New DVDs By Michael Snyder
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 This week headlines across the United States screamed that new home sales in the U.S. had declined to the lowest level since the U.S. government began keeping track in 1963. But in the news stories covering this data in the mainstream media, they were always very careful to give their readers lots of reasons why things are going to “get back to normal” very soon. But the truth is that is simply not going to happen. Right now the United States is heading for another real estate crash. The only thing that has been holding it back was the huge bribe (called a tax credit) that the U.S. government was giving people to buy houses. Now that the tax credit has expired, there is no artificial incentive to buy homes and the real estate market has fallen through the floor. Unfortunately, there is every indication that things are going to get even worse. Read on to find out why….
The following are 7 reasons why the U.S. real estate market is already a total nightmare….
#1) In May, sales of new homes in the United States dropped to the lowest level ever recorded. To be more precise, new home sales dropped 32.7 percent to a seasonally adjusted annual rate of 300,000. A “normal” level is about 800,000 a month. New homes have never sold this slowly ever since the U.S. Commerce Department began tracking this data back in 1963.
#2) The median price of all new U.S. homes sold in May was $200,900, which represented a 9.6% drop from May 2009. If prices are still falling on new homes that means that the real estate nightmare is not over.
#3) New home sale figures for the previous two months were also revised down sharply by the government. Apparently their previous estimates were far too optimistic. But those were supposed to be really good months for home sales with so many Americans taking advantage of the tax credit right before the deadline. So the fact that the data for the previous two months had to be revised downward so severely is a very bad sign.
#4) Newly signed home sale contracts in the U.S. dropped more than 10% in May.
#5) According to the U.S. Commerce Department, housing starts in the U.S. fell approximately 10 percent in May, which represented the biggest decline since March 2009.
#6) Internet searches on real estate websites are down about 20 percent compared to this same time period in 2009.
#7) The “twin pillars” of the mortgage industry are a complete and total financial mess. The Congressional Budget Office is projecting that the final bill for the bailouts of Fannie Mae and Freddie Mac could be as high as $389 billion. Both Fannie Mae and Freddie Mac continue to hemorrhage cash at an alarming rate, but the truth is that without them there wouldn’t be much of a mortgage industry left in the United States.
The following are 7 reasons why things are going to get even worse….
#1) The massive tax credit that the U.S. government was offering to home buyers has expired. This tax credit helped stabilize the U.S. real estate market for many months, but now that it is gone there is no more safety net for the housing industry.
#2) Foreclosures continue to set all-time records. In fact, the number of home foreclosures set a record for the second consecutive month in May. Not only that, but the number of newly initiated foreclosures rose 18.6 percent to 370,856 in the first quarter of 2010. A rising tide of foreclosures means that there is going to be a growing inventory of foreclosed homes on the market. As of March, U.S. banks had an inventory of approximately 1.1 million foreclosed homes, which was up 20 percent from a year ago. There is no indication that the number of foreclosed homes that need to be sold is going to decrease any time soon. This is going to have a depressing effect on U.S. home prices.
#3) Another giant wave of adjustable rate mortgages is scheduled to reset in 2011 and 2012. This “second wave” threatens to be as dramatic as the first wave that almost sunk the U.S. mortgage industry in 2007 and 2008. Unfortunately, what this is going to cause is even more foreclosures and even lower home prices.
#4) Banks and lending institutions have been significantly tightening their lending standards over the past several years. It is now much harder to get a home loan. That means that there are less potential buyers for each house that is on the market. Less competition for homes means that prices will continue to decline.
#5) Home prices are still way too high for most Americans in the current economic environment. Based on current wage levels, house prices should actually be much lower. So the market is going to continue to try to push home prices down to a point where people can actually afford to buy them. Right now Americans can’t even afford the houses that they already have. The Mortgage Bankers Association recently announced that more than 10% of all U.S. homeowners with a mortgage had missed at least one mortgage payment during the January to March time period. That was a new all-time record and represented an increase from 9.1 percent a year ago.
#6) The overall U.S. economy is caught in a death spiral. Unemployment remains at frightening levels, a large percentage of Americans are up to their eyeballs in debt and more than 40 million Americans are now on food stamps. If people don’t have jobs and if people don’t have money then they can’t buy houses.
#7) The Gulf of Mexico oil spill is the greatest environmental disaster in U.S. history, and it is threatening to become one of the greatest economic disasters in U.S. history. Already, real estate agents along the Gulf coast are reporting that the oil spill has completely killed the real estate industry in the region. As this disaster continues to grow worse by the day, homes in the southeast United States will continue to look less and less appealing. In fact, many are now projecting that the crisis in the Gulf will actually crush the housing industry from coast to coast.
So honestly there is not a lot of reason to think that the housing industry in the U.S. is going to rebound any time soon. In fact, for those waiting for a “rebound” the truth is that we have already seen it. Where we are headed next is the second dip of the “double dip” that so many of the talking heads on CNBC have been talking about. For those seeking to sell their homes this is really bad news, but for those looking to buy a home this is actually good news.
Who knows? Home prices may actually come down to a point where many of us can actually afford to purchase a home.
 Over the past several months, many in the mainstream media have hailed the slight improvement in the U.S. real estate market as a “housing recovery”. But the truth is that the small improvement in the numbers was primarily due to a significant number of Americans attempting to squeeze their home purchases in before the huge home buyer tax credit expired at the end of April. Now that there is no more giant tax incentive, real estate professionals all over the United States are fearing the worst. Mortgage defaults and foreclosures are still at record levels, and a giant “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012. In addition, there are numerous indications that the U.S. economy as a whole is going to experience a dramatic downturn shortly, and if that happens it is going to be really bad news for the housing industry. So are we about to see “Housing Crash Part 2″?
The reality is that it has taken unprecedented U.S. government intervention to even stabilize the U.S. housing market. Now that the tax credit has expired, and as the U.S. economy continues to worsen, there is simply no way (except if we see hyperinflation at some point) that housing prices are going to return to the levels that we saw during the height of the housing bubble.
Banks and other lending institutions all across the U.S. have seriously tightened their lending standards and so it is now much more difficult to get approved for a mortgage. That means that there are going to be less home buyers in the marketplace.
In addition, while mortgage rates are at record lows right now, the truth is that they will not stay there indefinitely. When interest rates do start to rise that is going to suck even more home buyers out of the market.
Truthfully, the housing market is not going to be as good as it was during the first several months of 2010 for quite some time. The entire U.S. economy is on the verge of collapse, and when it does the real estate industry is going to be one of the first to feel the pain.
The following are 12 reasons why the U.S. housing crash is far from over….
#1) Now that the huge home buyer tax credit (government bribe to purchase homes) has expired, the real estate industry is bracing for the worst. The truth is that a significant percentage of those Americans that planned to buy a home in 2010 really tried to squeeze their purchases in before the April 30th deadline in order to take advantage of the tax incentive. According to mortgage consultant Mark Hanson, “buyers were bidding on everything and sellers were accepting anything and everything before 4/30.” Now that the tax credit is over, things could get really slow for the U.S. real estate market.
#2) A massive “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012. In fact, there are many analysts that are openly speculating that this second wave could be even more brutal than the first wave that we experienced in 2007 and 2008.
#3) The number of home sale closings in May was down more than 5% compared to April.
#4) Newly signed home sale contracts dropped more than 10% in May.
#5) There has been an even more dramatic decline in mortgage applications. In fact, home purchase applications are now almost 40 percent below the level of just four weeks ago.
#6) Internet searches on real estate websites are down 20 percent compared to this same time period in 2009.
#7) From all indications, a record number of foreclosures is going to continue to flood the market. The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period. That was a record high and up from 9.1 percent a year ago.
#8) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a whopping 35 percent increase from the first quarter of 2009.
#9) A staggering 24% of all homes with mortgages in the United States were underwater as of the end of 2009.
#10) People can’t buy houses if they are flat broke. For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
#11) The truth is that American consumers are stretched to the limit and are increasingly finding it very difficult to pay their bills. During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.
#12) The overall U.S. economy is in really bad shape and is rapidly getting worse. If American workers cannot find good jobs and if they keep going bankrupt in record numbers they simply are not going to be able to buy homes in 2010 or any year thereafter.
Those who are projecting a robust housing recovery are living in some kind of fantasy world. It is just not going to happen. Let’s just hope that things don’t get as bad as the numbers seem to indicate that they might. Another devastating housing crash would just suck the life right out of the U.S. economy. So let us hope for the best but also let us be prepared for the worst.
 In 2010, record numbers of Americans are defaulting on their mortgages. For most of them, it is because they simply cannot afford the mortgage payments any longer. But for a growing number of Americans, the decision to stop paying on a mortgage is not because of financial hardship. Rather, after taking a hard look at the numbers, many Americans are simply deciding to walk away rather than continuing to make monthly payments on a home that has dramatically declined in value. It is called a “strategic default”, and it is a phenomenon that is sweeping the nation. So why have strategic defaults increased so dramatically? Well, in some areas of the United States, homes are only worth about half of what they were going for at the height of the market. So what is the morally right thing to do in that situation? Should someone “honor the contract” that they signed and continue making payments no matter how hard it hurts, or is the morally right thing to stop making payments on the mortgage in order to put your family in a better financial position?
The truth is that the answers to these questions are not easy.
In the past year it is estimated that at least a million Americans who can afford to stay in their homes simply walked away.
Take a moment and think about that.
A million Americans that have simply walked away from their homes.
This is something that is absolutely unprecedented in American history.
In fact, 31 percent of all foreclosures in March were deemed to be “strategic defaults” by researchers at the University of Chicago and Northwestern University. That is up from just 22 percent in March 2009.
So the strategic default trend is accelerating.
And with more than 24% of all homes with mortgages in the United States underwater as of the end of 2009, it is likely that we are going to see a whole lot more strategic defaults.
This is particularly true in areas that were hurt the worst by the real estate crash. In Arizona for example, it is estimated that 50 percent of all homes are underwater, and in Nevada it is estimated that a whopping 65 percent of all homes are underwater.
That is a whole lot of families that have some very hard decisions to make.
But it just isn’t families that are making these kinds of decisions. Even the biggest financial institutions in the United States have committed strategic defaults. For example, Morgan Stanley walked away from five San Francisco office buildings they bought at the height of the real estate boom.
But is it the right thing to do?
Well, let’s look at both sides of the issue.
Why many would say that strategic defaults are morally acceptable….
Many Americans have no problem at all walking away from their mortgages. After all, they would argue, they never agreed to pay twice what a house is worth.
If they signed up for a $400,000 mortgage, they would argue that they expect to be making payments on a house that is worth somewhere around $400,000.
So is that unreasonable?
After all, if a $400,000 house goes down to $200,000, there are many that would argue that it represents an unforeseen circumstance that negates the deal.
Others would argue that bankers tricked millions of Americans into accepting mortgages that they could not possibly afford, and therefore nobody should be crying for the bankers when people quit paying on those mortgages.
In essence, the argument is that the bankers created this mess so the bankers should be the ones to pay the penalty.
Still other Americans are choosing strategic defaults because it enables them to provide for their families during these hard economic times.
For many Americans, often the choice is between paying the mortgage and putting food on the table.
And because of the massive delays in processing foreclosures these days, many people are finding that they can live in their homes “rent free” for months on end after they stop making payments.
In fact, Bank of America’s credit loss mitigation executive, Jack Schakett, has even acknowledged that many home owners have a huge financial incentive to walk away: “there is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers.”
So how much “free rent” are those who have walked away from their mortgages getting?
According to LPS Applied Analytics, the average home owner in foreclosure has been delinquent for 438 days before actually being evicted. That is up from 251 days in January 2008.
The truth is that especially in states where the foreclosure process must go through the courts, the systems are simply being overloaded.
For example, in Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases. Ten years ago, there were only about 4,000.
But there are others that would argue that strategic defaults are 100 percent morally wrong.
Why many would say that strategic defaults are morally wrong….
Those who would say that strategic defaults are wrong would argue that no one put a gun to the head of anyone signing up for a mortgage.
They would argue that “a contract is a contract” and that Americans should fulfill their obligations, no matter how hard it hurts.
The truth is that once upon a time in America, a “strategic default” would have been unimaginable to most people.
Back then, a man was only as good as his word.
Even today, to purposely break a contact is on the same level as purposely telling a lie to many people.
Not only that, but the reality is that a strategic default will ruin your credit for years to come. Many would argue that it is immoral to ruin your family credit for the simple convenience of getting out of a bad mortgage.
In addition, many would argue that it is wrong to take advantage of the banks by exploiting the delay in foreclosure processing – no matter how evil the banks have been.
After all, do two wrongs make a right?
Plus, in some states there may be additional financial penalties even after you walk away.
Kyle Lundstedt, the managing director of Lender Processing Service’s analytics group says that those who do willingly walk away from their homes are playing a very dangerous financial game….
“These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”
Plus, those who do commit strategic defaults raise borrowing costs on the rest of us. In the future, banks are going to have to charge all of us higher interest rates on our mortgages in order to factor in the risk that many Americans will simply walk away from their mortgages if their house values go down.
So is it right for everyone else to suffer in the future so that some can get out of bad mortgages right now?
The truth is that it is not the purpose of this article to answer these questions.
The purpose of this article is simply to raise these questions.
We live in unprecedented economic times, and we are all going to be faced with very hard decisions as we move into a very uncertain future.
Strategic defaults pose some very interesting moral dilemmas, and if you ask 10 different people about strategic defaults you are likely to get 10 different opinions.
So what do you think about strategic defaults?
Is it morally right to decide to simply stop paying your mortgage?
Feel free to leave a comment with your opinion….
 If you listen to the mainstream media long enough, you just might be tempted to believe that the United States has emerged from the recession and is now in the middle of a full-fledged economic recovery. In fact, according to Obama administration officials, the great American economic machine has roared back to life, stronger and more vibrant than ever before. But is that really the case? Of course not. You would have to be delusional to believe that. What did happen was that all of the stimulus packages and government spending and new debt that Obama and the U.S. Congress pumped into the economy bought us a little bit of time. But they have also made our long-term economic problems far worse. The reality is that the U.S. cannot keep supporting an economy on an ocean of red ink forever. At some point the charade is going to come crashing down.
And GDP is not a really good measure of the economic health of a nation. For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving. German citizens were spending increasingly massive amounts of money. But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.
Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase. So just because Americans are spending a little bit more money than before really doesn’t mean much of anything. As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble.
Any “recovery” that the U.S. economy is experiencing is illusory and will be quite temporary. The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.
But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.
So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real….
#1) In what universe is an economy with 39.68 million Americans on food stamps considered to be a healthy, recovering economy? In fact, the U.S. Department of Agriculture forecasts that enrollment in the food stamp program will exceed 43 million Americans in 2011. Is a rapidly increasing number of Americans on food stamps a good sign or a bad sign for the economy?
#2) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005. So can you please explain again how the U.S. real estate market is getting better?
#3) The Mortgage Bankers Association just announced that more than 10 percent of U.S. homeowners with a mortgage had missed at least one payment in the January-March period. That was a record high and up from 9.1 percent a year ago. Do you think that is an indication that the U.S. housing market is recovering?
#4) How can the U.S. real estate market be considered healthy when, for the first time in modern history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together?
#5) With the U.S. Congress planning to quadruple oil taxes, what do you think that is going to do to the price of gasoline in the United States and how do you think that will affect the U.S. economy?
#6) Do you think that it is a good sign that Arnold Schwarzenegger, the governor of the state of California, says that “terrible cuts” are urgently needed in order to avoid a complete financial disaster in his state?
#7) But it just isn’t California that is in trouble. Dozens of U.S. states are in such bad financial shape that they are getting ready for their biggest budget cuts in decades. What do you think all of those budget cuts will do to the economy?
#8) In March, the U.S. trade deficit widened to its highest level since December 2008. Month after month after month we buy much more from the rest of the world than they buy from us. Wealth is draining out of the United States at an unprecedented rate. So is the fact that the gigantic U.S. trade deficit is actually getting bigger a good sign or a bad sign for the U.S. economy?
#9) Considering the fact that the U.S. government is projected to have a 1.6 trillion dollar deficit in 2010, and considering the fact that if you went out and spent one dollar every single second it would take you more than 31,000 years to spend a trillion dollars, how can anyone in their right mind claim that the U.S. economy is getting healthier when we are getting into so much debt?
#10) The U.S. Treasury Department recently announced that the U.S. government suffered a wider-than-expected budget deficit of 82.69 billion dollars in April. So is the fact that the red ink of the U.S. government is actually worse than projected a good sign or a bad sign?
#11) According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. So is that a sign of economic recovery or of economic disaster?
#12) Monstrous amounts of oil continue to gush freely into the Gulf of Mexico, and analysts are already projecting that the seafood and tourism industries along the Gulf coast will be devastated for decades by this unprecedented environmental disaster. In light of those facts, how in the world can anyone project that the U.S. economy will soon be stronger than ever?
#13) The FDIC’s list of problem banks recently hit a 17-year high. Do you think that an increasing number of small banks failing is a good sign or a bad sign for the U.S. economy?
#14) The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke. So what do you think will happen if a significant number of small banks do start failing?
#15) Existing home sales in the United States jumped 7.6 percent in April. That is the good news. The bad news is that this increase only happened because the deadline to take advantage of the temporary home buyer tax credit (government bribe) was looming. So now that there is no more tax credit for home buyers, what will that do to home sales?
#16) Both Fannie Mae and Freddie Mac recently told the U.S. government that they are going to need even more bailout money. So what does it say about the U.S. economy when the two “pillars” of the U.S. mortgage industry are government-backed financial black holes that the U.S. government has to relentlessly pour money into?
#17) 43 percent of Americans have less than $10,000 saved for retirement. Tens of millions of Americans find themselves just one lawsuit, one really bad traffic accident or one very serious illness away from financial ruin. With so many Americans living on the edge, how can you say that the economy is healthy?
#18) The mayor of Detroit says that the real unemployment rate in his city is somewhere around 50 percent. So can the U.S. really be experiencing an economic recovery when so many are still unemployed in one of America’s biggest cities?
#19) Gallup’s measure of underemployment hit 20.0% on March 15th. That was up from 19.7% two weeks earlier and 19.5% at the start of the year. Do you think that is a good trend or a bad trend?
#20) One new poll shows that 76 percent of Americans believe that the U.S. economy is still in a recession. So are the vast majority of Americans just stupid or could we still actually be in a recession?
#21) The bottom 40 percent of those living in the United States now collectively own less than 1 percent of the nation’s wealth. So is Barack Obama’s mantra that “what is good for Wall Street is good for Main Street” actually true?
#22) Richard Russell, the famous author of the Dow Theory Letters, says that Americans should sell anything they can sell in order to get liquid because of the economic trouble that is coming. Do you think that Richard Russell is delusional or could he possibly have a point?
#23) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. In fact, that was almost twice the level of a year earlier. Does that look like a good trend to you?
#24) In March, the price of fresh and dried vegetables in the United States soared 49.3% – the most in 16 years. Is it a sign of a healthy economy when food prices are increasing so dramatically?
#25) 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005. So shouldn’t we at least wait until the number of Americans filing for bankruptcy is not setting new all-time records before we even dare whisper the words “economic recovery”?
 Most people around the globe think of America as a great “capitalist” economic machine, but the truth is that the U.S. financial system is essentially one massive betting parlor at this point. In fact, there has been a whole lot of easy money made in this betting parlor over the past several years by our politicians and by the big financial players down on Wall Street. So how did they make all of this money? They did it by betting against America. By betting that the U.S. economy would do badly, a lot of very powerful people have gotten insanely wealthy. Literally billions of dollars have been made over the past five years simply by betting that the U.S. housing market would go into the toilet. But is all of this “short selling” and are all of these “side bets” actually good for the American economy? How is the U.S. economy supposed to succeed when the big banks and so many of our politicians are actively making bets against it?
Just take a moment and check out some of the folks that have been betting against America….
*A Wall Street Journal analysis of congressional disclosures shows that 13 members of the U.S. Congress or their wives were engaged in substantial short selling during the financial crisis of 2008.
*An individual by the name of Jeff Greene made hundreds of millions of dollars during the real estate collapse by making huge bets against the residential housing market. Now he wants to use some of that money to run for the U.S. Senate in Florida.
*Goldman Sachs openly and brazenly bet against its own clients as the housing market began to implode back in 2007 and 2008, and they made a TON of money by doing so.
*John Paulson (with the assistance of Goldman Sachs) has quickly become one of the richest men in the United States by betting against America. Shorting the subprime mortgage market enabled his firm, Paulson & Co., to make 15 billion dollars in 2007. John Paulson alone made approximately 4 billion dollars that year.
*Legendary investor Warren Buffett said on Saturday that he’s bearish about the ability of all currencies to hold their value over time because of massive deficits being run up by governments in the wake of the global financial crisis.
*The Federal Reserve holds credit-default swaps on the debt of Florida schools, and on debt owed by the states of Nevada and California. So the Federal Reserve would profit if one of those states defaulted on its debt.
*JPMorgan Chase, Bank of America, and Citigroup are offering “municipal credit default swaps” that enable investors to make big money if U.S. states and cities end up defaulting on their debts.
It is one thing to make a legitimate profit on an investment. It is another thing entirely for the biggest financial institutions in the United States and our politicians to be making massive amounts of money off of the economic collapse of America.
You see, those making huge bets against the U.S. economy also have an incentive to do what they can to make those bets profitable. So for those who have the power to do so, does there come a point where they give the U.S. economy a little “push” in the wrong direction so that their bets will pay off?
The reality is that we have created a financial environment where fear rules. For example, very few people want to back U.S. home loans anymore. So now the U.S. government has to do it. According to Inside Mortgage Finance, U.S. government-related entities backed 96.5% of all U.S. home loans during the first quarter of 2010. This was up from 90% in 2009.
We should really rethink a financial system where a few people make a ton of money off of the fact that everyone else is doing badly. Sure a few people are laughing all the way to the bank, but America as a whole is hurting.
Just consider the following charts. U.S. national income has never experienced such a radically negative change in modern times….
All of these economic problems have caused the revenue of the U.S. government to dramatically decline at the same time expenditures are rocketing into the stratosphere….
As the U.S. economy continues to tank, the U.S. national debt is going to keep spinning wildly out of control. Back in 1980, the U.S. national debt was approximately 1 trillion dollars. Today it is accelerating rapidly as it pushes past 12 trillion dollars and towards 13 trillion dollars….
The truth is that the massive deficits being run up not only by the U.S. government, but by governments all over the world, are something that is clearly not sustainable. In fact, Warren Buffett recently made an interesting remark about how painful it is going to be when the debt party ends….
“How the world weans itself off huge deficit financing is going to be difficult to watch.”
In fact, there are some nations that are in bigger trouble with debt than even the United States is. Japan’s gross public debt has reached 201% of GDP, and the only way that the government of Japan can avoid bankruptcy at this point is by borrowing ever-increasing amounts of money.
But the truth is that this game cannot be played forever.
There has never been a time when so many nations around the world have piled up so much debt so quickly.
When the sovereign debt bubble pops, things are going to get really messy and the dominoes will start falling really quickly.
But when that happens one thing is for certain – there will be a lot of people ready to make a lot of money by betting on the financial failures of others.
 A long time ago, in an America now far, far away, the majority of the American people owned the land that they live on. The term “my land” actually meant something back then. But today that has fundamentally changed. Now the majority of the American people owe on the land that they live on. In fact, most of them owe big money to the giant corporate banking interests that control the mortgage industry. So how did the American people come to be debtors and paupers in the land that our forefathers conquered? Today when someone says that they “bought a house” what they really mean is that they have signed up for 30 years (or more) of bloated mortgage payments which they care barely afford. As you will see below, the percentage of residential mortgage debt to total home equity (housing net worth) in the United States continues to rise at a staggering pace. In fact, thanks to the housing crash, for the first time in American history residential mortgage debt far surpasses the total home equity owned by all Americans. So what does that mean? It means that the big corporate banks have more of an interest in America’s homes than we do now.
So how are we getting our land taken from us?
Well, you can thank rampant inflation and the housing bubble.
Back in 1980, the United States was pushing up towards a total of $1 billion in total residential mortgage debt. It took us over 200 years to get to that point as a nation.
By 1990, the United States approximately doubled that amount and was sitting at about $2 trillion in total residential mortgage debt.
By the year 2000, the United States had just about $5 trillion in total residential mortgage debt.
By 2008, the United States had over $10 trillion in total residential mortgage debt.
Do you notice a trend?
In just the past 30 years the amount of residential mortgage debt in the United States has increased tenfold.
Meanwhile, thanks to the housing crash, home equity has taken a nosedive. As you can see from the chart below, total residential mortgage debt in the U.S. now far exceeds total home equity….
So what does this mean? It means that the banks have more of a financial interest in America’s homes than we do. It means that we are quickly becoming paupers and debt slaves.
As you can see from the chart below, back in 1945 total home equity as a percentage of home value was extremely high (80%). Home equity exceeded total residential mortgage debt by about a 4 to 1 margin. But today total residential mortgage debt exceeds home equity and the situation is rapidly becoming worse….
We were all told to buy into the system and we could live the American Dream. We were told to get a “good job” with one of the big global corporations and we were told to get a mortgage so that we could build up equity. Well, that has turned out great for most of us, hasn’t it?
The reality is that the system so many of us trusted is dying. We are now at the point where the system cannot provide jobs for millions of us anymore. If unemployment continues to soar as it has, millions more of us will find ourselves destitute and homeless on the continent our forefathers conquered….
So how did all of this happen?
Back in 1913, the U.S. Congress gave control over U.S. currency to the Federal Reserve. Since that time, the value of the U.S. dollar has slowly been eroded. $1.00 in 1914 (the year after the Federal Reserve was established) had about the same buying power as $21.59 in 2010. That means that the U.S. dollar has lost over 95 percent of its purchasing power since then.
So the accumulated wealth that our parents and grandparents hand down to us is being constantly devalued. The only way to keep up with rising prices on land and on everything else is to go out into the system to get more of the “currency” that is controlled and manipulated by the Federal Reserve and the big corporate banks. But what most of us don’t realize is that the game is rigged to slowly transfer the wealth of the nation over to them.
The house always wins in the end.
Thanks to the greed and stupidity of the American people, we have accumulated the biggest mountain of debt in the history of the world. It was a fun party while we were piling up all the debt, but now the bankers have us where they want us.
If only we had listened to those among our founding fathers who warned us about this trap.
For example, the words of Thomas Jefferson in a letter to John Taylor dated May 28th, 1816 ring more true today than they ever have….
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
The truth is that the American people are being swindled and most of them don’t even realize it. The wealth of America is slowly being transferred to the big banks. All of the interest that we pay month after month after month makes them rich.
The financial system of the United States is broken. But until the U.S. economy totally collapses most Americans will not realize it. By then it will be far too late.
 Housing prices have stabilized and are actually slightly increasing in some areas. The tax breaks passed by Congress have encouraged more first-time home buyers to get into the market. So is the U.S. housing crisis over? Will the real estate market be back to normal in no time? Well, if you listen to many of the talking heads on the news channels, you might be tempted to think that the worst of the housing crisis is behind us and that we are headed towards recovery. But that is not what is happening. The truth is that we are just now getting ready for round 2 of the real estate nightmare.
Where is the evidence to back that assertion up? Well, just consider the chart below. The delinquency rate on U.S. residential mortgages continues to explode at an exponential rate….
Please note that the rate of mortgage delinquencies is now much, much higher than it was when the housing market was crashing so hard in 2007 and 2008. More people than ever are falling seriously behind on their mortgages, and that means that more homes than ever are in danger of being foreclosed.
Now it is true that there are some signs that the rate of serious mortgage delinquencies is starting to stabilize, but the reality is that we will experience only a momentary pause.
Why?
A massive second wave of adjustable rate mortgages is scheduled to reset beginning this year, and if it goes anything like the “first wave” did, the results could be absolutely catastrophic for the U.S. economy. Just check out the chart below….
This coming second wave could result in another huge mountain of foreclosures being forced on to the market.
So is the housing crisis over?
No.
Not even close.
Unless something really dramatic happens, the U.S. housing market is going to experience pain so intense that it is hard to even imagine. Millions more Americans could lose their homes and scores of banks could end up being shut down.
Let’s hope that things end up being not quite as bad as it looks like they could be.
But you know what they say: “Hope for the best but prepare for the worst”.
 Is the Midwest about to see a massive wave of bank closings? That is apparently what the FDIC is expecting. The FDIC is opening up a massive new satellite office in the Chicago area that will be dedicated to managing receiverships and liquidating assets from failed Midwest banks. This new facility will occupy 7 floors in an 11 floor building. The office space that the FDIC is leasing is well over 100,000 square feet and will employ approximately 500 temporary employees and contractors. This is a huge expenditure by the FDIC. So will there really be so many bank failures over the next couple of years in the Midwest that a 100,000 square foot facility is required to deal with it?
Apparently someone at the FDIC thinks so.
But this is not the first time the FDIC has done something like this.
The FDIC has already opened similar offices in Irvine, California and Jacksonville, Florida. Each time, the number of bank failures in those states increased dramatically after the FDIC opened those facilities.
So what is going to cause such a massive wave of bank failures that the FDIC will need hundreds of new employees just to deal with it?
Well, as we have reported previously, the financial powers in the U.S. are now moving to reduce the money supply, hoard cash and tighten credit. All of those things cause a slowdown in economic growth.
At the same time, a gigantic “second wave” of adjustable mortgages is scheduled to reset starting this year. This could push the U.S. economy into “part 2″ of the housing crisis. Just check out the chart below….
In fact, one new study has been released that estimates that 5 million houses and condominiums on which mortgages are now delinquent will go through foreclosure and be put on the market within the next few years.
Another devastating housing crisis would absolutely destroy the vast majority of small to mid-size banks in the United States. In such a scenario, the FDIC would definitely be able to make use of the new facilities that they are opening up around the United States.
There are even rumors that the big bankers do not intend for most small and mid-size bankers to survive the coming crisis. There are whispers that the big bankers see all of this economic turmoil as a great opportunity to “consolidate” the banking industry.
So what should you and your family do to get prepared? Get out of debt and get rid of any unnecessary expenses. Try to start developing alternate streams of income and come up with a plan for what you will do if you lose your job.
The reality is that hard times are coming and a lot of people are going to lose their homes and their jobs. Don’t just blindly trust “the system” – now is the time to make sure that you and your family will be prepared even if a total economic collapse happens.
 Even though the U.S. financial system nearly experienced a total meltdown in late 2008, the truth is that most Americans simply have no idea what is happening to the U.S. economy. Most people seem to think that the nasty little recession that we have just been through is almost over and that we will be experiencing another time of economic growth and prosperity very shortly. But this time around that is not the case. The reality is that we are being sucked into an economic black hole from which the U.S. economy will never fully recover.
The problem is debt. Collectively, the U.S. government, the state governments, corporate America and American consumers have accumulated the biggest mountain of debt in the history of the world. Our massive debt binge has financed our tremendous growth and prosperity over the last couple of decades, but now the day of reckoning is here.
And it is going to be painful.
The following are 20 reasons why the U.S. economy is dying and is simply not going to recover….
#1) Do you remember that massive wave of subprime mortgages that defaulted in 2007 and 2008 and caused the biggest financial crisis since the Great Depression? Well, the “second wave” of mortgage defaults in on the way and there is simply no way that we are going to be able to avoid it. A huge mountain of mortgages is going to reset starting in 2010, and once those mortgage payments go up there are once again going to be millons of people who simply cannot pay their mortgages. The chart below reveals just how bad the second wave of adjustable rate mortgages is likely to be over the next several years….
#2) The Federal Housing Administration has announced plans to increase the amount of up-front cash paid by new borrowers and to require higher down payments from those with the poorest credit. The Federal Housing Administration currently backs about 30 percent of all new home loans and about 20 percent of all new home refinancing loans. Tighter standards are going to mean that less people will qualify for loans. Less qualifiers means that there will be less buyers for homes. Less buyers means that home prices are going to drop even more.
#3) It is getting really hard to find a job in the United States. A total of 6,130,000 U.S. workers had been unemployed for 27 weeks or more in December 2009. That was the most ever since the U.S. government started keeping track of this statistic in 1948. In fact, it is more than double the 2,612,000 U.S. workers who were unemployed for a similar length of time in December 2008. The reality is that once Americans lose their jobs they are increasingly finding it difficult to find new ones.
#4) In December, there were also 929,000 “discouraged” workers who are not counted as part of the labor force because they have “given up” looking for work. That is the most since the U.S. government first started keeping track of discouraged workers in 1949. Many Americans have simply given up and are now chronically unemployed.
#5) Some areas of the U.S. are already virtually in a state of depression. The mayor of Detroit estimates that the real unemployment rate in his city is now somewhere around 50 percent.
#6) For decades, our leaders in Washington pushed us towards “a global economy” and told us it would be so good for us. But there is a flip side. Now workers in the U.S. must compete with workers all over the world, and our greedy corporations are free to pursue the cheapest labor available anywhere on the globe. Millions of jobs have already been shipped out of the United States, and Princeton University economist Alan S. Blinder estimates that 22% to 29% of all current U.S. jobs will be offshorable within two decades. The days when blue collar workers could live the American Dream are gone and they are not going to come back.
#7) During the 2001 recession, the U.S. economy lost 2% of its jobs and it took four years to get them back. This time around the U.S. economy has lost more than 5% of its jobs and there is no sign that the bleeding of jobs is going to stop any time soon.
#8) All of this unemployment is putting severe stress on state unemployment funds. At this point, 25 state unemployment insurance funds have gone broke and the Department of Labor estimates that 15 more state unemployment funds will likely go broke within two years and will need massive loans from the federal government just to keep going.
#9) 37 million Americans now receive food stamps, and the program is expanding at a pace of about 20,000 people a day. The United States of America is very quickly becoming a socialist welfare state.
#10) The number of Americans who are going broke is staggering. 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008.
#11) For decades, the fact that the U.S. dollar was the reserve currency of the world gave the U.S. financial system an unusual degree of stability. But all of that is changing. Foreign countries are increasingly turning away from the dollar to other currencies. For example, Russia’s central bank announced on Wednesday that it had started buying Canadian dollars in a bid to diversify its foreign exchange reserves.
#12) The recent economic downturn has left some localities totally bankrupt. For instance, Jefferson County, Alabama is on the brink of what would be the largest government bankruptcy in the history of the United States – surpassing the 1994 filing by Southern California’s Orange County.
#13) The U.S. is facing a pension crisis of unprecedented magnitude. Virtually all pension funds in the United States, both private and public, are massively underfunded. With millions of Baby Boomers getting ready to retire, there is simply no way on earth that all of these obligations can be met. Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern’s Kellogg School of Management recently calculated the collective unfunded pension liability for all 50 U.S. states for Forbes magazine. So what was the total? 3.2 trillion dollars.
#14) Social Security and Medicare expenses are wildly out of control. Once again, with millions of Baby Boomers now at retirement age there is simply going to be no way to pay all of these retirees what they are owed.
#15) So will the U.S. government come to the rescue? The U.S. has allowed the total federal debt to balloon by 50% since 2006 to $12.3 trillion. The chart below is a bit outdated, but it does show the reckless expansion of U.S. government debt over the past several decades. To get an idea of where we are now, just add at least 3 trillion dollars on to the top of the chart….
#16) So has the U.S. government learned anything from these mistakes? No. In fact, Senate Democrats on Wednesday proposed allowing the federal government to borrow an additional $2 trillion to pay its bills, a record increase that would allow the U.S. national debt to reach approximately $14.3 trillion.
#17) It is going to become even harder for the U.S. government to pay the bills now that tax receipts are falling through the floor. U.S. corporate income tax receipts were down 55% in the year that ended on September 30th, 2009.
#18) So where will the U.S. government get the money? From the Federal Reserve of course. The Federal Reserve bought approximately 80 percent of all U.S. Treasury securities issued in 2009. In other words, the U.S. government is now being financed by a massive Ponzi scheme.
#19) The reckless expansion of the money supply by the U.S. government and the Federal Reserve is going to end up destroying the U.S. dollar and the value of the remaining collective net worth of all Americans. The more dollars there are, the less each individual dollar is worth. In essence, inflation is like a hidden tax on each dollar that you own. When they flood the economy with money, the value of the money you have in your bank accounts goes down. The chart below shows the growth of the U.S. money supply. Pay particular attention to the very end of the chart which shows what has been happening lately. What do you think this is going to do to the value of the U.S. dollar?….
#20) When a nation practices evil, there is no way that it is going to be blessed in the long run. The truth is that we have become a nation that is dripping with corruption and wickedness from the top to the bottom. Unless this fundamentally changes, not even the most perfect economic policies in the world are going to do us any good. In the end, you always reap what you sow. The day of reckoning for the U.S. economy is here and it is not going to be pleasant.
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25 Questions To Ask Anyone Who Is Delusional Enough To Believe That This Economic Recovery Is Real
And GDP is not a really good measure of the economic health of a nation. For example, if you would have looked at the growth of GDP in the Weimar republic in the early 1930s, you may have been tempted to think that the German economy was really thriving. German citizens were spending increasingly massive amounts of money. But of course that money was becoming increasingly worthless at the same time as hyperinflation spiralled out of control.
Well, today the purchasing power of our dollar is rapidly eroding as the price of food and other necessities continues to increase. So just because Americans are spending a little bit more money than before really doesn’t mean much of anything. As you will see below, there are a whole bunch of other signs that the U.S. economy is in very, very serious trouble.
Any “recovery” that the U.S. economy is experiencing is illusory and will be quite temporary. The entire financial system of the United States is falling apart, and the powers that be can try to patch it up and prop it up for a while, but in the end this thing is going to come crashing down.
But as obvious as that may seem to most of us, there are still quite a few people out there that are absolutely convinced that the U.S. economy will fully recover and will soon be stronger than ever.
So the following are 25 questions to ask anyone who is delusional enough to believe that this economic recovery is real….
#1) In what universe is an economy with 39.68 million Americans on food stamps considered to be a healthy, recovering economy? In fact, the U.S. Department of Agriculture forecasts that enrollment in the food stamp program will exceed 43 million Americans in 2011. Is a rapidly increasing number of Americans on food stamps a good sign or a bad sign for the economy?
#2) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March. This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005. So can you please explain again how the U.S. real estate market is getting better?
#3) The Mortgage Bankers Association just announced that more than 10 percent of U.S. homeowners with a mortgage had missed at least one payment in the January-March period. That was a record high and up from 9.1 percent a year ago. Do you think that is an indication that the U.S. housing market is recovering?
#4) How can the U.S. real estate market be considered healthy when, for the first time in modern history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together?
#5) With the U.S. Congress planning to quadruple oil taxes, what do you think that is going to do to the price of gasoline in the United States and how do you think that will affect the U.S. economy?
#6) Do you think that it is a good sign that Arnold Schwarzenegger, the governor of the state of California, says that “terrible cuts” are urgently needed in order to avoid a complete financial disaster in his state?
#7) But it just isn’t California that is in trouble. Dozens of U.S. states are in such bad financial shape that they are getting ready for their biggest budget cuts in decades. What do you think all of those budget cuts will do to the economy?
#8) In March, the U.S. trade deficit widened to its highest level since December 2008. Month after month after month we buy much more from the rest of the world than they buy from us. Wealth is draining out of the United States at an unprecedented rate. So is the fact that the gigantic U.S. trade deficit is actually getting bigger a good sign or a bad sign for the U.S. economy?
#9) Considering the fact that the U.S. government is projected to have a 1.6 trillion dollar deficit in 2010, and considering the fact that if you went out and spent one dollar every single second it would take you more than 31,000 years to spend a trillion dollars, how can anyone in their right mind claim that the U.S. economy is getting healthier when we are getting into so much debt?
#10) The U.S. Treasury Department recently announced that the U.S. government suffered a wider-than-expected budget deficit of 82.69 billion dollars in April. So is the fact that the red ink of the U.S. government is actually worse than projected a good sign or a bad sign?
#11) According to one new report, the U.S. national debt will reach 100 percent of GDP by the year 2015. So is that a sign of economic recovery or of economic disaster?
#12) Monstrous amounts of oil continue to gush freely into the Gulf of Mexico, and analysts are already projecting that the seafood and tourism industries along the Gulf coast will be devastated for decades by this unprecedented environmental disaster. In light of those facts, how in the world can anyone project that the U.S. economy will soon be stronger than ever?
#13) The FDIC’s list of problem banks recently hit a 17-year high. Do you think that an increasing number of small banks failing is a good sign or a bad sign for the U.S. economy?
#14) The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke. So what do you think will happen if a significant number of small banks do start failing?
#15) Existing home sales in the United States jumped 7.6 percent in April. That is the good news. The bad news is that this increase only happened because the deadline to take advantage of the temporary home buyer tax credit (government bribe) was looming. So now that there is no more tax credit for home buyers, what will that do to home sales?
#16) Both Fannie Mae and Freddie Mac recently told the U.S. government that they are going to need even more bailout money. So what does it say about the U.S. economy when the two “pillars” of the U.S. mortgage industry are government-backed financial black holes that the U.S. government has to relentlessly pour money into?
#17) 43 percent of Americans have less than $10,000 saved for retirement. Tens of millions of Americans find themselves just one lawsuit, one really bad traffic accident or one very serious illness away from financial ruin. With so many Americans living on the edge, how can you say that the economy is healthy?
#18) The mayor of Detroit says that the real unemployment rate in his city is somewhere around 50 percent. So can the U.S. really be experiencing an economic recovery when so many are still unemployed in one of America’s biggest cities?
#19) Gallup’s measure of underemployment hit 20.0% on March 15th. That was up from 19.7% two weeks earlier and 19.5% at the start of the year. Do you think that is a good trend or a bad trend?
#20) One new poll shows that 76 percent of Americans believe that the U.S. economy is still in a recession. So are the vast majority of Americans just stupid or could we still actually be in a recession?
#21) The bottom 40 percent of those living in the United States now collectively own less than 1 percent of the nation’s wealth. So is Barack Obama’s mantra that “what is good for Wall Street is good for Main Street” actually true?
#22) Richard Russell, the famous author of the Dow Theory Letters, says that Americans should sell anything they can sell in order to get liquid because of the economic trouble that is coming. Do you think that Richard Russell is delusional or could he possibly have a point?
#23) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010. In fact, that was almost twice the level of a year earlier. Does that look like a good trend to you?
#24) In March, the price of fresh and dried vegetables in the United States soared 49.3% – the most in 16 years. Is it a sign of a healthy economy when food prices are increasing so dramatically?
#25) 1.41 million Americans filed for personal bankruptcy in 2009 – a 32 percent increase over 2008. Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005. So shouldn’t we at least wait until the number of Americans filing for bankruptcy is not setting new all-time records before we even dare whisper the words “economic recovery”?