Wall Street Gets Trillions While Workers Get Bupkis

Politics / Credit Crisis Bailouts
Jul 30, 2010 - 04:20 AM

By: Mike_Whitney

On Tuesday, the 30-year fixed rate for mortgages plunged to an all-time low of 4.56%. Rates are falling because investors are still moving into risk-free liquid assets, like Treasuries. It's a sign of panic, and the Fed's lame policy response has done nothing to allay the public's fears. The flight-to-safety continues a full two years after Lehman Bros blew up.

Housing demand has fallen off a cliff in spite of the historic low rates. Purchases of new and existing homes are roughly 25% of what they were at peak in 2006. Case/Schiller reported on Monday that June new homes sales were the "worst on record", but the media twisted the story to create the impression that sales were improving. Here are a few of Monday's misleading headlines:

"New Home Sales Bounce Back in June"--Los Angeles Times. "Builders Lifted by June New-home Sales", Marketwatch. "New Home Sales Rebound 24%", CNN. "June Sales of New Homes Climb more than Forecast", Bloomberg.

It's all bunkum. The media's lies are only adding to the sense of uncertainty. When uncertainty grows, long-term expectations change and investment collapses. Lying has an adverse effect on consumer confidence and, thus, on demand. This is from Bloomberg:

The Conference Board’s confidence index dropped to a 5-month low of 50.4 from 54.3 in June. According to Bloomberg News:

"Sentiment may be slow to improve until companies start adding to payrolls at a faster rate, and the Federal Reserve projects unemployment will take time to decline. Today’s figures showed income expectations at their lowest point in more than a year, posing a risk for consumer spending that accounts for 70 percent of the economy.

“Consumers’ faith in the economic recovery is failing,â€