Believe it or not the euro zone and European Union crisis is still in the formative stages. The bailout packages arranged for Greece and Ireland are not to bail out those two countries, but to bail out the European banks that lent to them and bought their bonds when it was imprudent to do so. They knew, because they control the governments that the public of the solvent governments would bail them out. Thus, the governments of Ireland and Greece with Portugal and Spain to follow will be showered with an Anglo-American style bailout. As you know $1 trillion wonât be enough to make the banks happy, so $3 trillion will be needed. Germany says no we are not going to do that. Well, weâll see just who the real masters of Germany are. Such policy flies in the face of German culture. It shows you though how close to the edge Europe and its euro zone really is. Germany understands, but the rest of Europe, particularly the PIIGS are in denial. The IMF has its nose under the blan ket. It will lend and participate, so that it can serve its masters by keeping these wayward states completely in austerity and bondage for the next 50 years and in that process relieve them of their sovereignty. As all of Europe belatedly understands, one interest rate can never fit all.We can assure you that the euro zone is on the edge of collapse. Itâs just a question of when. Nothing has been contained nor can it be contained. Like in the US the taxpayers of the solvent countries must bail out the banks and other financial institutions of Europe. The monetary policy created by the European Central Bank and the bankers has failed. Whether this was deliberate or not, we do not as yet know, but the truth will eventually surface. Currently the scapegoats are the citizens of these beleaguered countries, when in fact the real malefactors reside at the ECB and the European Parliament. These same players still do not have solutions other than destroying the Greek and Irish so cieties in the name of repaying the bankers. Whether you realize it or not, it has been a year since this odyssey began in Greece. We now have Ireland and they will be followed by Portugal and Spain and perhaps even Italy.Â Â Â The main battlefield that will decide the outcome will be Spain due to its size and its persistent claim that Spanish banks are very solvent, which is symptomatic of denial. Mr. Zapatero tells us the Spanish debt crisis has passed. Our question, is he dumb, naive or a liar? How could he be so out of touch with reality? He blames Greece and Ireland for the euro zoneâs problems as if Spain was a victim of theirs and blameless. Mr. Zapateroâs leadership is simply idiotic. This incompetent is shepherding his people toward financial disaster and servitude. Their real problem is the euro, the euro zone, the ECB, the EU and those who have allowed Europe to be led into a financial and economic trap. Germany, the euro zone powerhouse, doesnât want the e uro or the EU and has never wanted them. They have been it shoved down their throats, because they lost WWII. This is also why Germany was forced to merge Eastern Germany into Western Germany under such horrible terms. Germany is sick of being used as a punching bag and they want out of both. In addition, the cost of staying in the euro is already unacceptable. Any further higher costs could lead to insolvency of currently stable countries such as Germany. Then there are the social issues. Germans expect other countries to work as hard as they do. That has not been the case and will never be the case, so they no longer want to continue to support them. Some say, the withdrawal from the euro will be too traumatic to contemplate. We say concerns regarding bankruptcy would be far more painful. A reflection of that are Germanyâs recent failed auctions. Buyers are only taking 20% of the offering. We interpret that as fear that Germany will financially injure itself if it has to continue bailing out failed euro zone members. European bond markets are beset with the same problems and solutions that the UK and US are. The ECB and the Fed have to remain active in the bond markets, otherwise they fall. They have to buy persistently and in size. This week we saw the biggest drop in bonds and rise in yields in some time, as the selling grew overwhelmingly. The yield on the 10-year T-bill rose to 3.30% from 2.50% only a month ago. The 30-year fixed rate mortgage as a result rose from 4.30% to 4.66%. The bond markets cannot function without manipulation from the ECB, the Fed and the Bank of England. Needless to say, these interventions are not solutions â" they only prolong the inevitable. The bonds need higher yields to compensate for risk or buyers must be convinced solutions are in hand, otherwise in the end the ECB, the Fed and the Bank of England will end up with all the government bond issues, which will lead to collapse. The sovereign crisis in all of these countries has not been solved, nor will it be solved with current policies. Once Ireland and Greece leave the euro, Portugal and Spain and perhaps Italy would be forced to follow. That would mean the demise of the euro. Like it or not that would cause currency controls in each of these currencies. Bank withdrawals would be limited as would travel outside each country. Each country making their goods and services inexpensive and competitive with those of other nations would set currency values low. There would be no debt overhang because debt would have been decimated. Bourses would function in a primary fashion. In many ways Europe would look as it did in the late 1940s and 1950s, without the physical destruction. We were there we experienced it. Recovery would take five to ten years, perhaps longer. There will be no Marshall Plan because the US and England will not be any better off. Nations will put new currencies in place and the rebuilding of economies and mark ets would commence accompanied by tariffs. The cycle would begin again.The option presently being pursued is unworkable. Perhaps $1 trillion can take care collectively of Greece, Ireland and Portugal, but an additional $2 trillion would be needed to bail out Spain ad Italy. In the end the debt load forced on the solvent countries would be unmanageable and that doesnât even include the political will, which could disappear at anytime. Remember, Germans, French, Dutch and Austrian patience are already close to an end. At the same time there would be a major bureaucratic tug of war between those who want their national sovereignty returned and those who would want even more amalgamation, the reason that Europe is in the state that it is today.The assumption of fiscal decisions by the EU in Brussels regarding fiscal policy will be a fateful decision, because it will strip each state of its sovereignty. Otherwise Brusselsâ bureaucrats have made an expensive mess of everything else. Transferring such power under todayâs circumstances would be a shortsighted mistake.There is no changing the culture and attitude of Portugal, Spain, Italy, Greece and Southern France. They are what they are and have been for centuries. They will never have the work ethic of northern Europe and, thus, they will never be competitive. This is why the Treaty of Versailles II option will be met with aggressive non-compliance. This is a forced devaluation internally within the EU in the form of lower wages. The goal is to make exports more competitive. This is just another wrinkle in the currency war that will bring about tariffs. This is not ingenious â" it is transparent and stupid. The cheapening of capital is essentially a devaluation, that is if they can get away with it, which they cannot.The cuts are too deep too fast. Shock treatment is traumatic and often does not bring the desired results. Overnight it is expected that Greece and Ireland will balance their bud gets, have no reason to issue more debt, while the ECB buys toxic sovereign bonds. Who is going to absorb those losses? The public of all euro zone countries, of course. This is exactly what the UK and US are doing through their central banks. The ECB is just a little late to the party. Monetizing doesnât work and the debt purchased is still there to be written off. Deflation has gotten a small foothold in Europe and unless quickly reversed could end up irreversible. We do not think so though. The ECB has seen the error of its ways via Keynesianism and they will issue money and credit to meet the challenge and suffer the same inflation that others will. In the end monetization destroys all in the name of buying time.If all of this is not going to work eventually then why do it? Why not do what Iceland has done and restructure debt, allowing bondholders to share losses. This, of course, is a form of partial default and in all probability it will work. This is also called a managed default similar to what happened in the early 1970s at the Smithsonian talks, at the Plaza Accord in 1985 and the Louvre Pact in 1987. Due to the contagion that would be caused by such unilateral policies, such attempts have to be done with all nations participating. This is the only fair way to solve the overall dilemma. There is no nation without quilt. They have all participated in cheapening their currencies, have created far more debt than they should have and have all engaged in excessive creation of money and credit. The notion that Germany, China and the US can produce capital to solve the problem is ludicrous. They all have their own problems. There can be no bailout, or the appearance of some savoir this time. Every nation has to bite the bullet simultaneously. This means that nations have to understand that quantitative easing will have to end and that a deflationary depression has to be accepted. The system has to be purged of its excesses in the creation of capital and its allocation. Banks and other financial institutions have to accept the blame for what they have done in their quest for excessive profits and power. This approach is the only way to avoid social chaos. After three years of recession and depression the world public is in no mood to play games. They have to be told the truth and what to expect. The blame game can be dealt with later. Either this happens or the world goes down in flames economically and financially.We cannot afford more stress tests, which are nothing less than a game of fraud. Bank tests have to account for the risk of sovereign default. Most nations do not want their public or the rest of the world to know that they are financially on the edge of the abyss. It is important to understand the concept of European government default and the potential inability to bailout banks. In the end there isnât enough money to bail them out, even if they print it. The flipside is inflation, hyperinflati on and deflationary depressions. As a consequence very few people have much confidence in their bank, or its ability to survive. As a result, credit default swaps linked to 25 banks and insurers continue upward, which means confidence and perception are worsening. In addition, investors do not believe banksâ assets are worth what they say they are.The bottom line is the stress test does not work. How can it when they are allowed to keep two sets of books?
Â Â Â Â October wholesale inventories were expected to rise 0.8%.Â They surged 1.9%; and September inventories were revised higher, to 2.1% from 1.5%.Â Yes, Virginia, there is an inventory overhang problem. Â Â Â Â Â Jobless Claims were lower than expected; but once again it is due to seasonal adjustments.
Â Â Â Â The Fedâs balance sheet exploded $35.388B for the week ended on December 8 due to the monetization of $32.162B of US Treasuries.Â http://www.federalreserve.gov/releases/h41/Current/
Â Â Â Â Â The Fedâs Flow of Funds report that was released yesterday shows: Household debt contracted at an annual rate of 1Â¾ percent in the third quarter, the tenth consecutive quarterly decline. Home mortgage debt fell at an annual rate of 2Â½ percent in the third quarter, about the same as in the previous quarter. Â Â Â Â Â Consumer credit was down 1Â½ percent, after a decline of 3Â¼ in the previous quarter.Â Â Â Â Â Â Â Â Â Â Â Â Â State and local government debt rose 5Â¼ percent at an annual rate in the third quarter, after a 1Â½ percent decline in the second quarter. Federal government debt increased at an annual rate of 16 percent in the third quarter, 6Â½ percentage points less than the average during the first half of the year. http://www.federalreserve.gov/releases/z1/current/z1.pdf
Â Â Â Â Once again, it was feder ally-supported credit (i.e. student-backed loans) that accounted for all the increase last month [October] â a record $31.8 billion expansion. Over the past three months consumer credit outstanding net of federal student assisted loans has collapsed $76 billion â" this degree of contraction is without precedent. Â Â Â Â Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies' total assets the largest share since 1959.http://online.wsj.com/article/SB10001424052748703766704576009501161973480.html
Â Â Â U.S. Senator Bernard Sanders asked Federal Reserve Chairman Ben S. Bernanke for more information about eme rgency lending programs after the central bank last week released data on 21,000 transactions.Â Â Â âMuch of the information that you provided on your website raises bigger questions than it answers, and some of the information mandated by the law appears to be missing,â Sanders, the Vermont independent who wrote the provision in the Dodd-Frank Act requiring the Fed disclosures, said in a letter to Bernanke dated today.Â Â Â Sanders asked for copies of correspondence between some board members of regional Fed Banks and Bernanke or any regional Fed bank president. The request covers Fed board members who also served on the boards of firms that received aid or were employed by those firms.Â Â Â âIt is an obvious conflict of interest when CEOs of banks and large corporations who serve on the Fedâs board of directors receive cheap loans from the Fed,â Sanders said in his letter.Â Â Â Sanders also asked for data on the individual securities pledged as collateral for Fed loans, saying he was âdisappointed that the Fed chose not to disclose all of the specific details.â
Â Â Â Nearly two years after Bernard Madoffâs swindle became public, one of his most enduring clients and friends, Boston philanthropist Carl J. Shapiro, has agreed to return $625 million that Madoff stole from other people and paid to him over four decades.Â Â Â The legal settlement, announced yesterday, is the largest so far in the Madoff case and resolves the governmentâs civil claims against Shapiro and his extended family.Â Â Â The sum includes $38 million to be paid by Robert M. Jaffe Shapiroâs son-in-law and a former broker for Madoff as well as millions from trusts for Shapiroâs children and grandchildren. The settlement is less than the $1 billion the trustee in the Madoff bankruptcy case had originally sought from the Shapiros.Â Â Â Shapiro, 97, admitted no wrongdoing in yesterdayâs settlement. He is among Bostonâs most generous philant hropists, with many buildings bearing his name Beth Israel Deaconess Medical Center, Brandeis University, and the Museum of Fine Arts among them.
Â Â Â Minnesotaâs attorney general sued Discover yesterday, accusing one of the nationâs biggest credit card companies of billing tens of thousands of the stateâs customers for account protection programs they didnât want.Â Â Â The lawsuit alleges that Discover Bank, DFS Services, and parent company Discover Financial Services broke state consumer fraud and deceptive trade practices laws. Attorney General Lori Swanson sued on behalf of the Minnesota public but said the billing practices are probably widespread in other states. She is seeking refunds for Minnesota customers and civil penalties.Â Â Â Swanson said Discover telemarketers talked fast, skipped over words, and rushed customers through a script to sign them up for the programs, including payment protection, identity theft protection, and credit monitoring.
Â Â Â Bank of America Corp.âs agreement to pay $137 million in restitution for taking part in a nationwide bid-rigging conspiracy for municipal-investment contracts may soon be followed by more settlements to repay the schemeâs victims, the Justice Departmentâs Antitrust Division head said.Â Â Â âStay tuned to this channel I think you will see a lot more activity in the coming weeks and months,â Christine Varney, the antitrust chief, told reporters yesterday. âWe are committed to getting restitution, full restitution, to all the municipalities that were victims of this scheme.âÂ Â Â Bank of America, which has assisted the government probe of the $2.8 trillion municipal-bond market since at least 2007 in return for leniency, has provided documents, e-mails and recordings of phone calls, according to court records of civil suits. In September, Douglas Lee Campbell, formerly employed by the bankâs municipal derivatives group, pleaded guilty to taking p art in a conspiracy to pay state and local governments below- market rates on investments purchased with bond proceeds.Â Â Â Bank of Americaâs settlement is âlikely the tip of the iceberg,â Andrew Gavil, a law professor at Howard University in Washington, D.C., said in an e-mail. He said other conspirators may pay much higher penalties.Â Â Â The government has identified more than a dozen firms, including JPMorgan Chase & Co., UBS AG, and Societe Generale as unindicted co-conspirators in a criminal case brought by the Justice Department against a Los Angeles investment broker.
Â Â Â The number of mortgage applications in the U.S. fell last week as higher lending rates led to a fourth straight decline in refinancing.Â Â Â The Mortgage Bankers Associationâs index decreased 0.9 percent in the week ended Dec. 3, figures from the Washington- based group showed today. Refinancing fell 1.4 percent, while purchases climbed 1.8 percent, the third straight increa se.Â Â Â The average rate on a 30-year fixed mortgage rose to the highest level since July as the economy showed signs of improving heading into 2011. Home-purchase applications rose for the sixth week in the last seven, indicating the housing market may be stabilizing even as foreclosures mount and unemployment hovers near a 26-year high.Â Â Â âThe housing market continues to bounce along this fragile bottom,â Neil Dutta, an economist at Bank of America Merrill Lynch Global Research, said before the report. The purchase index is down 13 percent from the same time last year.Â Â Â The average rate on a 30-year fixed mortgage rose to 4.66 percent, the highest since the week ended July 23, from 4.56 percent. Borrowing costs have been rising since reaching 4.21 percent during the week ended Oct. 8, the lowest in records going back to 1990.Â Â Â At the current 30-year rate, monthly payments for each $100,000 of a loan would be about $516.24, or $14 less than a year ago wh en the rate was 4.89 percent.Â Â Â The average rate on a 15-year fixed mortgage rose to 3.98 percent from 3.91 percent, and the rate on a one-year adjustable mortgage increased to 7.07 percent from 6.81 percent.Â Â Â Borrowing costs may continue to increase. Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates jumped to their highest level in almost six months yesterday after President Barack Obama agreed to extend tax cuts for two years, as well as reduce payroll taxes and extend emergency unemployment benefits.
Â Â Â U.S. states are preparing for more budget cuts next year as tax revenue isnât likely to rebound enough to replace almost $38 billion in aid that will be gone as federal economic stimulus ends, according to a report.Â Â Â At least 31 states and Puerto Rico are forecasting deficits of $82.1 billion in the next fiscal year even as tax receipts are picking up, the National Conference of State Legislatures said today. Unde r a temporary mandate since 2009, the U.S. has provided economic aid to states, helping to pay government workers and shoulder the cost of the Medicaid program to provide health care for the poor. That aid will be gone, the group said.Â Â Â âAlthough a recovering national economy is helping to stabilize state revenues in fiscal year 2011, serious budget challenges await state lawmakers in the new year,â the group said today in the report. âThis largely stems from fewer federal stimulus funds available for next yearâs budgets.âÂ Â Â The report, which says states will get $37.9 billion less in stimulus money in fiscal 2012 compared with 2011, is the second in as many weeks to warn of renewed financial pressure on states as the funding winds down. Last week, Raymond Scheppach, executive director of the National Governors Association, said states may confront $175 billion in budget gaps through June 2013, forcing leaders to weigh spending cuts and tax increases.Â Â Â As stimulus programs under the 2009 American Recovery and Reinvestment Act conclude and the money they have supplied stops flowing, it âwill create big holes in state budgets what many officials are calling the âARRA cliffâ,â the report said.Â Â Â State governments are also dealing with cost increases for health-care services and primary and secondary education, the Denver-based legislature group said today in its report. As rising unemployment left more without health insurance, Medicaid enrollment jumped to 48.6 million nationwide by December 2009, rising at an 8.4 percent annual rate, according to the Kaiser Family Foundationâs Commission on Medicaid and the Uninsured.Â Â Â Republican governors, who will lead a majority of states next year as a result of the Nov. 2 elections, have said the fiscal imbalances will require them to reduce the size of government in Ohio, South Carolina and Pennsylvania.Â Â Â The fiscal 2012 deficits come on top of at least $110. 6 billion in gaps that have been dealt with or are pending for the current year, the group said. Imbalances totaling $66 billion are projected for fiscal 2013 by 19 states, according to the report. In most states, the fiscal year begins in July.Â Â Â So far, the largest 2012 gaps are forecast in Nevada, where the deficit is about one-third the size of the stateâs general fund, New Jersey, at 26 percent of general-fund spending, and North Carolina, at 20 percent, according to the report. Some states, including Illinois, havenât provided forecasts, the group said.
Â Â Â The Pentagon's manpower chief made the Obama administration's latest long-shot pitch Tuesday to revive faltering legislation to legalize young immigrants who came to the country illegally.Â Â Â Clifford Stanley, the undersecretary of defense for personnel and readiness, called the measure, known as the Dream Act, a "commonsense" and "obvious" way to attract more high-quality recruits to the armed f orces. It faces long odds in Congress, where most Republicans and a handful of Democrats are likely to band together to block it from advancing in a test-vote expected Wednesday. Â Â Â Rep. Steny Hoyer of Maryland, the No. 2 Democrat, said he expected to bring the measure to the House floor this week, but it's unclear whether it would have the votes to prevail.Â Â Â President Barack Obama's push for the measure and congressional Democrats' determination to vote on it before year's end reflect the party's efforts to satisfy Hispanic groups whose backing has been critical in elections and will be again in 2012.Â Â Â Critics regard the measure as backdoor amnesty for lawbreakers.Â Â Â The legislation would give hundreds of thousands of young illegal immigrants brought to the United States before the age of 16, and who have been here for five years and graduated from high school or gained an equivalency degree, a chance to gain legal status if they joined the military or att ended college.Â Â Â "They're actually doing very well in our schools, many of them. They're high quality," Stanley told reporters in a conference call. "As we look at our force now for the future, bringing in talented people in this cyclical nature of how our recruiting business goes is significant." Â Â Â Hispanic activists - angry that Obama hasn't pressed harder for a broad immigration overhaul to give several million illegal immigrants a path to legalization - have described the Dream Act as the least Congress can do on the issue. It targets the most sympathetic of the millions of undocumented people - those brought to the United States as children, who in many cases consider themselves American, speak English and have no ties to or family living in their native countries.Â Â Â The measure is "very, very far from amnesty," said Cecilia Munoz, Obama's director of intergovernmental affairs, citing the numerous hurdles those eligible would have to scale in order to keep their legal status and eventually become citizens.Â Â Â The bill's prospects "should be good, if we move past politics and look at what's good for the country, what's good for our military readiness, what's good for our competitiveness, what's good for the law enforcement goals that we are trying to achieve," Munoz added.Â Â Â Estimates differ widely as to how many young people would be eligible for some sort of legal status under the measure. The Congressional Budget Office has estimated that one version of the bill that applies to immigrants aged 35 and under would let more than 1 million apply for legal status over the next 10 years, and potentially allow 500,000 to receive it.Â Â Â A newer version of the bill changed to improve its chances only applies to those under 30, which supporters say would limit it to 300,000 or so.Â Â Â GOP opponents in the Senate circulated a memo calling the measure "mass amnesty," noting that the bill has no cap and no end-date. They cont end it could allow even the most dangerous criminals and terrorists to gain legal status.Â Â Â "What does it say? It says to anybody thinking about coming illegally, if I can just get in the United States and hang on for a number of years, sooner or later they're going to make me lawful. That's not the message we need to send," said Sen. Jeff Sessions of Alabama, the top Republican on the Judiciary Committee. "Americans want us to enforce the laws, but we are considering a bill that would reward and encourage their violation." [Our government needs cannon fodder for their wars. These people will stop at nothing. Bob]
Â Â Â Wal-Mart Stores Inc., the largest private employer in the U.S., plans to stop paying staff there an additional $1 an hour for working Sundays, taking a bite out of its single biggest expense.Â Â Â The move, which takes effect next year, applies only to employees hired after Jan. 1, spokesman Greg Rossiter said in an interview yesterday. The move w ouldnât affect the Bentonville, Arkansas-based retailerâs 1.4 million current U.S. staff.Â Â Â Since taking over almost two years ago, Chief Executive Officer Mike Duke has pledged to slow cost growth as the retailer copes with six straight quarters of sales declines at U.S. stores open at least a year. Operating expenses rose to about $80 billion last year, partly because of health benefits.Â Â Â âItâs sad -- people who work on Sunday need that extra dollar,â Cynthia Murray, a Wal-Mart employee at a supercenter in Laurel, Maryland, said in an interview. Murray said she makes $11.20 an hour, and doesnât work Sundays.Â Â Â The move wonât apply to employees based in Rhode Island and Massachusetts. Those workers werenât eligible for the $1 extra pay because they get 1.5 times their hourly rate for Sunday work under state employment laws, Rossiter said. The retailer has 49 stores in Massachusetts and 10 in Rhode Island as of this month, according to its websit e. The change will take effect at Wal- Mart stores, Samâs Club outlets and distribution centers.Â Â Â âWe regularly review our compensation programs and we are confident Wal-Martâs pay and benefits are as good if not better than other retailers,â Rossiter said. He declined to say how much the company would save from the switch, nor would he disclose the number of employees who work on Sundays.
Â Â Â U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.Â Â Â This yearâs estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.Â Â Â The drop in home values pushed more buyers underwater, meaning they owe more on their mortgages than their homes are worth, Zillow said. The percentage of h omeowners with so-called negative equity reached 23.2 percent in the third quarter, up from 21.8 percent at the end of 2009.Â Â Â âWith foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief,â Stan Humphries, Zillowâs chief economist, said in the statement. âGovernment incentives can only temporarily hold back the tide.âÂ Â Â Housing demand has slumped since the start of the year as the government tax credit expired and unemployment hovers near 10 percent. Sales of existing homes in October fell to an annual pace of 4.43 million, compared with 5.98 million a year earlier and an annual average of 5.81 million over the past decade, the National Association of Realtors said Nov. 23. The median price was $170,500, down from $172,000 a year earlier.Â Â Â More than $1 trillion of this yearâs decline in home values occurred in the second half, Zillow said. Fed eral tax credits of as much as $8,000 for qualified first-time homebuyers and $6,500 for repeat buyers required a sales contract by April 30.Â Â Â Only 31 metropolitan areas, or fewer than one-fourth of the 129 tracked by Zillow, had gains in home values this year. They include Boston and San Diego.Â Â Â Zillowâs report is similar to other forecasts for prolonged weakness in the U.S. housing market. U.S. home prices will decline as much as 11 percent by 2012 as weak demand and rising inventory extend the housing slump, Morgan Stanley said in a report yesterday.Â Â Â Prices will be as much as 36 percent below their 2006 peak before finding a bottom, Morgan Stanley analysts led by Oliver Chang wrote. Sales will stay âdepressedâ through next year amid tightened lending standards, they said.Â Â Â As many as 8 million homes are in default or foreclosure and may be offered for sale, known as shadow inventory, according to Morgan Stanley. The looming supply will combine w ith tight credit and questions about housing-finance regulation to reduce prices 6 percent to 11 percent from current levels, the analysts said.Powered By iWebRSS.com