Saturday, May 9, 2009

Free Falling

Greetings good citizen,

There is a certain futility about using MSM articles as the basis for social commentary.

I think most of us are waiting for an article that presents the unvarnished truth, all the while knowing that such an article would never make it past the editor.

So, all of the banks are ‘healthy’ and the market rallied again today on ‘less than last time’ unemployment figures.

But what, really, has changed?

In honesty, nothing. The banks posted profits during ‘earning season’ thanks to the rescinding of the ‘mark to market’ rule a few weeks prior. Then, incredibly, the monthly unemployment number drops while the overall number of unemployed hits an all time high!

Perhaps most vexing of all is the stubborn refusal of anyone in either the government or the MSM to provide us with an accurate picture of the overall economy.

Looks like we’re gonna have to figure it out for ourselves.

We do have ‘some’ data. One of the most useful pieces is the understanding of the concept that if no one can afford the item you’re selling (or if nobody wants it) it HAS NO PRICE!

Let’s examine the issue of millions of unsold properties (many of them repossessed.) Let look at this situation ‘logically’ (because no one else is.)

While it’s tempting to say too many homes and no buyers, the better description is too many homes, too few buyers.

Just as there are millions of empty houses out there, there are also millions of homeless people…why aren’t the homeless people snapping up these now bargain priced homes?

The simple answer is the homeless can’t afford these homes even if they were free…but the real answer is somewhat more complicated. The reason home prices are dropping so slowly has to do with valuations and the act of putting existing homeowners ‘underwater’ in their loans.

If you get too far underwater, it becomes impossible to sell your property. Most of us can’t afford to show up at the closing with a $40 to $75 thousand dollar check to make up for the difference between what a buyer will pay and what you owe on your mortgage.

Sadly, the banks, through the foreclosure process, are destroying your equity by selling neighboring homes at stiff discounts to what you paid for yours.

Perhaps more disturbing is the comparatively tiny number of buyers that still qualify for a mortgage. If you already have a house, you don’t ‘need’ another one. This eliminates a large number of ‘potential’ buyers right out of the box.

Not that this stops ‘flipper’. Flipper will by a foreclosed property and if he can’t find a tenant for it, he’ll let the bank take it back as he has no intention of EVER paying for the property.

Worse, Flipper can do his repeatedly because Flipper never buys the property theirselves. They start and fund a ‘reality trust’ and the trust buys the property, if the tenant defaults. The ‘trust’ takes the hit and Flipper invents a new trust and heads off to the next auction.

You’d think the banks would smarten up and start pinning these serial defaults to Flipper’s Tax payer ID which is cross referenced to their social security number but no, that’s too much work…so who gets plastered for Flipper’s serial defaults? You and me!

But wait, it gets worse! The CDO market froze solid back in August of 2007 but they’re still making CDO’s and today they only have one buyer, the GSE’s!

So the banks are still writing new loans then they are packaging them up and selling them to the taxpayers…and if the loans default, it’s not their problem, it’s yours!

Since the ‘crisis’ began nearly two years ago, the government has lavished over twelve trillion dollars on…the banks!

Our 2007 GDP was only 13 trillion! I haven’t heard a dollar figure placed on 2008 yet but I’m willing to bet its nowhere near 13 trillion. (Although I have seen projections that it was, incredibly, 14 trillion…which is unfathomable since our economy has been in ‘free fall’ for all of 2008.)

What is truly astounding is the taxpayers have laid out more than 12 trillion dollars and we don't own one stinking bank!

The entire US housing market is estimated to be worth between 8 and12 trillion dollars…so, instead of being up to our eyeballs in debt we could own every stinking house in the US but no, that would be ‘socialism!’

Worse, we’d be overpaying madly as the 12 trillion-dollar figure is still roughly fifty percent too high!

This is a rather puzzling conundrum good citizen. How could the government hand over more than the cost of rectifying the problem to the same people that created the problem in the first place and we are still buried under a mountain of debt?

It makes no sense, but there it is.

This information is out there and not a single economist has pointed out what a blatant rip off this is…if it were up to me, they’d all have their degrees revoked as well as being booted to the curb!

Worse, while it ‘looks like’ incompetence, the real explanation is corruption. While economists aren’t being ‘paid off’, they do ‘toe the line’ so they don’t lose their tenured positions or their pensions…which is more a form of ‘moral bankruptcy’. It is the willingness to sell society down the river just so they can hold on to ‘theirs’.

Simply put good citizen, a society without trust is beyond salvation.

We’ve only scraped the very tip of the iceberg but it’s no good to cover too much ground in one sitting as it all starts running together after a while.

With that warning, this subject is not closed.

Thanks for letting me inside your head,


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