On Sept. 2 it reported that new home sales had "plunged 21.6 percent in July from the year earlier, inventories of unsold homes soared and prices fell-there is little debate that the housing market is stumbling much faster than most expected."

This is another way of saying that the real estate market may be in for a crash, not merely a "soft landing," as market optimists have hoped.

The National Association of Realtors covers a wide array of real-estate investors, speculators and banks heavily invested in all types of mortgages.

Over the last five years, housing prices had been rising at a hectic rate. Now the day of reckoning has come. "The deceleration has been the fastest in the history of the [Realtors] survey," says MarketWatch.

Developers have cut back on construction as overproduction in residential housing has led to big-time inventories of unsold new homes. However, plummeting prices may bring buyers back into the market, temporarily relieving the glut.

Mortgages that allow homeowners to take out equity based on the assessed valuation of their homes have been a key driver of continued strong consumer spending-accounting for two-thirds of the Gross Domestic Product. The GDP is the total value of a country's goods and services. But declining home prices will cut into this, meaning bad news for the overall capitalist economy.

Current consumer debt has reached record-breaking numbers. Spending levels of consumers can no longer be sustained. Homeowners will spend less and tighten belts to save the homes they have.

An Aug. 10 Wall Street Journal survey was headlined: "Outlooks for GDP and Employment Are Cut, While Concerns About Recession Edge Up." The newspaper's economists have raised to 26 percent "the probability of a recession over the next 12 months."

Wall Street economists who predict an impending recession are behind the times. The recession is already here for a large part of the multinational workforce.

Plants are closing, wages relative to inflation are dropping, benefits are disappearing, and layoffs are spreading throughout the industrial and service sectors.

The capitalist economy is drowning in debt, deficits and the virus of hyper-speculation in non-traditional mortgage lending. These dire developments were only worsened by a recent announcement of the Federal Reserve Board that the economy needs to slow down to contain inflation.

Not true. A slowdown will develop into stagflation-stagnation on top of inflation. The workers and oppressed nationalities now face a slowing economy, soaring prices for food, health care and other necessities of life, and a housing bubble about to burst.

The tycoons of Wall Street, however, prefer a slowing economy to inflation. They reacted favorably to the Fed's announcement, sending the stock market up to new highs during the week of Sept. 25.
Lenders run wild

In a revealing Sept. 1 Wall Street Journal article headlined, "Housing Chill Begins to Pinch Nation's Banks," Robin Sidel wrote that "[B]anks have begun to warn investors that the housing slowdown is starting to hurt their business."

The article explains that financial institutions are already grappling with "a difficult interest-rate environment, competition for traditional banking customers, a saturated credit-card market, and expectations that strong consumer-credit quality will soon show signs of weakening. ... As a result real estate, including mortgages, home-equity loans, and commercial loans, represented a record 33.5 percent of the U.S. banking industry's $9,298 trillion in assets in July, according to the Federal Reserve. The numbers represent the highest level in the Fed's database going back to 1973."

Since then, this dependence on real estate assets has continued to rise.

Sandra Thompson of the Federal Deposit Insurance Corporation, speaking on Sept. 20 at the opening session of the Senate Banking Committee on Banking, warned of the dangers of nontraditional mortgage loans: "According to the publication Inside Mortgage Finance, an estimated $432 billion interest-only loans and payments-option ARMs were originated during the first half of 2006," she said. ARMs are adjustable rate mortgages.
Dreams turn into nightmares

In a frenzy of real estate loans, bankers and financial institutions have created mortgage portfolios that include ARMs. They feature no down payment, no interest, and what is called negative amortization: the buyer pays less than the interest due and the unpaid principal and the interest rates will grow exponentially. Down the road, the increase in mortgage payments will force homeowners to ante up big bucks far exceeding their incomes. This likely will lead to record levels of mortgage defaults and foreclosures, which are now beginning to rise. Homeowners are helplessly trapped as their home values fall.

The banks and financial institutions have spread the risk to the secondary mortgage markets-Fannie May and Freddie Mac-which are government-sponsored enterprises and big-time speculators. Hedge funds, pension funds and insurance companies are big players in this market.

Will there be a rerun of the 1987 stock market crash? That's when many savings and loans banks-primary lenders in mortgage financing-went belly up. It cost the worker/taxpayers $ 150 billion to bail out those banks and financial institutions. Will the current housing bubble throw the economy into another such crisis?

The warning signs are there.

Housing is a multiplier industry. The impact of the growing housing crisis affects a wide range of industries and workers. Steel, lumber, home furnishings, financial institutions, construction and other related industries are dependent on this bubble, which has reached an unprecedented size.

According to the June 16, 2005, Economist, the housing bubble has become a global phenomenon. "The worldwide rise in house prices is the biggest bubble in history. ... Property markets have been frothing from America, Britain and Australia to France, Spain and China. Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000. What if the housing boom now turns to bust? ... It is larger than the global stock market bubble in the late 1990s ... or America's stock market bubble in the late 1920s."

That bubble led to the 1929 crash, which triggered the greatest depression in U.S. history.

"The housing market has played such a big role in propping up America's economy that a sharp slowdown in house prices is likely to have severe consequences. Over the past four years, consumer spending and residential construction have together accounted for 90 percent of the total growth in GDP."

Interest rates for those years were the lowest in history and cheap money saturated the monetary system. "And over two-fifths of all private sector jobs created since 2001 have been in housing-related sectors...."

The U.S. $10 trillion housing bubble contains the potential for class struggle. There is brewing within it a clash of class interests. Within the housing industry is a multinational workforce in conflict with construction bosses and a myriad of related companies. At the first signs of a downturn in the industry, layoffs will spiral. Homeowners will struggle with banks and financial institutions, which will strip them of ownership as soon as they falter on mortgage loans. Their dreams of home ownership can turn into nightmares.

As the institutions of high finance face bankruptcy-victims of their own greed and hyper-speculation-the government will bail them out at the expense of the worker/taxpayers, leading to a conflict between the people and the government.

On the other hand, real estate institutions and investors like Fannie Mae and Freddie Mac-government-sponsored enterprises that package billions of dollars of mortgage-backed securities-will have the backing of the government when they fail.

Ultimately, as recession and further social convulsions ignited by "preemptive" wars engulf the imperialist government, the predatory interests of the billionaire class will be pitted against the entire multinational working class. Organized and unorganized, immigrant and native, poor and middle class, they will be swept into the raging sea of class struggle, with great consequences for the whole world.

This week, the blue-chip Dow Jones industrial average hit a record closing high and an all-time intraday high for three days in a row in a rally driven by a sharp drop in oil prices and expectations that the Federal Reserve will not raise interest rates in the near future.

The rally also propelled the Standard & Poor's 500 Index to fresh 5-1/2-year highs more than once.

But on Friday, weaker-than-expected September employment data, following a White House forecast for slower
GDP growth late on Thursday, brought the rally to a halt and may drag stocks lower in the week ahead, analysts said.

"We had a long run in equities and we're probably due for a sell no matter what the news is," said Elliot Spar, market strategist at Ryan Beck & Co., in Shrewsbury, New Jersey. "If the economy is going to go down, then you have to worry about earnings momentum."

Investors will scrutinize corporate profits next week, Spar said, as the earnings season heats up, with Alcoa Inc., Costco Wholesale Corp. PepsiCo Inc. and General Electric Co., slated to report.

Trading may be lighter than usual on Monday as the U.S. bond market will be closed in observance of the Columbus Day holiday. The U.S. stock market will remain open.

BEWARE OF THE JINX MONTH

For the week, stocks rose -- with the Dow up 1.5 percent, the S&P 500 up 1 percent and the Nasdaq up 1.8 percent.

The Dow average closed at record highs three times in the week, with an intraday high on Thursday at 11,870.06, its highest level since January 14, 2000. On Thursday, the S&P 500 closed at 1,353.22 and peaked intraday at 1,353.79 -- with those levels marking the highest since February 5, 2001.

For the year to date, the Dow is up 10.6 percent, the S&P 500 is up 8.1 percent and the Nasdaq is up 4.3 percent.

After stocks broke new ground last week, some investors may be more cautious during the rest of October, known as "the jinx month," according to the Stock Trader's Almanac, because of stock market crashes in 1929 and 1987.

Volatility may increase early this week, traders said, with the possibility of a nuclear weapon test by
North Korea over the weekend.

"If they do go ahead with the test, the stock market may get a bit more skittish," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. "It's just one thing we don't need right now."

The White House said on Friday that it had no new information to disclose about whether a nuclear test was being planned, but said North Korea should not carry out the test.

On Friday, U.S. crude oil for November delivery settled at $59.76 per barrel -- down 5 percent for the week. NYMEX crude is down 24 percent from its record set in July.

EARNINGS ON FRONT BURNER

On Tuesday, the third-quarter earnings season kicks off for blue chips with Alcoa reporting results, followed by General Electric on Friday.

Other companies reporting results next week include PepsiCo, M&T Bank Corp., Yum! Brands Inc., Monsanto Co. and Safeway Inc.

"Earnings have been on the back burner, and they move to the front very soon," said Michael Panzner, vice president of sales trading at Collins Stewart in New York. "I have a funny feeling things haven't been particularly great."

S&P 500 companies are expected to achieve third-quarter earnings growth of 14.1 percent from a year earlier, according to Reuters Estimates. Meanwhile, pre-announcement activity for U.S. companies stayed negative for the week ended September 29.

FOMC MINUTES, RETAIL SALES AHEAD

Next week's economic data could help investors assess the likely magnitude of consumer spending before the start of the holiday season as well as the Fed's view of the economy.

On Tuesday, the government releases its report on wholesale inventories for August. Economists polled by Reuters expect inventories to rise 0.7 percent, down from a 0.8 percent gain in the previous month.

Minutes of the Federal Open Market Committee's September 20 meeting will be released on Wednesday and the Fed's Beige Book -- a survey of economic conditions in the Fed's 12 districts -- will follow on Thursday.

The international trade deficit for August, also due on Thursday, is forecast at $66.70 billion, down from $68 billion in July, according to the Reuters poll.

A slew of data is due on Friday, including import prices, retail sales and the University of Michigan's reading on consumer confidence.

Import prices likely shrank 1.2 percent in September, after a 0.8 percent gain in the previous month, according to the estimates of economists surveyed by Reuters.

Retail sales for September are forecast to rise 0.2 percent, matching a 0.2 percent gain in August, according to economists polled by Reuters. Excluding auto sales, September's retail sales are seen unchanged, compared with a 0.2 percent gain the previous month.

The preliminary October reading of the University of Michigan's consumer sentiment index probably will show a rise to 86.5 from 85.4 in September, according to the Reuters poll.

Oil prices have been range-bound in the past week as traders weighed tough rhetoric from some OPEC members calling for output cuts against comments by Saudi Arabia denying there was a deal to reduce production.

Still, recent posturing "may be enough to discourage aggressive near-term selling," noted Mike Fitzpatrick at Fimat USA.

Light, sweet crude for November delivery on the New York Mercantile Exchange rose 56 cents to $60.32 a barrel in electronic trading by midafternoon in Europe.

Following a dip below $60 a barrel last week, prices rose as high as $60.50 Monday after North Korea said it had carried out its first-ever nuclear weapons test.

In London, November Brent gained 78 cents to trade at $60.61 a barrel on the ICE Futures exchange.

Heating oil futures gained 2.57 cents to $1.7197 a gallon while gasoline prices rose 0.95 cent to $1.5137 a gallon. Natural gas futures rose 7.3 cents to $6.500 per 1,000 cubic feet.

Reports have said a majority of OPEC states back a voluntary reduction, and the deal could be ratified as early as mid-December at a meeting in the Nigerian capital of Abuja. Some agencies reported the cartel would decide by Monday whether to cut production.

The reports came about a week after OPEC members Nigeria and Venezuela voluntarily began reducing their oil production by a combined 170,000 barrels per day. Official figures released in August put total OPEC production at just under 30 million barrels a day.

Analysts said the longer-term view is that the Organization of Petroleum Exporting Countries would likely act before the end of the year to trim its output as global inventories rise and economic growth slows.

Meanwhile, the current rise in oil prices was not only because of concern about a possible decline in supply amid robust demand, but also a reflection of a strong global economy, analysts said.

"The market's been toying for a while with whether OPEC will or will not cut production," said Joseph Capurso, an analyst with Commonwealth Bank of Australia in Sydney. "But whether or not it happens, the world economy is strong, so that will put a floor under prices - there isn't a concern that U.S. oil consumption is going to fall into a hole."

Four million workers!   In the US we celebrated the birth of a new global social movement when 60,000 people showed up for the "Battle of Seattle" in 1999.  In China there is now more than enough evidence of continual worker self-organization outside of official trade union channels to put to rest notions that "there is no labor movement in China".

According to Robin Munro, research director of China Labour Bulletin,

"[W]hereas 10 years ago I think you could have said China did not have a labor movement, that is no longer really the case...there is no freedom of association for workers, but hitherto, people have tended to think that, therefore, there is no Chinese labor movement. I think the scale of worker unrest nowadays is so great, you can go to almost any city in the country now and there will be several major collective worker protests going on at the same time.

So China now has a labor movement. This is an important point to just put there on the table and recognize. It is not organized. It is spontaneous, it is relatively inchoate. But then so were labor movements in most Western countries before trade unions were permitted.  We have basically a pre-union phase of labor movement development in China today. It also has great potential, I think, for becoming a proper labor movement."

In the years before the passage of the National Labor Relations Act - known as the Wagner Act or "Labor's Magna Carta" - there was no legally enforced right to organize, bargain collectively, or strike in the United States.  But US workers who were denied these rights responded with their own "pre-union" phase of struggle. Thousands of workers were arrested or beaten and scores shot dead for trying to exercise these rights.  For example, in 1934 alone there were three general strikes and a huge national textile strike - all marked by substantial violence."

Largely in response to this upsurge, in 1935 the Federal government passed the Wagner Act hoping to legalize the labor movement and divert it into more moderate channels.  According to a recent study by labor law historian James Gray Pope, the massive sit-down strikes and factory occupations of the following year cajoled the Supreme Court into reversing its own precedents and accepting the Wagner Act as constitutional.

American workers did not get their rights by waiting for the government to provide them; rather, they began asserting rights they believe they were entitled to, and thereby forced the Congress and the courts to acquiesce. 

One innovative labor strategy that is being encouraged by CLB as a way to relate to the new emerging Chinese labor movement is the CC-2005 Campaign or Collective Contract 2005. (According to CLB staff, the Campaign's name is "a slightly cheeky designation, thinking in terms of SA-8000" and other Corporate Social Responsibility (CSR) standards.)

Under existing Chinese labor law, where there is no union presence in a factory, workers are allowed to elect their own representatives to negotiate and sign a collective contract.  With the ACFTU holding only 30% representation outside the government sector, CLB is trying to take advantage of this legal "loop-hole" by urging multi-national corporations that operate in China "to pressure their supplier factories into allowing the workers to negotiate a proper collective contract in the workplace."  The innovation of this approach is the use of existing Corporate Codes of Conducts to negotiate binding collective agreements with enforceable rights.  CLB views the CC-2005 campaign an opportunity to create a basic organizing space that is legally protected in the private sector.

As Han Dongfang, Director of CLB, explains,

"What we want to do is get this collective contract regulation connected, with a code of conduct, a corporate social responsibility kind of thing, which they have been trying to work out for more than 10 years but have never worked out. Now we try to put it together as a new program. We make the corporate social responsibility, the Code of Conduct document, which has no teeth, and make them, together with Chinese law, have teeth, in particular with the workers' participation, workers' representation."

CC-2005 has three major strategic objectives:

• To mobilize workers to participate in collective bargaining, so that they can play an active role in protecting their own rights;



• To achieve real implementation of China's labor laws, trade union legislation and the relevant standards of the International Labour Organization;



• To provide a new and effective means by which multinational buyers can realize their commitment to the principle of social accountability.

The massive number of wildcat strikes occurring in China shows that Chinese workers are not waiting for official unions to reform themselves. Instead, they are fashioning new ways to improve their lot. So the challenge is for the US and the other labor movements to find ways to reach out and encourage new independent workers organizations in China. We might want to start by supporting CC-2005 campaign.