[The Liberty Insight Newswire is an aggregation of what we consider to be important financial and political news and commentary from across the web.]
This week’s newswire discusses the real price tag for the Iraq war, a new wave of foreclosures, China’s shift away from U.S. Treasuries, my energy bill, and the burden of doing business in San Francisco.
Iraq war ends with a $4 trillion I.O.U.
Market Watch, December 15, 2011
Near the start of the war, the U.S. Defense Department estimated it would cost $50 billion to $80 billion. White House economic adviser Lawrence Lindsey was dismissed in 2002 after suggesting the price of invading and occupying Iraq could reach $200 billion.
Well, it turns out those estimates were a little off base. As the Iraq war officially ends*, a new study estimates the total costs for the war to exceed $4T. Much of that will go towards long term care for the more than 32,000 U.S. soldiers wounded in Iraq. Clearly, it was well worth it though, since we got rid of all of those weapons of mass destruction that were hidden under Saddam’s bed. Well… maybe we didn’t find any WMDs but we did manage to eliminate one of the major counterbalancing forces to Iran.
*The U.S. State Department will retain 16,000 people (including 5000 military contractors) in Iraq indefinitely.
New Foreclosure Wave is Coming
CNBC, December 15, 2011
As painful as the bursting of the real-estate bubble was in 2008, the correction was only a small fraction of what needed to occur to reach market equilibrium. Several interventions by the government and procedural issues in the courts have served to a) move the losses from the banks and homeowners to the general public, and b) delay the day of reckoning.
To recap: The Congress changed mark-to-market accounting rules to mark-to-fantasy so the banks wouldn’t fail, the Fed bought up $800B worth of toxic assets from the banks, the government created programs like the new home buyers tax credit to prop up housing prices, homeowners had the audacity to ask the banks to provide the proper documentation that showed they had legal title to foreclose on the property, and owner friendly laws in several states lengthened the time to foreclose up to 2.7 years in NY and NJ.
All of this had the affect of keeping foreclosures off the market and propping up home prices. Now, increasingly, these foreclosures are working their way through the process and a new wave of foreclosures is on the horizon. This will cause banks to have to write down their losses on these homes. It also means people in NY and NJ who have been living in their homes rent free for the past 2.7 years will no longer have that money to spend into the economy. How long before the before the Fed launches a new wave of mortgage backed securities purchases?
Analysis: China’s $300 billion fund a wake-up call to U.S.
Reuters, December 14, 2011
Crap! They’re on to us. Apparently the Chinese have decided they would rather use their excess reserves to buy real things instead of promises to pay paper dollars and Euros.
Household electricity bills skyrocket
USA Today, December12, 2011
I had to double check the energy bill for my office the other day because it had exceeded the maximum on my automatic withdrawal payment. I went back and added up the last 5 months of bills and compared them to the same months from a year ago and found that my energy costs had risen by 16%. Apparently I’m not the only one. But not to fear, it’s only energy so it’s not real inflation.
SF becomes first U.S. city to top $10 minimum wage
AP, December 12, 2011
San Francisco, my hometown, has decided to put any employee, who can’t deliver $10.24 per hour (plus benefits) worth of value to their company, out of work. Read this article and then ask how David Frias will feel once the theatre he works at decides they don’t need ushers anymore. For an excellent essay on how the minimum wage really works, check out the short video below.