How Can Anyone Claim That The Housing Crisis Is Over When The Delinquency Rate On U.S. Mortgages Continues To Explode At An Exponential Rate?

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”.

Thrive Life

 

FDIC Opens A Massive New Office Near Chicago Just To Handle The Coming Tidal Wave Of Midwest Bank Closings They Are Expecting

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.

Economic Black Hole: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover

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.

Goldman Sachs Admits To Engaging In “Improper Behavior” During The Housing Crash – But They Aren’t About To Give The Money Back

Goldman Sachs Wall StreetIn an absolutely stunning admission, the CEO of Goldman Sachs acknowledged on Wednesday that the investment bank engaged in “improper” behavior during 2006 and 2007.  This improper behavior included making huge bets against the housing market while at the same time peddling more than $40 billion in securities backed by risky U.S. home loans.

The CEO of Goldman Sachs, Lloyd Blankfein, made this stunning admission during the opening hearing of the Financial Crisis Inquiry Commission.  The Financial Crisis Inquiry Commission is a 10 member panel that Congress created to investigate the causes of the worst financial crisis since the Great Depression.

The chairperson of this commission, Phil Angelides, warned Blankfein that he would be “brutally honest” during his questioning.  He directly confronted Blankfein about Goldman’s behavior during the housing crash.  In particular, he pressed Blankfein about whether it was proper or not for Goldman Sachs to make huge bets against the housing market when they were peddling tens of billions of dollars worth of mortgage-backed securities at the same time.  In response to the questioning by Angelides, Blankfein made the following statement….

“I do think the behavior is improper, and we regret . . . the consequence that people have lost money in it.”

Lost money?

The truth is that tens of billions of dollars were lost.  In fact, the garbage that Goldman sold them has some state governments on the verge of bankruptcy.

But Goldman came out of the housing crash smelling like a rose.  In fact, they made tens of billions of dollars in 2009.

So will this commission get to the bottom of this mess?

Not likely, but at least Angelides was willing to ask some of the tough questions.

You can see a large portion of the confrontation between Blankfein and Angelides below….

Meanwhile, the U.S. government continues to deal with the horrific aftermath of the housing crisis.  The U.S. government just posted its largest December budget deficit on record (91.9 billion dollars) as higher unemployment reduced revenue and the government spent large amounts of money to help the U.S. economy recover.

A 91 billion dollar deficit in a single month?

What kind of madness is this?

We are dumping a massive debt on to our children and grandchildren that they will never, ever be able to repay.

In fact, a two year study by the 24 member Committee on the Fiscal Future of the United States says that the United States must soon either raise taxes or cut government spending to curb its debt.

But either action would have devastating effects on the U.S. economy.

However, if the U.S. government keeps piling up debt at the current rate it is absolutely going to destroy the financial system of the United States.

The truth is that the U.S. government is between a rock and a hard place.

If it raises taxes or cuts spending it will seriously hurt the economy, but if the government continues to rack up debt at this pace the consequences will be catastrophic.

The truth is that hard choices need to be made and that there is going to be economic pain no matter what is decided.

In fact, U.S. Chamber of Commerce President Tom Donohue is warning that the U.S. faces a double-dip recession because of the new taxes and the new regulations under consideration by Barack Obama and the Democratic Congress.

While some in the mainstream media talk hopefully of “recovery”, the truth is that things continue to get worse for the U.S. economy.

Millions of Americans have lost their jobs and are now stuck in a cycle of hopelessness.  In fact, some analysts now believe that the true unemployment rate in the United States is close to 22 percent.

All of this unemployment means that millions of Americans cannot pay their mortgages.  Almost 3 million U.S. homeowners received at least one foreclosure filing during 2009 which set a new all-time record.

However, things are going to get even worse for the housing market when the next wave of adjustable mortgages start resetting in 2010.  A massive wave of adjustable mortgages is scheduled to reset between 2010 and 2012, and the reality is that there is simply no way that another huge wave of mortgage defaults is going to be able to be avoided.

Things have gotten so bad that a record number of American citizens are turning to the U.S. government for assistance.  The number of Americans enrolled in the food stamp program has set a record for the ninth month in a row.

So is there any end to this economic misery?

Are things going to get even worse?

Well, not for the folks over at Goldman Sachs.  Total bonuses for executives at Goldman Sachs for 2009 are expected to be somewhere around 20 billion dollars.

You see, being a bankster is quite profitable these days – even if it did take a little “improper behavior” to get it done.

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