals on wall street and corporate america.

[flashl]

2. These criminals?

Fed `Rogue Operation' Spurs Further Bailout Calls

May 2 (Bloomberg) -- A month after the Federal Reserve rescued Bear Stearns Cos. from bankruptcy, Chairman Ben S. Bernanke got an S.O.S. from Congress.

...

Student loans are just the start. Former Fed officials and other Fed-watchers say that Bernanke's actions in saving Bear Stearns will expose the central bank to continuing pressure to use its $889 billion balance sheet to prop up companies or entire industries deemed important by politicians. The Fed satisfied Dodd's request today, expanding the swaps to include securities backed by student debt.

"It is appalling where we are right now,'' former St. Louis Fed President William Poole, who retired in March, said in an interview. The Fed has introduced "a backstop for the entire financial system.''

Critics argue that the result will be to foster greater risk-taking among investors emboldened by the belief that the government will bail them out of bad decisions.

The Fed's loans to Bear Stearns were "a rogue operation,'' said Anna Schwartz, who co-wrote "A Monetary History of the United States'' with the late Nobel laureate Milton Friedman.

Bloomberg

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3. The FED, Congress and the WH are the ENABLERS.

Total Corruption Rules.

[InkAddict]

4. Slavery and/or starvation - degreed or not. n/t

If they don't find his teeth in sufficient health to be chosen as a slave, resources for 30 days max here - slaveowners who specialize in IT pay every two weeks - Government invents their own payment schedules for those "in the marketplace."

Timing is everything!