The WORST finanical CRISIS EVER!!!!!!
Let's get something clear, this is NOT you typical ordinary recession. This is the Worst Fincanical Crisis since the great depression that is shutting our economy down. We are now at the point where the revenues for our Auto Industry is insufficient to service its hundreds of billions of debt. Almost 10% of ALL mortgages in America are delinquent.....never in our nations history have we even come close to contemplating these numbers. It has become so bad that we are putting $5 Trillion dollar Fannie and Freddie into effectively bankruptcy.
Its funny, somepeople think that we are in a recession. Truly the government and press has done a fantastic job dulling our minds into complacency. Those that understand the problem understand the severity of the current situation.
Volcker says finance system 'broken'
"This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down," Volcker said Friday
"It is the most complicated financial crisis I have ever experienced, and I have experienced a few," Volcker said. Volcker ran the Fed from 1979 to 1987
This statement should shock the hell out of you if you understand its implications. You can sit there and analyze distressed homebuilders until the cows come home 25 hours a day, but in the end, as defaulting debt continues to absorb available cash, prices will continue to crash until money runs out chasing the falling knife.
FB is an excellent housing analyst. He understands the nuances and business well. But his forward vision is impaired by his reading glasses analyzing HBs all day and night long missing the forest for the trees. Notice how he keeps revising his estimate on the index lower and lower.....expect him to be in single digits very very soon.
The crisis we are facing is unprecedented....my guess is by early next year.....people will understand the implications will be far more severe than The Great Depression. This isn't about being an alarmist, it is simple accounting, back then, there wasn't much debt...our businesses were not very leveraged, our governments were not very leveraged, and for the most part, the people were not very leveraged.
Today, leverage makes up over 85% of the net worth of America. Those that are not leveraged, their assets maintain value as a direct result of leverage. (A million dollar house in a no money down low interest rate environment is a $200K house in a cash only world). Leverage is defaulting at record rates and destorying real wealth in America at a faster rate than ever seen in history.
You have been warned by Volcker!!!!!!!!!!!!!!!!!!!!!!!!!!! Others such as Karl Denninger see the light. Right now we only have money because the banking system tells us we can withdraw our money.
But can we trust the system????
A few weeks ago, Paulson was saying there was little liklihood of bailing out the GSEs. Fannie's CEO was saying it was well capitalized. Today it is about to go bankrupt and he fired with a fat severance package. When JP Morgan had a conference call in the Spring, the CEO said it didn't need any additonal capital, THAT AFTERNOON, JPM raised BILLIONS in a preferred offering. There are numerous situations like the above involving statements of our bankers government officials and contrary behavior.
We have been systematically lied to as millions and millions of Americans are losing their homes and losing their jobs. The rest of us sit back and watch as the wealth we have spent a lifetime accumulating evaporates day by day.
At this point, no one really knows the truth nor what will happen. We just have to trust .....just like our soldiers trusted and believed that Iraq had WMD even though our chief weapons inspector denied evidence of any such weapons.
The problem now is whether the people we are supposed to trust are the ones bending us over?
You can believe your farm, or house, shopping center, or business is worth X, but when only a few have money....nothing is worth much. By bailing out Fannie and Freddie, we are imposing Trillions of dollars of debt on many to guarantee payment to a few.....shouldn't it be the other way around....especially when the few knew the risks at the outset?
RIGHT NOW!!!!! 1 in 10 mortgages is delinquent. If that number doubles.....there will be enough inventory on the market where no new home will need to be built in America for the next 10 years. But don't worry, we will get through it....it will just be looked back on as a tough 10 year cycle.
You can claim all you want that we should have an election about The War, about national security, about health care or about energy independence.
None of this matters if our economy and government funding mechanisms are damaged or destroyed due to the irresponsible and outrageous bailing out of TWO GIANT HEDGE FUNDS that happen to be called "Fannie Mae" and "Freddie Mac", and THE PRESENT GOVERNMENT just took FIVE TRILLION DOLLARS onto its balance sheet!
If select financial instutions are being bailed out, then every single American individual and business should be bailed out and bankrupctcy avoided for all. Otherwise, let the free markets distill the toxic debt out of the system and begin with a clean balance sheet for all....not just a select few.