Predictions – 2010 The worst economic year in US history
Staggering Statistics:
In less than the first 2 months of 2010, there have been over 142,000 Foreclosures
In less than the first 2 months of 2010, there have been over 221,000 Bankruptcies
Presently the US has almost 39 Million food stamp recipients That’s almost 1 in 10 people.
There are presently over 24 Million unemployed or under-employed people.
Our National Debt is now over 12.4 Trillion and growing
In less than the first 2 months of 2010, The interest that we have paid on this debt is over $31,747,000,000
Between 2008 and 2010 The amount of money the U.S has lent, spent or guaranteed to avert an economic collapse. Is over $7.1 Trillion. Agencies involved include the Federal Reserve, the Treasury department, FDIC and HUD.
The biggest of all and growing at around 100k a second. Is US Unfunded Liabilities.
$107,572,129,955,543 as of Feb 24, 2010 at 5:30 pm PST.
That’s over 107.5 Trillion dollars which equates to about $348,410 per citizen. (Statistics provided by USDebtClock.org)
The Recession Is On Recess.
Despite many recent media reports and statements released by big business & government saying that the recession is over and the economic recovery is in full swing, there have been many more reports that have been pointing to exactly the opposite. In fact, when looked at from a broad systematic perspective, much of the data and reports released over the past few weeks point not to the fact that the recession is over, but that perhaps we may in fact be looking at the Second Great Depression.
This report is a cumulative summary of a number of articles, news releases, and reports from government agencies & independent analysts. It will look at three major pieces of the economic puzzle – The banking system, state governments, and finally, the people. In part 2 I will discuss the comparisons to the previous great depression and the collapse of previous economic superpowers.
The Banks – An Overview:
According to a recent FDIC report, the number of “troubled” banks in the US jumped from 552 in the third quarter of 2009 to 702 in the fourth quarter. That number is the highest of the current economic downturn, in fact the highest since the Savings & Loan Crisis of the late 1980’s and early 1990’s.
In 2008-2009, a total of 45 banks failed. The failures pushed the deposit insurance fund into the red last year. It was $20.9 billion in deficit as of Dec. 31, the FDIC reported. That compared with a positive balance of $17.3 billion at the end of 2008. The FDIC expects the total cost of the bank failures to run about $100 billion through 2013.
The Residential Mortgage Problem:
Despite many recent reports (most by associations of realtors, mortgage brokers, and lenders – surprise, surprise) that housing sales are climbing along with prices, and foreclosures are slowing down, a recent report from Standard & Poors states that is grossly wrong and puts the claims of a recent “upturn” in perspective…
“We believe that the recent reversal in housing prices is the result of a temporary constriction in the supply of foreclosed homes on the market. This temporary constriction ensued because servicers have completed fewer foreclosures due to court delays, servicing backlogs, and political pressure to keep borrowers in their homes. However, there is a rapidly growing shadow inventory of properties where borrowers are delinquent but foreclosure has not been completed. Overall, it is our opinion that recent positive housing reports should not be construed as a sign that the distress in the residential housing market is abating, but rather should be attributed to the temporarily limited supply of homes on the market.”
At present, there are currently 7.7 million homes whose mortgages are in some stage of default, although due to political pressure and lack of manpower, have yet to be foreclosed on by their lenders. It is estimated that 4-5 million of these will become REO (bank owned) properties by the end of 2010. This jamming up of the foreclosure process is largely attributed to the failure of the government’s “Making Home Affordable” program, launched just over a year ago. According to that article…
“The program lowered mortgage payments on a trial basis for hundreds of thousands of people but has largely failed to provide permanent relief. Critics increasingly argue that the program has raised false hopes among people who simply cannot afford their homes. As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. Some borrowers have seen their credit tarnished while falsely assuming that loan modifications involved no negative reports to credit agencies.”
So although it has been reported by some that the residential housing market and foreclosure crisis has seen it’s worst days, there are certainly some huge signs pointing to the contrary.
Now an unprecedented amount of homeowners who otherwise could pay, are choosing to walk away and strategically default on their home. This, on a large scale, is something that is a completely new concept that hasn’t been seen before in the history of our housing market. The growing trend is that someone with perfect credit is willing to tarnish their credit and stop paying an underwater mortgage. Many have no idea how this is going to play out and how it will ultimately affect our economy. I believe that many were and are holding on thinking that the recovery was soon coming. I believe it will be 15-20 years before housing is back at it’s peak of 2005-2006 (Here’s why)
There is no question that with all the vacant and boarded up homes, there is a lack in a true reading of what we call housing “supply”. It is skewing the numbers and gives a misleading picture of our housing market. When these homes get purchased, renovated, re-listed on the market, the supply of homes is only going to increase. That’s bad for the housing market. Then there is the other side…”demand”. Demand will only increase as lending loosens up. Loose lending is why we got in this mess in the first place.
Stay tuned for Part 2 tomorrow. The commercial real estate collapse, state governments bankrupt, financial institutions getting ready for a run on banks and the fall of our once great nation.
Jon Maddux
CEO
www.YouWalkAway.com
