The city walls of Dodge are crumbling as we speak, and we urge you to get out before they flatten you.

http://theautomaticearth.blogspot.com/2010/06/june-24-2010-magic-yellow-brick-wall.html


Ilargi: It makes no difference whether the stock markets go up or down or sideways anymore, except for those actively playing them. The demise of the American economy continues unabated regardless. Here's the real economy for you:

Unemployment: Outlook Grim For Jobs Bill Ahead Of Vote

Democratic leaders in the Senate have apparently failed to win enough support to overcome a Republican filibuster of a bill to help the poor, the old and the jobless, despite making a series of cuts to the measure over the past several weeks to appease deficit hawks [..]

The legislation, known as the "tax extenders" bill, would reauthorize extended unemployment benefits for people out of work for six months or longer, would protect doctors from a 21% pay cut for seeing Medicare patients, and would provide billions in aid to state Medicaid programs. Come Friday, 1.2 million people will lose access to the extended unemployment benefits, a number that will grow by several hundred thousand every week after that. Fifty million Medicare claims from June are currently in process at the reduced rate, which the AARP says has already caused some of its members to have trouble finding a doctor.[..]

That is the most accurate portrait of the real America you will find. The country is deliberately creating un underclass below its underclass. And that will have severe consequences.

Initial jobless claims fall 19,000 to 457,000, total beneficiaries rise 155,000 to 9.7 million

First-time applications for state unemployment benefits fell by 19,000 last week to a seasonally adjusted 457,000, the lowest in six weeks, the Labor Department reported Thursday, confirming that U.S. labor markets remain weak. [..]... the total number of people collecting unemployment benefits of any kind rose by 155,000 to 9.66 million in the week ending June 5 from 9.51 million.

In other words, all the White House job-creating plans continue to fail, initial claims go up or down a few thousand margin-of-error jobs each time we look, but if this were a recovery, they'd be nowhere near 450,000. Moreover, total benefits paid out keep rising, while the total number of people falling off the back of train, who no longer get a penny, rises more than we care to look at. Hundreds of thousands of additional Americans will be added to that category every single week from now on in. This is a recipe for disaster, not just for them, but for society as a whole. You can't have a successful society where people are starving by the side of the road.

The link between unemployment and real estate is undoubtedly clear for all of you who are regulars at this joint. You should therefore not be surprised to see numbers like these:

New-home sales plunge 33% to record low in May

Sales of new single-family homes plunged 33% in May to a record-low level after a federal subsidy for home buyers expired, according to data released Wednesday by the Commerce Department. Sales dropped to a seasonally adjusted annual rate of 300,000, the lowest since records began in 1963. April's sales pace was revised down to 446,000 compared with the 504,000 originally reported. March's sales were also revised lower.

Still, new homes are a tiny part of the market. Existing homes are what counts. Well, they are down too:

Existing-home sales dip 2.2% in May

Resales of U.S. homes and condominiums fell 2.2% to a seasonally adjusted annual rate of 5.66 million in May despite the boost from a federal tax credit for home buyers, according to National Association of Realtors data released Tuesday.

Please note that these sales are falling while there's still a tax credit in place. Which is about to run out.

And sure, it may be extended another time. Or it may not. The same goes for the extended emergency unemployment benefits mentioned earlier. But so what? It’ll have to stop sometime, and as long as the real economy keeps sinking the way it does, there’ll neither be anywhere near enough jobs to either satisfy the demand for them, nor to keep desperate owners in their homes. Which will in turn further depress home prices, which in turn will cost more jobs. There is no way out anymore.

And while this is going on, the logical outcome is that state governments are pathetic participants in the squeeze and be squeezed game. TIME Magazine of all sources has this:

Inside the Dire Financial State of the States

Twenty-two states have instituted unpaid furloughs. At least 28 states have ordered across-the-board budget cuts, with many of them adding deeper cuts in targeted agencies. And massive shortfalls in public pension plans loom as well. Almost no one — and no place — is exempt. Nearly everywhere, tax revenue plummeted as property values tanked, incomes dwindled and consumers stopped shopping. Falling prices for stocks and real estate have made mincemeat of often underfunded public pension plans. Unemployed workers have swelled the demand for welfare and Medicaid services. Governments that were frugal in the past are just squeaking by. Governments that were lavish in the good times, building their budgets on optimism and best-case scenarios, now risk being wrecked like a shantytown in an earthquake.[..]

Many taxpayers might say that it's about time spending dropped. But then they start hearing the specifics. Government budgets contain a lot of fixed costs and herds of sacred cows. K-12 education absorbs nearly a third of all spending from state general funds. Add medical expenses, primarily Medicaid, and it's over half. Prisons must be maintained, colleges and universities kept open, interest on bonds and other loans paid. Real cuts provoke loud howls, and you can hear them rising in every corner of the country. College students have marched in California, firefighters have protested in Florida, and on June 10, Minnesota saw the largest one-day strike of nurses — some 12,000 — in U.S. history.

And don't count on the shaky economic recovery for relief. After plunging in 2009, tax receipts are stabilizing in many places — but the next big shoe is fixing to drop. Having poured billions of dollars into state coffers through the stimulus act of 2009, the federal government is poised to close the tap. President Obama made an unusual Saturday night request to Congress last week for $50 billion in emergency aid to the states to stave off layoffs of teachers, firefighters and police. [..]

On the grand scale, this fiscal fiasco is playing out in California and New York. Both states boast economies far larger than that of Greece, which so disturbed the world economy this spring. And both are paralyzed by structural deficits far larger than their politicians seem able to grasp. The impasse in California between Republican governor Arnold Schwarzenegger and the Democrats controlling the legislature appears set in concrete. Last year, the Golden State was reduced to issuing IOUs; this year's budget, some $19 billion in the hole, is once again a shambles. In New York, Democrats control all the levers, but they can't find a cost-cutting deal acceptable to the public-employee unions that helped elect them. The deficit in Albany is $9.2 billion.

[..] .... a majority of states will have reserves well below safe levels recommended by the National Association of State Budget Officers. Leery of broad tax hikes in a bad economy, governments have instead chosen to shake the sofa cushions and punish the naughty, closing loopholes, cracking down on tax evaders and raising levies on tobacco, alcohol, gambling, soda pop and candy — even bottled water in Washington State. Nearly half the states have hiked fees for higher education, court services, park access, business licenses — or all of the above.

These are the tried-and-true responses to dips in the business cycle, but as the woes drag on from year to year, the job of closing budget gaps grows more difficult. Now larger issues and harder choices are being laid bare, beginning with the sprawling mess that is Medicaid. Created by Congress, administered by the states and paid for by a patchwork of federal, state and local governments, the health care system for America's poor is a jumble in the best of times. With enrollments growing rapidly, that jumble is becoming a train wreck.

What's going to give? Prepare for a free-for-all. The states are pressing Washington to maintain the emergency Medicaid supplement that was part of the stimulus package. So far, congressional moderates are blanching at the price tag. If the Beltway budget hawks win that battle, states plan to squeeze the patients, who are currently protected by strings attached to the stimulus money. No federal supplement means no more strings. Already various states are contemplating tighter eligibility rules, lower benefits, higher co-pays and other restrictions. And then there's the ongoing fight between the states and the medical system. Governments are wringing money from doctors and hospitals coming and going: first they are cutting payments for Medicaid services, and then they are raising fees on Medicaid providers.

Really, do you need it any clearer than that? Do you now still think you and yours will be spared? There is no magical way out. Your federal, state and municipal governments will start taxing you ever more, trying to save their own jobs and asses, at the very moment that your incomes will begin to decline.

Paul Krugman and his Keynesian "Spend, spend, spend" ideas and followers, like Obama and his buddies Larry Summers and Tim Geithner and the rest of Washington base their notions and measures on one grand idea: that the economy will start growing again, and strong, and soon.

But the economy isn't growing, and if they wouldn't have thrown your grandchildren's tax revenues at the magic yellow brick wall, this would be evident to everyone today. All they have achieved, apart from a prolongation of their own careers in power, is that it will be even more, and far more brutally, evident in the future.

It’s about to blow up in your face, guys, literally, the whole thing, your entire lives. And it really doesn’t matter whether it does so in two weeks or two months or two years, does it? If it would take two years, you'd just get sucked even deeper into the hologram.

What matters is that everyone begins to understand that this thing is inevitable, and that the consequences will be beyond anything you've ever known.

The city walls of Dodge are crumbling as we speak, and we urge you to get out before they flatten you.