Spread & Containment
Politics, Profit, & Poppies: How The CIA Turned Afghanistan Into A Failed Narco-State
Politics, Profit, & Poppies: How The CIA Turned Afghanistan Into A Failed Narco-State
Authored by Alan Macleod via MintPresNews.com,
The COVID-19 pandemic has been a death knell to so many industries in Afghanistan. Charities and aid…

Authored by Alan Macleod via MintPresNews.com,
The COVID-19 pandemic has been a death knell to so many industries in Afghanistan. Charities and aid agencies have even warned that the economic dislocation could spark widespread famine. But one sector is still booming: the illicit opium trade. Last year saw Afghan opium poppy cultivation grow by over a third while counter-narcotics operations dropped off a cliff. The country is said to be the source of over 90% of all the world’s illicit opium, from which heroin and other opioids are made. More land is under cultivation for opium in Afghanistan than is used for coca production across all of Latin America, with the creation of the drug said to directly employ around half a million people.
This is a far cry from the 1970s, when poppy production was minimal, and largely for domestic consumption. But this changed in 1979 when the CIA launched Operation Cyclone, the widespread funding of Afghan Mujahideen militias in an attempt to bleed dry the then-recent Soviet invasion. Over the next decade, the CIA worked closely with its Pakistani counterpart, the ISI, to funnel $2 billion worth of arms and assistance to these groups, including the now infamous Osama Bin Laden and other warlords known for such atrocities as throwing acid in the faces of unveiled women.
“From statements by U.S. Ambassador [to Iran] Richard Helms, there was little heroin production in Central Asia by the mid 1970s,” Professor Alfred McCoy, author of “The Politics of Heroin: CIA Complicity in the Global Drug Trade,” told MintPress. But with the start of the CIA secret war, opium production along the Afghanistan-Pakistan border surged and refineries soon dotted the landscape. Trucks loaded with U.S. taxpayer-funded weapons would travel from Pakistan into its neighbor to the west, returning filled to the brim with opium for the new refineries, their deadly product ending up on streets worldwide. With the influx of Afghan opium in the 1980s — Jeffrey St. Clair, co-author of “Whiteout: The CIA, Drugs and the Press,” alleges — heroin addiction more than doubled in the United States.
“In order to finance the resistance for a protracted period, the Mujahideen had to come up with a livelihood beyond the weapons that the CIA was providing,” McCoy said, noting that the weapons issued could not feed the fighters’ families, nor reimburse them for lost labor:
So what the resistance fighters did was they turned to opium. Afghanistan had about 100 tons of opium produced every year in the 1970s. By 1989-1990, at the end of that 10-year CIA operation, that minimal amount of opium — 100 tons per annum — had turned into a major amount, 2,000 tons a year, and was already about 75% of the world’s illicit opium trade.”
The CIA achieved its goal of giving the U.S.S.R. its Vietnam, the Soviets failing to quash the Mujahideen rebellion by the time they finally pulled out in 1989. But American money and weapons also turned Afghanistan into a dangerously unstable place full of warring factions that used opium to fund their battles for internal supremacy. By 1999, annual production had risen to 4,600 tons. The Taliban eventually emerged as the dominant force in the country and attempted to gain international legitimacy by stamping out the trade.
In this, they were remarkably successful. A 2000 ban on opium cultivation by the Taliban-led government led to an almost overnight drop to just 185 tons harvested the following year, as frightened farmers chose not to risk attracting their wrath.
The Taliban had hoped that the eradication program would win favor in Washington and entice the United States to provide humanitarian aid. But unfortunately, history had other ideas. On September 11, 2001, the U.S. experienced a massive case of blowback, as Bin Laden’s forces launched attacks on New York and Washington. The U.S. ignored the Taliban’s offer to hand him over to a third party, instead opting to invade the country. Less than a month after the planes hit the World Trade Center, U.S. troops were patrolling the fields of Afghanistan.
The world’s first true narco-state
The effect of the occupation was to expand drug production to unprecedented new proportions, Afghanistan becoming, in Professor McCoy’s estimation, the world’s first true narco-state. McCoy notes that by 2008, opium was responsible for well over half of the country’s gross domestic product. By comparison, even in Colombia’s darkest days, cocaine accounted for only 3% of its GDP.
Today, the United Nations estimates that around 6,300 tons of opium (and rising) is produced yearly, with 224,000 hectares — an area almost the size of Rhode Island — planted with poppy fields.
Source | Dyfed Loesche | Statista
But even while it was financing a widespread and deadly aerial spraying campaign in Colombia, the United States refused to countenance the same policy in Afghanistan. “We cannot be in a situation where we remove the only source of income of people who live in the second poorest country in the world without being able to provide them with an alternative,” said NATO spokesman James Appathurai.
Not everyone agreed, however, that a passionate commitment to defending the quality of life of the poorest was the actual reason for rejecting the policy. Matthew Hoh, a former captain in the U.S. Marine Corps is one skeptic. Hoh told MintPress that airborne fumigation was not carried out because it would be outside the control of Afghan government officials, who were deeply implicated in the drug trade, owning poppy fields and production plants themselves. “They were afraid that, if they went to aerial eradication, the U.S. pilots would just eradicate willy nilly and a lot of their own poppy fields would be hit.” In 2009, Hoh resigned in protest from his position at the State Department in Zabul Province over the government’s continued occupation of Afghanistan. He told MintPress:
NATO forces were more or less guarding poppy fields and poppy production, under the guise of counterinsurgency. The logic was ‘we don’t want to take away the livelihoods of the people.’ But really, what we were doing at that point was protecting the wealth of our friends in power in Afghanistan. “
According to Hoh, there was widespread disillusionment within the military among service members who had to risk their lives on a day to day basis. “What are we doing here? This is bullshit,” was a common sentiment among the rank and file.
A US Marine stands in a poppy field during a foot patrol at Sangin, Afghanistan. Photo | DVIDS
The heroin trade implicated virtually everyone in power, including Afghan President Hamid Karzai’s brother Ahmed Wali, among the biggest and most notorious drug kingpins in the south of the country, a man widely understood to be in the pay of the CIA.
U.S. attempts to stymie the opium trade, such as the policy of paying domestic militias to destroy poppy fields, often backfired. Locals came up with ways of profiting, such as refraining from planting in one area, collecting large sums of money from occupying forces, and using that cash to plant elsewhere — effectively getting paid both to plant and not to plant. Even worse, local warlords and drug bosses would destroy their rivals’ crops and collect money from the U.S. for doing so, leaving themselves both enriched and in a stronger position than before, having gained NATO forces’ favor.
One notable example of this is local strongman Gul Agha Sherzai, who eradicated his competitors’ crops in Nangarhar Province (while quietly leaving his own in Kandahar Province untouched). But all the U.S. saw was a local politician seemingly committed to stamping out an illegal drug trade. They therefore showered him with money and other privileges. “We literally gave the guy $10 million in cash for rubbing out his competition,” Hoh said. “If you were going to write a movie about this, they’d say ‘This is too far fetched. No one is going to believe this. Nothing is this insane or stupid.’ But that is the way it is.”
McCoy noted that the Taliban was one of the prime beneficiaries of the drug trade, and used it to increase their power and vanquish the U.S.:
That booming opium production, and the U.S. failure to curb it, provided the bulk of the financing for Taliban, who captured a significant but unknown share of the local profits from the drug traffic, which they used to fund guerrilla operations over the past 20 years, becoming a determinative factor in the U.S. defeat in Afghanistan.”
‘The needle and the damage done’
It is not particularly difficult to grow opium. Opium poppies flourish in warm and dry conditions, away from the damp and the wind. Consequently, they have found a fertile home across much of central and western Asia. The plant has flourished in Afghanistan, particularly in southern provinces like Helmand, close to the tripoint where Afghanistan meets Pakistan and Iran. Much of the irrigation system in Helmand was underwritten by USAID, an organization that acts as the CIA’s public-facing front. In full bloom, the poppy fields look spectacular, with beautiful flowers of vibrant pink, red or white. Underneath the flowers, one can find a large seed pod. Farmers harvest these, draining them of a sap which dries into a resin. This is often transported out of the country through the so-called “Southern Route” via Pakistan or Iran. But, as with any pipeline, much of the product is spilled along the way, causing an epidemic of addiction across the region.
The effect on the Afghan population has been nothing short of a disaster. Between 2005 and 2015, the number of adult drug users jumped from 900,000 to 2.4 million, according to the United Nations, which estimates that almost one in three households are directly affected by addiction. While Afghanistan also produces copious amounts of marijuana and methamphetamine, opioids are the drug of choice for most, with around 9% of the adult population (and a growing number of children) addicted to them. Added to this has been a spike in HIV cases, as users share needles, Professor Julien Mercille, author of “Cruel Harvest: U.S. Intervention in the Afghan Drug Trade,” told MintPress.
Only contributing further to the despair has been 20 years of war and U.S. occupation. The number of Afghans living in poverty rose from 9.1 million in 2007 to 19.3 million in 2016. A recent poll conducted by Gallup found that Afghans are the saddest people on Earth, with nearly nine in ten respondents “suffering” and zero percent of the population “thriving,” in their own words. When asked to rate their lives out of a score of ten, Afghans gave an average answer of 2.7, a record low for any country studied. Worse still, when asked to predict the quality of their life in five years, the mean answer was even lower: 2.3.
The effects of the CIA operation to bleed the Soviets dry in Afghanistan have also produced a humanitarian crisis in neighboring Pakistan. As McCoy noted, in the late 1970s, Pakistan had barely any heroin addicts. But by 1985, Pakistani government statistics reported over 1.2 million, turning the two nations into “the global epicenter of the drugs trade” almost overnight.
The problem has only grown since. A 2013 U.N. report estimated that almost 7 million Pakistanis use drugs, with 4.25 million requiring urgent treatment for dependency issues. Nearly 2.5 million of these people were abusing heroin or other opioids. Around 700 people die every day from overdoses. The highest rate of dependency is, unsurprisingly, in provinces on the Afghan border where heroin is manufactured. The same U.N. study notes that 11% of people in the northwestern province of Khyber Pakhtunkhwa use illicit substances — primarily heroin.
The drug crisis, of course, is also a medical crisis, with overstretched public hospitals filled with drugs-related maladies. The social stigma of addiction has ripped families apart while the money and power illicit drugs have brought has turned many towns into hotspots of violence.
Iran has a similar number of opioid users, generally estimated at between two and three million. In towns close to the Afghan/Pakistani border, a gram of opium can be bought with loose change — between a quarter and fifty cents. Thus, despite the extremely harsh penalties for drug possession and distribution on the official books, the country has the highest addiction rate in the world
On a micro level, addiction tears apart families and ruins lives. On an international scale, however, the opium boom has placed an entire region under significant strain. Therefore, one consequence of U.S. policy in the Middle East — from supporting jihadists to occupying nations — has been to unleash a worldwide opium addiction that has made a few people fantastically wealthy and destroyed the lives of tens of millions.
Domestic despair
The boom in production has also led to a worldwide disaster. In the past decade, opioid-related deaths increased by 71% globally, according to the United Nations. Much of the product grown by Afghan warlords ends up on Western streets. “I don’t see how it can be a coincidence that you have that explosive growth in poppy production in Afghanistan and then you have the worldwide opioid epidemic,” Hoh stated, a connection that raises the question of whether users in Berlin, Boston, or Brazil should be seen as victims of the war in Afghanistan as much as fallen soldiers are. If so, the numbers would be staggering. Nearly 841,000 Americans have died of a drug overdose since the war in Afghanistan began, including more than 70,000 in 2019 alone. The majority of these have involved opioids.
Officially, the DEA claims that essentially all illicit opioids entering the U.S. are grown in Latin America. Hoh, however, finds this unconvincing. “When you look at their own information and their reports on the illicit opioid production hectarage in Mexico and South America, it is clear that there is not enough production in the Western hemisphere to meet the demand for illicit opiates in the U.S.,” he told MintPress.
A dirty history
The U.S. government has a long history of directly involving itself with the worldwide narcotics trade. In Colombia, it worked with President Alvaro Uribe on a nationwide drug war, even as internal U.S. documents identified Uribe as one of the nation’s most important drug traffickers, an employee of the infamous Medellin Cartel and a “close personal friend” of drugs kingpin Pablo Escobar. Profits from drug-running funded Uribe’s election runs in 2002 and 2006.
General Manuel Noriega was also a key ally of the U.S. For many years, the Panamanian was on the CIA payroll — despite Washington knowing he was involved in drug trafficking since at least 1972. When he became de facto dictator of Panama in 1984, little changed. But the director of the Drug Enforcement Agency initially praised him for his “vigorous anti-drug trafficking policy.” Eventually, however, the U.S. decided to invade the country and capture Noriega, sentencing him to 40 years in federal prison for drug crimes largely committed while he was still in the CIA’s pay.
At the same time as this was going on, investigative journalist Gary Webb exposed how the CIA helped fund its dirty war against Nicaragua’s leftist government through sales of crack cocaine to black neighborhoods across the United States, linking far-right paramilitary armies with U.S. drug kingpins like Rick Ross.
An Afghan farmer collects raw opium from poppy plants in his field in Chaparhar, Afghanistan. Nisar Ahmad | AP
To this day, the U.S. government continues to support Honduran strongman Juan Orlando Hernandez, despite the president’s well-established connections to the cocaine trade. Earlier this year, a U.S. court sentenced Hernandez’s brother Tony to life in prison for international drug smuggling, while Juan himself was an unindicted co-conspirator in the case. Nevertheless, President Hernandez has proven himself effective at suppressing the anti-imperialist Left inside his country and cementing the U.S.-backed 2009 military coup, one reason he is unlikely to face charges in the near future.
Using the illegal drug trade and the profits from it to fund imperial objectives has been a constant of great empires going back centuries. For instance, in the 1940s and 1950s, the French Empire utilized opium crops in the so-called “Golden Triangle” region of Indochina in order to help beat back a growing Vietnamese independence movement. Going further back, the British used its opium machine to subdue and economically conquer much of China. Britain’s insatiable thirst for Chinese tea was beginning to bankrupt the country, as the Chinese would accept only gold or silver as payment. It therefore used the power of its navy to force China to cede Hong Kong, from which Britain began flooding China with opium it grew in its possessions in South Asia.
The humanitarian impact of the Opium War was staggering. By 1880, the British were inundating China with over 6,500 tons of opium every year — equivalent to many billions of doses, causing massive social and economic dislocation as China struggled to cope with a crippling, empire-wide addiction. Today, many Chinese still refer to the era as “the century of humiliation.” In India and Pakistan, too, the effect was no less dramatic, as colonists forced farmers into planting inedible poppy fields (and, later, tea) rather than subsistence crops, causing waves of huge famines, the frequency of which had never been seen before.
Millions of losers
The story is much more nuanced than some “CIA controls the world’s drugs” conspiracy theories make out. There are no U.S. soldiers loading up Afghan carts with opium. However, many commanders are knowingly enabling warlords who do. “The U.S. military and CIA bear a large responsibility for the opium production boom in Afghanistan,” Professor Mercille said, explaining:
Post-9/11, they basically allied themselves with a lot of Afghan strongmen and warlords who happened to be involved in some way in drug production and trafficking. Those individuals were acting as local allies for the U.S. and NATO, and therefore were largely protected from retribution or arrest for drug trafficking because they were U.S. allies.”
From the ground, the war in Afghanistan has looked a lot like the war on drugs in Latin America and previous colonial campaigns in Asia, with a rapid militarization of the area and the empowerment of pliant local elites, which immediately begin to embezzle the massive profits that quietly disappear into black holes. All the while, millions of people pay the price, suffering inside a militarized death zone and turning to drugs as a coping mechanism. In the story of the opium boom, there are few winners, but there are millions of losers.
Government
Delivering a Real-time Genomics OS to Healthcare
When the opportunity arose to work with population genomics company Helix on a large genomic screening program, Judge was incredibly enthusiastic. With…

Director of the Cardiovascular Genetics Program and Fellowship Director for Cardiovascular Disease
The Medical University of South Carolina (MUSC)
When Daniel Judge, MD, director of the Cardiovascular Genetics program and fellowship director for cardiovascular disease at The Medical University of South Carolina (MUSC), moved over from John Hopkins a bit over five years ago, the use of genetics in clinical practice was absent in South Carolina.
“When you ask a clinician what genetics means, it’s often infants with phenylketonuria (PKU) or inherited disorders of metabolism,” Judge told Inside Precision Medicine. “But for adults with cardiovascular, pulmonary, or renal disease, not everyone uses genetics routinely in practice.”
So when the opportunity arose to work with population genomics company Helix on a large genomic screening program, Judge was incredibly enthusiastic.
“Here’s an opportunity for us and MUSC to stand apart from the large for-profit hospital centers that operate around the state, and for us to provide an academic and improved healthcare approach to things,” said Judge. “This was the opportunity for clinicians who have been doing good clinical work to bring genetics into their practice.”
In 2021, MUSC launched “In Our DNA, SC,” a first-of-its-kind genomics program to drive preventive, precision health care for South Carolinians. The statewide initiative has set out to enroll 100,000 patients in genetic testing over the next four years at no cost to the patients.
Walking the walk
Excluding COVID-19, the top cause of death in South Carolina is heart disease, followed by cancer. In the time that In Our DNA SC has been up and running, the cancer and heart disease rates haven’t yet begun to go down, but that’s the goal. Judge estimates that the program has detected about 175 positive results, which are split across breast cancer, colon cancer, and hyperlipidemia.
“Many of those patients with those results were quite surprised because they don’t have a family history of cancer or heart disease,” said Judge. “It’s nice to diagnose it because we’re seeing the ability to prescribe medications on the clinical side that are available more readily for people with familial hyperlipidemia or hypercholesterolemia.”
Judge is excited about the opportunity to provide an academic and improved healthcare approach. “It’s an opportunity for clinicians who have been doing great clinical work but haven’t integrated genetics into their primary care, or whatever that practice might be,” he said. “I think the use of genetics in clinical practice…is entering that mainstream. The patient benefits, and the family benefits.”
Judge’s experience in clinical genetics started about twenty years ago, and “I’ve always seen this pattern: once people see a successful use of something like this, they want to do more of it,” he said. “I think our clinicians will witness success with their patients and will want to see more.”
Making genomics part of real-time care

Founder, Helix
Behind the scenes of the In Our DNA SC initiative is a population genomics company called Helix that strives to accelerate the integration of genomic data into patient care and public health decision-making. Founder James Lu, MD, PhD, has dreamt of a world where genetic testing will provide a real-time response versus one that takes weeks. He set his sights on offering top-tier provider and patient experiences by making genomics a part of the healthcare fabric.
Lu thinks the best way to deliver genomics as a data stream or operating system within healthcare is to work with health systems. “Most of our partnerships are with large-scale health systems and are focused on large-scale, population-level programs,” said Lu. “Typically, a hundred thousand people plus, where they inevitably believe that this is going to become the standard of care over time.”
Lu believes that health systems will want to do this because it allows them to identify patients who are clearly at risk and are hiding in plain sight, such as carriers of well-established deleterious DNA variants. Helix went the route of whole exome sequencing (WES) rather than looking at an entire genome, as Lu believes that the coding regions contain almost all the relevant genomic data for clinical decision-making.
With its genomics data, Helix is currently narrowly focused on the diseases that are part of the CDC Tier 1 genomic application toolkit. This set addresses the nearly two million people in the United States who are at increased risk for adverse health outcomes because they have genetic mutations that predispose them to one of three conditions: hereditary breast and ovarian cancer syndrome (HBOC), Lynch syndrome (LS), or familial hypercholesterolemia (FH). The healthcare system currently has a poor understanding of these conditions, and many affected people and their families are unaware that they are at risk; however, early detection and intervention could significantly lower morbidity and mortality.
The type of work that Helix is doing enables health systems to create fresh population health and value-based care algorithms to manage the health of larger populations. Over time, health systems want to drive the cost of care down while improving the quality of patient experiences.
From sea to shining sea
In addition to In Our DNA, SC, Helix currently has five other major programs running across the country that represent over 100,000 people in total, representing potentially one of the largest-scale programs across America’s health systems.

VP of primary care, clinic operations, and laboratories HealthPartners
In addition to South Carolina, Helix is located in Minnesota, where it is working with HealthPartners on a program called “myGenetics.” This large-scale community health research program, which launched in May 2022, is a first of its kind in Minnesota. Implementing this requires knowing what information to analyze, interpret, and communicate to patients, which Leslie Dockan, VP of primary care, clinic operations, and laboratories at HealthPartners, said aligns nicely with its and Helix’s core principle of providing clinicians with clear decision support.
The myGenetics program is free to the patient, given that it is a research project and the goal is to further biomedical understanding. “We wanted to create workflows that were easy for patients and weren’t disruptive to patient visits in the clinic, because our primary care clinicians have so many responsibilities and so many things that are happening,” said Dockan. This required HealthPartners to work closely with its electronic medical group and Helix to create a seamless workflow.

A day in the myGenetics life
After signing up and consenting electronically, the patient gets an automatic email to schedule their lab appointment at a pace that suits them. “They can take their time, ask questions, and review the information at a time when they’re comfortable, not feeling pressured to move into this,” said Dockan.
Once the appointment is scheduled, the patient gives a blood sample and receives clear information on what to expect, including how long sample processing takes and the information researchers will be looking for. From the results, HealthPartners shares information with the patient about the genes that it has screened for and what the results mean, in addition to facts about the patient’s ancestry and other genetic insights.
While this is happening, the clinical results for the CDC Tier 1 Genomic Applications Toolkit gets fed into the patient’s clinical record for any positive results. In the case of such a result, a nurse calls the patient and notifies them of the result, and offers a no obligation appointment with a genetic counselor to talk about their risk, what their results mean, and any additional testing that might be needed. Direct referrals get set up with a specialist. “If you need an oncology, cardiac, or a gastroenterology referral, we do that work for them, put the referral in, order any follow-up labs that may be needed, and set them on a clear clinical pathway,” said Dockan.
This information also goes to the primary care physician as part of the patient’s medical record, which impacts their future health maintenance, namely, how often screening occurs. “If they have a genetic variant, it doesn’t necessarily mean that they have the disease or will get the disease,” said Dockan. “So, we follow them closely and then have that as a part of their ongoing health maintenance and preventative care.”
Dockan said that genomics will be brought into everyday care, such as with pharmacogenomics. “Physicians will be able to see that there are drug-gene interactions,” said Dockan. “If your physician starts to order a drug that’s not going to be compatible with your genetic makeup and how you metabolize drugs, then we want to be able to alert your clinician at the time of order and have them be able to give you an alternative. Today, we have many people on drugs that just don’t work for them, and no one knows why.”
Outreach in every corner
As of June 2023, myGenetics has had 25,000 people consent, which is about the annual number its organizers are shooting for. “We’re starting to see positive results and have more people who are benefiting from this work in a positive way and learning things about themselves,” said Dockan. “We just identified our first early cancer—someone who was underage and not yet even at screening age came back positive for BRCA2. We ended up doing follow-up screening and an MRI, and we found cancer. She’s crediting the program with potentially saving her life.”

Dockan would like to see the next step of the program’s outreach be to everyone who’s due for their annual physical or a preventative exam. “We want to offer it with all of our mammography screenings,” said Dockan. “We have amazing screening rates for mammography, and this is just another layer that takes it even further.”
Dockan also wants to make sure that myGenetics is reaching underserved communities. She tells a story about a black woman in her fifties who has a long history of breast cancer in her family and found out that she was positive for one of the gene variants that put her at higher risk. Dockan thinks that this story can have a major influence on the communities of black women in Minnesota. Not only is there a benefit in getting the word out so that people get better immediate treatment, but the myGenetics team knows that patients of color are underrepresented in a lot of research databases and wants to help fuel new therapies and other ways of fighting disease in local underserved populations.
Judge laments that the program wasn’t in place several years earlier so that it could have worked in time for a famous South Carolina resident, Chadwick Bozeman. The actor developed metastatic colon cancer in his late thirties, well before colon cancer screening was done. Part of the plan for In Our DNA SC is to become one of the top-enrolled genomic screening programs for non-white participants. “We are in the southeast U.S., and while we are in the 15–16% range, we want to be like 30% of our participants who are non-white, predominantly black, representing our state,” said Judge. “When we look at what our goal is for inclusion in this program, we want the demographics in our publications to look like the state of South Carolina. We’re not there yet.”
Jonathan D. Grinstein’s wonder for the human mind and body led him to an undergraduate education in Neural Science and Philosophy and a doctorate in Biomedical science. He has 10 years of experience in experimental and computational research, during which he was a co-author on research articles in journals such as Nature and Cell. Since then, Jonathan hung up his lab coat and has explored positions in science writing and editing. Jonathan’s science writing work has been featured in Scientific American, Genetic Engineering and Biotechnology News (GEN), and NEO.LIFE.
The post Delivering a Real-time Genomics OS to Healthcare appeared first on Inside Precision Medicine.
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As Mortgage Rates Hit 8%, US Housing Affordability At Lowest Level Since The ’80s
As Mortgage Rates Hit 8%, US Housing Affordability At Lowest Level Since The ’80s
Update (1320ET): The average rate on the popular 30-year…

Update (1320ET): The average rate on the popular 30-year fixed mortgage rate hit 8% Wednesday morning, according to Mortgage News Daily.
That is the highest level since mid-2000.
“Here’s another milestone that seemed extreme several short months ago,” said Matthew Graham, chief operating officer of Mortgage News Daily.
“The fact is that many borrowers have already seen rates over 8%. That said, many borrowers are still seeing rates in the 7s due to buydowns and discount points.”
As CNBC reports, to put it in perspective, a buyer purchasing a $400,000 home with a 20% down payment would have a monthly payment today of nearly $1,000 more than it would have been two years ago.
* * *
As Andrew Moran detailed earlier via The Epoch Times, the U.S. housing market has witnessed a slowdown in activity this year due to tighter supply, says Thomas Barkin, the president of the Federal Reserve Bank of Richmond.
Speaking at a Real Estate Roundtable event in Washington, D.C., Mr. Barkin explained that home prices have remained strong in an environment of higher interest rates and slowing sales volumes.
But the industry has been pining for lower rates, he noted.
"You may know that the last time the Fed tackled high inflation, in the ’80s, homebuilders sent Paul Volcker two-by-fours inscribed with the message: Lower interest rates," he said.
In a letter to Fed Chair Jerome Powell by the National Association of Home Builders, the Mortgage Bankers Association, and the National Association of Realtors, the central bank was urged not to pull the trigger on more rate hikes.
"Further rate increases and a persistently wide spread pose broader risks to economic growth, heightening the likelihood and magnitude of a recession," the letter stated.
A treasure trove of data and research shows that further Fed tightening could exacerbate current conditions in the real estate sector, especially regarding affordability.
Housing Affordability Challenges
With supply failing to keep up with demand and mortgage rates marching toward 8 percent, housing affordability deteriorated to a fresh all-time low in August, new industry data show.
The NAR Housing Affordability Index clocked in at 91.7 in August, down from 93.9 in July - anything below 100 indicates a household with a median income does not earn enough to be approved for a mortgage on a median-priced home. This was the lowest reading since at least the early 1980s.
NAR figures highlighted that the typical family needed to earn $107,232 in August to qualify for a mortgage, based on a 20 percent downpayment. It was the third consecutive month of a six-figure headline number.
Meanwhile, the organization reported that the average family spent more than one-quarter (27 percent) of their income on annual mortgage payments.
Housing inventories have worsened over the past year. Existing home sales have declined in 13 of the last 15 months, including a 0.7 percent drop in August.
The challenge faced by the U.S. real estate market today is that homeowners are not erecting for-sale signs on their front lawns.
When the Federal Reserve slashed interest rates to nearly zero during the coronavirus pandemic, mortgage rates crashed to their lowest levels on record.
According to the Freddie Mac Primary Mortgage Market Survey (PMMS), the 30-year fixed-rate mortgage collapsed to 2.77 percent in August 2021. For the week ending Oct. 12, 2023, it is close to a 23-year high of 7.6 percent.
Home prices have also surged since the public health crisis, rising nearly 30 percent to a median sales price of $416,100.
The mix of high mortgages and prices has prevented the new generation of homebuyers from achieving the American dream of homeownership. However, anyone who purchased a home before the U.S. central bank launched its quantitative tightening cycle is in good shape: a 2 to 4 percent 30-year mortgage rate and a residential property that has accumulated plenty of equity.
This past summer, a Redfin analysis revealed that 92 percent of homeowners enjoyed a mortgage rate below 6 percent, offering minimal incentive for owners to sell their properties and move to another home with a higher rate. Nearly one-quarter (24 percent) maintain a rate below 3 percent, close to a record high achieved in the first quarter of 2022.
Ultimately, it could be a tale of two housing market participants.
Andy Walden, the ICE vice president of enterprise research, warned that incomes would have to spike 55 percent or home prices would have to collapse 35 percent to restore affordability.
"Those are massive movements we're talking about, and none of them are going to happen in a vacuum, and none of those one single factors are going to make the move," Mr. Walden told CNBC earlier this month.
Mortgage Rates Now and Beyond
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) found that builder confidence in the real estate market for newly constructed single-family homes slumped for the third consecutive month in October. They are seeing lower levels of buyer traffic as some buyers, including the younger families, are "priced out of the market because of higher interest rates," says NAHB Chairman Alicia Huey, a custom home builder and developer.
"Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability," Ms. Huey added.
A construction worker carries materials as he works on a home under construction at a housing development in Petaluma, Calif., on March 23, 2022. (Justin Sullivan/Getty Images)
NAHB Chief Economist Robert Dietz noted that one of the primary tools available to solve the housing affordability crisis is contributing "attainable, affordably supply."
"Boosting housing production would help reduce the shelter inflation component that was responsible for more than half of the overall Consumer Price Index increase in September and aid the Fed’s mission to bring inflation back down to 2%," he said. "However, uncertainty regarding monetary policy is contributing to affordability challenges in the market.”
The September consumer price index (CPI) shelter index is up 7.2 percent compared to a year ago.
While the futures market is pricing in the Fed, keeping rates unchanged at the November and December Federal Open Market Committee (FOMC) policy meetings, the central bank’s Summary of Economic Projections suggests officials are planning one more rate hike this year.
In addition, Treasury yields have been accelerating, with the 2-, 10-, and 30-year yields touching their highest levels in 16 years. The volatility in the bond market has played a critical role in the housing market because mortgage lenders tie their interest rates closely to Treasury bond rates.
As a result, Fannie Mae projects that mortgage rates will hover in the 7 percent range for most of next year before sliding to 6.7 percent by the end of 2024.
"In many ways, the housing market experienced four years of business in a two-year period between mid-2020 and mid-2022," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.
"With ongoing affordability constraints and rising mortgage rates, much of that activity has essentially been given back. We expect the higher mortgage rate environment to continue to dampen housing activity and further complicate housing affordability into 2024."
The FOMC will hold its next two-day policy meeting on Oct. 31 and Nov. 1.
Spread & Containment
Backlash forces Goldman Sachs CEO to give up side gig he absolutely loves
It was the day the music died at Goldman Sachs as the CEO reportedly packs in his side hustle.

Hey, Mr D.J.--get back to work!
Everyone knows that party can't get started until the DJ shows up.
Weddings, private parties, holiday bashes, you need somebody to spin records, get people dancing and to make sure that nobody's car is blocking the driveway.
Related: Elon Musk takes a shot at Tesla's most prominent U.S. electric vehicle rival
Just think of some the legendary DJs, such as Grandmaster Flash, Frankie Knuckles, David Guetta, and, of course, DJ D-Sol.
Craig Barritt/Getty Images for Casamigos
Wait, what? Who was that last guy?
Proceeds go to charities
DJ D-Sol is the nom de disc of David Solomon, whose day job is chairman and CEO of Goldman Sachs (GS) - Get Free Report.
Solomon, 61, has performed a variety of high-profile gigs in recent years, including a performance last summer at the Lollapalooza music festival in Chicago.
However, the top executive has changed his tune and pulled the plug on his musical side hustle, according to the Financial Times.
His hobby reportedly hit a sour note in some circles within the company, who felt that his DJ schtick created a distraction from his work leading the Wall Street firm, the publication reported, citing people with knowledge of the decision.
Some folks were uneasy about his decision in 2019 to perform at Tomorrowland, a Belgian music festival known for heavy drug taking.
Solomon, who was named chief executive in 2018, also apologized to Goldman’s board in 2020 after he DJed at a 2020 event in the Hamptons resort area of New York that was criticized for blowing off social distancing rules during the Covid-19 pandemic.
His interest in DJing started more than a decade ago when he was working on a financing deal for a Las Vegas casino. He has said that proceeds from his performance have gone towards charities combating addiction.
'Music not a distraction'
Few colleagues remarked on his hobby before he became CEO, but his decision to keep it up after taking over the top spot was controversial for some employees who felt it brought unwelcome attention.
Amid all this, Solomon has been under fire from some investors over the bank's lackluster profits.
In the second quarter, Goldman posted its lowest quarterly profit in three years, as a costly retreat from consumer banking was compounded by the industry-wide slowdown in deals and trading
The investment bank posted better-than-expected third quarter earnings on Oct. 17, but booked more than $800 million in write downs linked to its real estate and home improvement lending divisions.
Goldman Sachs maintains that any controversy about Solomon's deejaying is just so much chin music.
"This is not news," spokesman Tony Fratto told the Financial Times. "David hasn’t publicly DJed an event in well over a year, which we have confirmed multiple times in the past."
"Music was not a distraction from David’s work," Fratto added. "The media attention became a distraction."
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