Home Prices at 5 Year Low

Home Price Index December 2008
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The Case-Shiller Composite Home Price Index has dropped to 162.12 from 166.05 last month and 200.67 a year ago (-2.34% and -19% respectively). It is now below the level from January 2004.

Top 3 annual declines by cities:

1. Phoenix, AZ: 34%
2. Las Vegas, NV: 33%
3. San Francisco, CA: 31%

Top 3 monthly declines by cities:

1. Phoenix, AZ: 5.06%
2. Las Vegas, NV: 4.81%
3. Minneapolis, MN: 4.67%

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Money Supply Growth – December 2008

Money Supply Growth December 2008
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The money supply has grown by 15.85% in December of 2008 when compared to December 2007. It has now grown to $2.16 trillion. This data still supports the thesis that asset prices might bottom out between the end of 2009 and mid 2010.

To be sure, this is an estimation. The number for retail sweeps for December is not out yet. This number is usually published with a 2 month time lag. This is all the more noteworthy since a dramatic change has occurred in the development of retail sweeps in October and November of 08. For the first time ever retail sweeps have begun to drop significantly.

This level of growth is almost at the record levels of 1997. It is of course a direct outcome of  the government’s disastrous spending spree that is setting the stage for a hyperinflation or at least another asset bubble, once the credit contraction is over.

It is amazing that while Hank Paulson, Ben Bernanke, Barack Obama and others are touting the necessity of more regulation, they themselves are blithely cheering on an out of control money supply inflation, which was of course what caused the credit crisis in the first place. If anyone needs more regulation it is these people.

We need more regulation of the government by the people, more regulation of the Federal Reserve Bank, the Department of Treasury, and Congress. What steps has Congress taken to restrain government spending? Nancy Pelosi, the most clueless out of all of them, just proudly announced another $850 billion and called it “pretty exciting”. Please consider House Minority Leader Boehner’s appropriate response.

Of course the politicians don’t have this kind of regulation in mind. They think they need yet more power in order to regulate private business. They think the government needs to grow even more than it already has. The public is in full compliance with this nonsense. What a mess. Who protects us from our government if not a vigilant public?

The reserve ratio is beginning to adjust as expected. There is still plenty of room for the money supply to explode. As I mentioned, in order for the ratio to get back to regular levels, the money supply approximately needs to triple. Now that has changed. Bank reserves are now at $820 billion. If the reserve ratio adjusts to regular levels without a drop in reserves, the money supply would need to rise to roughly $8 trillion.

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