Tuesday, September 30, 2014

The Housing Market's Lost Decade - Looking Ahead

While the American housing market has shown improvement since the collapse that began in 2006, it is still not back to its pre-Great Recession levels as shown on this graph:

In fact, according to Clear Capital, as shown on the red line, U.S. nominal housing prices are just back to 2005 levels, completely ignoring inflation.  This means that many homeowners today have no more equity in their homes than they did when they bought a decade ago.  Even two and a half years of real estate market recovery has not brought an end to the lost decade for many markets and the nation as a whole.

How unusual is this?  Over the past 30 years, on a rolling ten year period, housing prices have increased 55 percent on a nationwide basis.  That said, individual real estate markets have performed far differently with some markets showing no losses over the past decade and some markets showing that prices have not increased for more than 15 years, particularly those in the Midwest.

Let's look at the data on a national and regional basis from August 2013 to August 2014 and on a quarter-over-quarter basis:

The high distressed saturation in both the South and Midwest is of great concern and will continue to put downward pressure on price increases going forward.

Let's look at the 10 poorest performing markets over the last quarter:

Notice how in each case, on a year-over-year basis, the metropolitan area is under performing the national average price increase of 8 percent.  In fact, in the Hartford area, over the year between August 2013 and August 2014, the market has shown almost no increase in the price of homes.

What does Clear Capital see for the year ahead?  The growth rate of 8 percent over the last year is more than twice the average historical annual house price increase of 3.5 percent but it is not likely to continue.  Weakness in price appreciation is already taking place with August 2014 house price growth falling 0.4 percentage points from 8.4 percent in July 2014 which itself was down from 9.0 percent the month before.  This downward trend has Clear Capital projecting that through 2015, house prices will increase by only 1.8 percent, suggesting that the "lost decade" will continue for more than ten years.

Here is a chart showing Clear Capital's six month house price appreciation forecast by region:

Over the next six months, Clear Capital projects that the worst performing markets will be:

As if Detroit's real estate market hasn't been hit hard enough over the past decade!

With real wages doing this over the past six years...

 ...it is highly unlikely that America's strained housing market will show significant price appreciation over the coming years since so much of our economic health depends on the perception of household wealth.

Monday, September 29, 2014

Placing the Blame for Africa's Ebola Outbreak

As most of us are aware, parts of western Africa are experiencing the largest outbreak of Ebola since it was first noted in 1976.  A recent letter in the Liberian Observer, a newspaper in Monrovia, by Dr. Cyril E. Broderick, Sr., a Professor of Plant Pathology at Delaware State University lays the blame for the recent outbreak in an interesting direction.

Let's open by looking at a chart from the Ministry of Health and Social Welfare in Liberia showing us the current situation:

A total of 3458 cases of Ebola have been noted in Liberia up to September 23, 2014.  Of the 3458 cases, 1830 have resulted in death for a death rate of 57.7 percent.  As well, there have been 184 cases affecting health care workers with a total of 91 deceased health care workers for a death rate of 49.5 percent.  Most of the workers infected have been nurses (46) and nurse aids (20).

Here is a graph showing the ramping up of the number of cases as the weeks passed:

Here is a map showing the cumulative number of deaths by geographic area up to September 22, 2014:

 Most of the deaths have occurred in Montserrado County where 68 percent of those infected die as a result of contracting Ebola.  Note that Liberia's capital city, Monrovia, is located in Montserrado County.  Monrovia, named for United States President James Munroe, has a population of just over 970,000 and is the largest city in Liberia.

Now, let's look at Dr. Broderick's letter.  Here is the graphic that accompanies the submission:

Here is the opening paragraph:

"Dear World Citizens:

I have read a number of articles from your Internet outreach as well as articles from other sources about the casualties in Liberia and other West African countries about the human devastation caused by the Ebola virus. About a week ago, I read an article published in the Internet news summary publication of the Friends of Liberia that said that there was an agreement that the initiation of the Ebola outbreak in West Africa was due to the contact of a two-year old child with bats that had flown in from the Congo. That report made me disconcerted with the reporting about Ebola, and it stimulated a response to the “Friends of Liberia,” saying that African people are not ignorant and gullible, as is being implicated...Because of the widespread loss of life, fear, physiological trauma, and despair among Liberians and other West African citizens, it is incumbent that I make a contribution to the resolution of this devastating situation, which may continue to recur, if it is not properly and adequately confronted."

Dr. Broderick goes on to note that during the Cold War, the CIA and KGB were involved in the "manufacturing" of AIDS-like viruses with the intention of using them as a weapon.  In a book by Leanard Horowitz titled "Emerging Viruses: AIDS and Ebola - Nature, Accident or Intentional, the author confirms the existence of an American military-medical-industrial complex that conducts biological weapons tests under the guise of vaccinating "black Africans overseas".  

Here is another quote from his letter:

"The World Health Organization (WHO) and several other UN Agencies have been implicated in selecting and enticing African countries to participate in the testing events, promoting vaccinations, but pursuing various testing regiments. The August 2, 2014 article, West Africa: What are US Biological Warfare Researchers Doing in the Ebola Zone? by Jon Rappoport of Global Research pinpoints the problem that is facing African governments. 

Obvious in this and other reports are, among others: 

(a) The US Army Medical Research Institute of Infectious Diseases (USAMRIID), a well-known centre for bio-war research, located at Fort Detrick, Maryland; 

(b) Tulane University, in New Orleans, USA, winner of research grants, including a grant of more than $7 million the National Institute of Health (NIH) to fund research with the Lassa viral hemorrhagic fever; 

(c) the US Center for Disease Control (CDC); 

(d) Doctors Without Borders (also known by its French name, Medicins Sans Frontiers); 

(e) Tekmira, a Canadian pharmaceutical company;  

(f) The UK’s GlaxoSmithKline; and 

(g) the Kenema Government Hospital in Kenema, Sierra Leone. 

Reports narrate stories of the US Department of Defense (DoD) funding Ebola trials on humans, trials which started just weeks before the Ebola outbreak in Guinea and Sierra Leone. The reports continue and state that the DoD gave a contract worth $140 million dollars to Tekmira, a Canadian pharmaceutical company, to conduct Ebola research. This research work involved injecting and infusing healthy humans with the deadly Ebola virus. Hence, the DoD is listed as a collaborator in a “First in Human” Ebola clinical trial (NCT02041715, which started in January 2014 shortly before an Ebola epidemic was declared in West Africa in March. Disturbingly, many reports also conclude that the US government has a viral fever bioterrorism research laboratory in Kenema, a town at the epicentre of the Ebola outbreak in West Africa. The only relevant positive and ethical olive-branch seen in all of my reading is that Theguardian.com reported, “The US government funding of Ebola trials on healthy humans comes amid warnings by top scientists in Harvard and Yale that such virus experiments risk triggering a worldwide pandemic.  That threat still persists.'

Dr. Broderick states that the United States, Canada, France and the United Kingdom are implicated in this Ebola outbreak and that African nations need to seek criminal and civil compensation for damages from these countries and the corporations that are responsible.

The author notes that:

"There is urgent need for affirmative action in protecting the less affluent of poorer countries, especially African citizens, whose countries are not as scientifically and industrially endowed as the United States and most Western countries, sources of most viral or bacterial GMOs that are strategically designed as biological weapons. It is most disturbing that the U. S. Government has been operating a viral hemorrhagic fever bioterrorism research laboratory in Sierra Leone. Are there others? Wherever they exist, it is time to terminate them. If any other sites exist, it is advisable to follow the delayed but essential step: Sierra Leone closed the US bioweapons lab and stopped Tulane University for further testing."

While some of this has a tin foil hat ring to it, here is an interesting news release from the Facebook page of Sierra Leone's Ministry of Health and Sanitation dated July 23, 2014:

Note that during the outbreak, Tulane University was to stop Ebola testing during the current Ebola outbreak.  

Tulane University researchers have been operating in West Africa for the past several years as part of the Viral Hemorrhagic Fever Consortium along with Harvard University, the Kenema Government Hospital in Kenema, Sierra Leone, Irrua Specialist Teaching Hospital in Nigeria, Autoimmune Technologies (a biomedical company located in New Orleans), Corgenix Medical Corporation (a Colorado-based medical diagnostics company)  and the Scripps Research Institute

While his conclusions may be a bit off target, at the very least, Dr. Broderick's thesis gives us cause to ponder the source of the recent Ebola outbreak in Africa.  

Friday, September 26, 2014

The World's Jobs Gap

As a matter of habit, we all concern ourselves with the employment/unemployment situation in our home countries and pretty much ignore what happens elsewhere unless it happens to impact us directly.  A recent report prepared for the G20 Labour and Employment Ministerial Meeting looks at the global employment picture and provides us with a glimpse of the outlook and key challenges that face global labour markets.

As we all know, persistent low growth rates in most of the world's Western economies are having a dampening effect on employment which, in turn, is having a dampening effect on the economy.  The world's economy is caught in a cycle from which there is no easy escape.  Just ask your friendly central banker.  None of their usual monetary magic has been able to resuscitate the world's moribund economy.  On top of the job creation issues, the jobs that are being created are of poor quality with real wages stagnating at levels that are resulting in even greater income inequality.  

Over the past 12 months, most of the G20 economies have seen what can only be termed as modest reductions in their unemployment rate and in those nations where the unemployment rate has declined, the decline was often due to a shrinking labor force participation rate with the United States being a prime example as shown here:

In the United States, the current labour force participation rate is 62.8 percent, down from a high of 67.3 percent in 2001 and about the level that was seen in 1978.

As well, in nations like Spain, the United States, Italy and South Africa, long-term unemployment has increased.  Here is a bar graph that shows the long-term unemployment rate in the fourth quarter of 2007 on the blue bars and the long-term unemployment rate in the first quarter of 2014 with a grey dot:

Among the G20 as a whole, the median of long-term unemployment as a percentage of total unemployment has risen from 24.6 percent at the end of 2007 to 30.2 percent in the first quarter of 2014, an increase of 22.8 percent.

Here is a chart showing the year-over-year changes in the labour markets of the G20 nations:

You'll notice that the situation for younger potential workers is dire; of the 20 nations, 6 have youth unemployment rates in excess of 20 percent with Spain coming in first place at 53.1 percent and South Africa coming in second at 52.5 percent.  Here is a bar graph showing the unemployment rates for youth aged 15 and 16 to 24 years of age for 2007 in blue and the second quarter of 2014 in grey:

Here is a graph that shows the relationship between the growth in real GDP and the growth in total employment over the period from 2008 to 2013:

Notice the 45 degree line?  That line marks the points where real GDP growth equals growth in total employment.  In almost all G20 nations, real GDP has grown at rates in excess of the rate of growth of total employment, making this a relatively jobless recovery.  You will also notice that the US economy has among the lowest real GDP growth and the lowest increase in total employment among its G20 peers.

This has resulted in a jobs gap among advanced G20 economies as you can see on this graph:

Had the world's economy continued along its growth pattern that was established prior to the Great Recession, it was projected that there would be about 480 million employed workers in the advanced G20 economies by 2014 as shown on the blue dashed line.  Right now, there are only around 445 million employed workers, a jobs gap of 35 million.  On top of the jobs gap in the G20 advanced economies, there is a jobs gap of around 40 million in the G20 emerging economies as shown on this graph:  

As you noticed on the chart summarizing the labour market changes over the past year, employment rates vary widely by age.  This graph shows the employment rate by age grouping and gender for all G20 nations:

The total share of the population that has found work varies widely across the G20, from 42 percent in South Africa to 75 percent in China with the United States coming in at 67 percent and Canada coming in at 72 percent.

It is obvious that central banks around the world have been completely incapable of creating sufficient high quality jobs to eliminate the jobs gap that has appeared since the beginning of the Great Recession.  When potential workers have no means of support other than temporary government social programs, they cut back on consumption.  In our consumption oriented economy, without that consumption, we can only expect that the world's economy will continue to grow at rates that are nowhere near what we experienced prior to 2008. 

Thursday, September 25, 2014

The Islamic State - Hollywood Style

With ISIS/ISIL/IS making the front page of the world's newspapers for yet another beheading, the mujahideen of the Islamic State continue to concern the world's political leaders who seem unable to end the cycle of violence.

ISIS is a far different organization than al-Qaeda.  ISIS has a very sophisticated media arm, Al-Hayat Media.  Al-Hayat was launched in April 2014 and has grown as the Islamic State has gained ground in Iraq.  Unlike the primitive video productions that we were exposed to during the al-Qaeda era, these productions are rather slick and include videos, news reports and magazines in their media offensive.  These productions are in several languages including German and English.

One of the first productions was an English language video titled "There is No Life Without Jihad" released in June 2014.    In this 13 minute video, we are exposed to a series of Western ISIS recruits who are doing their best to convince other Westerners, in English, to join their holy war.  Here is a screen capture showing one of the "Brothers" from Britain:

Another video with English subtitles, "Clanging of the Swords IV" gives us an hour long, up-close and personal look at warfare, ISIS-style that you can find here at Liveleak.  You should be warned that the video is quite graphic in nature  :

This film is part of a series that was first published on internet forums that are frequented by ISIS members and was posted to ISIS official Twitter account on May 17, 2014.  The opening sequence is a drone flyover of Fallujah which has been under ISIS control since early 2014.  While the video, like some other ISIS videos, has been removed from YouTube for violating its terms, particularly its policy on shocking and disgusting content as shown here....

...the content is readily available elsewhere on the "tubes that make up the internet" (my apologies to the late Senator from Alaska).   

One of Al-Hayat's most glitzy productions was released in late September 2014.  "Flames of War" is a 55 minute long terrorist extravaganza that gets close to the action, giving us a real sense of what the battle is like and how well-armed ISIS is:

At the 1 minute and 15 second mark, you'll notice the use of the "Mission Accomplished" banner and George Bush's famous "Major combat missions in Iraq have ended" line from his address on board the aircraft carrier USS Abraham Lincoln on May 1, 2003 as shown on this screen capture:

As well, if you go to the 34 to 36 minute mark of the video, you will even see some super-slow motion shots that are very reminiscent of Hollywood-style productions.  While it's not The Matrix, the production values are distinctly different than what we used to see from al-Qaeda and are obviously meant to appeal to a wider and more sophisticated audience.

When we watch these videos, it is easy to see how wrong John Kerry was when he insists that the Islamic State is not Islamic in his testimony before the House Foreign Affairs Committee in mid-September as quoted here:

"I was very encouraged to hear yesterday that Saudi Arabia’s top clerical entity, 21 clerics, unanimously came out and declared again that terrorism is a heinous crime under Sharia law, and more importantly declared that ISIL has nothing to do with Islam and that it is, in fact, the order of Satan."

From the beginning to the end of the movie, the name Allah is repeated and justification for the holy war on unbelievers is drawn from the Qu'ran.  The narrator clearly proclaims that ISIS goals are to fight to bring back the Kalifah and to rule the entire world with Allah's revelation as shown in this quote:

"Finally, this is a message that we direct to America.  Know, O defender of the cross, that a proxy war won't help you in Sham (the region of Syria) just as it didn't help you in Iraq.  As for the near future, you will be forced into a direct confrontation, with Allah's permission, despite your reluctance.  And the sons of Islam have prepared themselves for this day, so wait and see."

When we watch these videos, we get a sense for how difficult it will be for a coalition of any kind to uproot a rather well-entrenched, reasonably well-armed and extremely well-indoctrinated ISIS fighting force and how it will be very difficult for a formal armed response to differentiate between Iraqi and Syrian friend and foe.  The slickness of their productions and their obvious attempts to lure Westerners into their fold makes ISIS and Al-Hayat one of the most effective terrorist recruiters that the Western world has seen.