Anatomy of a Zombulated America
Between 2000 and 2008...Americans borrowed TENS OF TRILLIONS OF DOLLARS with mortgages, home equity loans, auto loans, credit card loans, corporate loans, and municipal loans.
These loans were encouraged by the FED and the banking system with little regard for the borrowers ability to repay infecting our nation with an unsustainable debt burden..
By loaning out massive amounts of money to anyone with a pulse, a buying frenzy ensued and the price of real estate skyrocketed.
Tens of Millions of Americans borrowed tens of trillions of dollars to purchase real estate at unsustainable values and much of America's real estate became massively leveraged.
As a result of rising property values and a huge number of transactions, government generated trillions of dollars in property taxes, capital gains taxes, sales taxes, and income taxes.
Heck, 75% of the Class A office space in San Francisco turned over between 2005 and 2007.
Then the FED raised interest rates 17 times, made it more difficult to declare bankruptcy, and started restricting lending.
Property values crashed, businesses shut down, millions of jobs were lost, tens of millions more suffered wage cuts, and tax receipts evaporated.
Thousands of finance/mortgage companies went out of business.
Businesses, Citizens, Municipalities and Wall Street Banks were going insolvent due to an inability by millions to service their debt. Instead of restructuring the debt, The Fed took the debt off the Wall Street Banks books and left the burden on the American Economy.
Now, the Wall Street Banks are solvent and the American Economy is crashing at an accellerating rate due to very little credit being extended. The FED knows relatively few Americans qualify for credit anymore and those that do have no use for it.
Wall Street sold this debt to our pensions, mutual funds, and nations around the world. It was this selling, packaging, and insuring the debt that drove finanical profits in America accounting for over 40% of the earnings at peak.
Without stimulating the economy with excessive credit, business earnings are gone and will likely never return under the current Zombulation policies. Without credit, sales are evaporating in practically every industry and not much prospect for recovery unless the government prints money that doesn't exist.
If the government prints, due to the excessive amount of debt, our money will eventually become practically worthless and few will be willing to work for worthless money.
Where Alstry sees things going in the short term:
In the very near term, 60 days or less, you will learn the following:
!. The Stock Market Trading was manipulated by computers utilizing High Frequency Trading improper behavior was supported by the SEC.
2. The revenues to Federal, State, and Local government will continue evaporating contracting our economy even further.
3. Tens of thousands of police officers and firefighters will lose their jobs.
4. Substantial budget cuts will materially impact the poor of America causing massive hardships and potentially a rise in crime rates.
5. The only reason the economy is not in a severe Depression is because President Obama is spending hundreds of billions of extra dollars the nation does not have driving us deeper into debt.
6. Any hopes for second half recovery will be dashed by millions of Americans losing their jobs and suffering massive wage cuts.
7. Over 1 million Americans will lose access to unemployment benefits even though they have still not found a job by the end of the year.
8. Commercial Real Estate defaults will skyrocket and distress in the commercial market will grow unprecedented levels.
9. Residential delinquincies will shock even the most bearish of prognosticators and housing prices will continue to crash...regardless what the government reports.
10. It will be clear that America is on a path where 50% or more of its municipalities are on a path to declaring bankruptcy within 12 months.
The above assumes continuation of the Fed's current Zombulation policies. My next blog will outline the solution.