Friday, April 16, 2010

Wrecking Ball...

Greetings good citizen,

If time and frequency are any indicators, things are going to ‘blow’, and I suspect the operative word will be ‘soon’.

Yes, ‘timing’ has ever been the ‘bane’ of Doomers and we’re always predicting that doom is, er, ‘near’…and even now I’d toss in the ‘qualifier’ that we aren’t talking ‘the big one’ (although it could be the trigger that leads up to ‘the main event’!)

Naturally, there are as many versions of what constitutes ‘doom’ as there are doomers. The whole ‘climate change’, er, ‘movement’ is centered on an ‘ecological crisis’ that would result in the collapse of civilization via drought, crop failure and famine.

Then there’s the ‘peak oil’ crowd who predicts economic mayhem caused by the ‘end’ of ‘cheap and abundant’ energy. One of the huge misunderstandings here is that there’s nothing to worry about UNTIL we physically ‘RUN OUT’ of oil, which is untrue…we’ll be in a world of shit long before that unhappy event.

Add in your Biblical ‘end timers’, your various Mayan Calendar, er, ‘enthusiasts’, your ‘bolt from outer space’…er, ‘freaks’ and you have quite a collection on your hands…oops, sorry, left out the nuclear annihilation crowd…(unforgivable, me, a child of the long, cold war ‘forgetting’ about that!)

As you can see, the trouble begins when you relax the rein hand…you sort of start wandering all over the map! (And you can find ‘smoking guns’ just about anywhere you look, which doesn’t help matters at all!)

So, where were we? Oh yeah…I was ‘predicting’ (once again) that we were edging closer to what many mainstream doomers have dubbed ‘The Great Unraveling’!

Naturally you know all about ‘The Great Unraveling’, don’t you?

What do you mean ‘no’? Do you live in a cave?

Okay, I’m going to try to give you the ‘Reader’s Digest’ version but be aware that my feeble old mind tends to wander…where were we?

Oh yeah…’The Great Unraveling’…to understand what it’s about you need to understand just how ‘interconnected’ the aspects of our civilization are.

I’ve danced along the edges of this topic in dozens of essays. Some of them point to the importance of ‘cash flow’ while others expounded on the ‘symbiotic’ nature of the employer/employee relationship, where your employees are also your customers.

Central to both phenomena is money and how it flows in a ‘healthy’ society. When all of the money flows to the ‘head/top’, the society in question suffers a stroke and loses the function of its extremities, turning vast swaths of its economy into ‘deadwood’.

If this ‘misallocation’ goes uncorrected, the end result is a Banana Republic.

Sadly, this transformation is not ‘instantaneous’. The process by which a formerly prosperous nation becomes a Banana Republic is called an ‘unraveling’, all of the ‘opportunities’ flee (in the pockets of the elite) while the corpse of a once robust nation is left to rot in the sunshine of endless ‘happy talk’.

So we arrive at tonight’s offering for a look at one disturbing aspect of a much larger problem…

April 15 2010: Foreclosures will be the wrecking ball for the American economy [Perhaps, although greater dangers lurk just below the surface…]

Ilargi: Seven million American households are presently behind on their mortgage payments. Foreclosure filings were reported on 367,056 properties in March (that’s 4.4 million annualized). 1 million repossessions are foreseen in 2010. One in every 138 US homes received foreclosure filings just in the first quarter alone. Of the 230,000 or so "lucky" few who got a mortgage modification done (1.2 million began the program over the past year), 75% already, or still, owe more on the loan than the home is worth. The Obama administration's foreclosure prevention program is "worth" $75 billion. That so far then comes to $326,000 per lucky owner, who has a 3 in 4 chance (s)he's underwater regardless. How does one gauge the success of a plan like that? [Often ‘overlooked’ is the stiff plunge in payrolls here in the US. The pool of buyers that ‘could have’ afforded homes at such inflated prices has only continued to dwindle, never to return. (Why ‘never’ is a separate debate.)]

The foreclosure flood has been temporarily stalled, that's all there ever was, and now the gates are opening. There were ill-conceived and ill-fated federal programs, states introduced moratoriums and most of all banks delayed foreclosure proceedings either because they liked a full face value loan on their books better than a broken one or because they didn't like the foreclosure costs (which can run into the tens of thousands of dollars), or perhaps because they're simply completely overwhelmed and don’t have the people to process all the paperwork.

But the respite is over. Two weeks ago, the Irvine Housing Blog stated in Bank of America to Increase Foreclosure Rate by 600% in 2010 that Bank of America's OREO department said that the bank would increase its foreclosure activity from 7500 per month to 45,000 per month. That’s 540,000 annualized for just one bank (granted, the biggest one). If this is substantiated, one of two things is true: either 2010 foreclosures will go well over 1 million, or 2011 ones will go so far over it should scare us all breathless. Moreover, there's a solid chance that numbers like these in 8 months time will have debilitating effects on the overall economy, even before New Year's.

Not only are foreclosures, short sales and the like devastating for homeowners, they are a death knell for many banks. For the past three years, Washington's policy has been to sweep anything toxic under the carpet. Well, we’ve run out of carpet. And pondering this unequaled mess, it shouldn’t surprise anyone that jobless claims come in far worse than projected. The very foundations are starting to shake. And it no longer matters what tricks come out of the Fed, the Treasury, Wall Street, the White House or Capitol Hill. There was always just one possible end to the housing crisis: plummeting prices. The glut of newly foreclosed properties added to a hugely oversaturated market will see to it that they do fall, and fast and furious at that.

This will have a cascading effect throughout the economy. Falling home prices will put huge additional numbers of owners underwater. Fannie Mae, Freddie Mac, the FHA, they will all grow beyond salvation, suffering losses (even with funny accounting) that will run in the hundreds of billions [tens of trillions!] of dollars. [turning dollars into so much ‘confetti’] Property taxes, for many places in America the only thing that stands between mere austerity and full-blown bankruptcy, will have to come down with the home values. [Think closed school systems, gutted fire and police departments, shuttered libraries and ‘volunteer’ snow removal programs…isn’t capitalism grand! (The idiot ‘Tea partiers’ think so!)]

And most and worst of all, the banks which hold large portions of the loans, and which have already received untold trillions of dollars in hand-outs courtesy of the house, will need to come knocking for more, because the process of increasing foreclosures will function to draw toxic paper out of vaults all over the nation, and beyond. Yes, there is a fake recovery in banking, and yes, consumers are fooled enough to go out and buy some more stuff on their credit cards. But there are not nearly enough buyers for all those millions of homes that are now part of the inventory, be it the official or the real one.

How do you get those buyers? Let prices drop 50% from where they are now, that might move some things along. But it would also eradicate the financial system as it is, and, more importantly, as the administration has elected to try and maintain it. There is no smooth solution here, it will get real ugly, and the government's not on your side. If attitudes and policies don't change real quick, it's going to cost you a whole lot of trillions more. Keeping up hugely inflated home prices at all cost has de facto been declared a matter of national security. And to an extent it may well be. But it still must fail. Or not nearly enough people can afford to buy a home. Catch 22. It makes no difference what the next smart way is to keep up appearances even longer: the outcome is as clear as it is inevitable. Real estate built America, and it's going to take it down. Foreclosures will be the wrecking ball for the American economy.

Naturally, Ilargi’s statement that it is going to ‘cost you trillions’ is ‘rhetorical’ (because YOU don’t have ‘trillions’…what it’s going to cost you, for real, is the services you’ve come to expect in exchange for your tax dollars.)

Perhaps the thing that is not crystal clear here is ‘why’ you are going to ‘forfeit’ those services…

It will be because our ‘co-opted’ government, at the behest of our corrupt politicians, has chosen to ‘backstop’ a predatory private enterprise in exchange for campaign contributions!

How many of you find it ‘amusing’ that we have no way to put a stop to this insane behavior?

Perhaps it is not ‘humorous’ to you BUT the fucking elites who have exploited these circumstances think it is absolutely hilarious! They get rich and YOU get screwed!

Understand, they (the elite) realize they are tap dancing on a land mine…and will have to escape before their structure collapses, trapping them ‘behind enemy lines’ (and this is an enemy that makes the legendary Scythians look tame!)

It’s not a real big mystery why Blackwater markets (armed, airborne) ‘extraction services’ for you and yours domestically. If there were no demand, it wouldn’t exist.

I guess the real kicker here, good citizen, is the fact that, as you can see from Ilargi’s ramblings, ‘the die is cast’. It is no longer a question of ‘if’ but ‘when’…and from the rumblings of the ground, the answer to that question is soon.

How soon is still dependent on a bunch of factors…but credibility isn’t one of them. The steady barrage of lies has reached its logical conclusion. How many times can you cry wolf before the responders cry ‘bullshit’?

We’re in the third year of this thing good citizen and she’s going to pop, one way or the other.

As you can see, the path we are on leads directly to Banana Republic…and lord help the children if we let ourselves be dragged there…

Thanks for letting me inside your head,


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