FedUpUSA

Archive for February, 2011

The media has done a fantastic job painting over the enormous sinkhole of a problem that is commercial real estate (CRE).  U.S. banks hold over $3 trillion in commercial real estate loans on properties that were once valued at over $6 trillion.  Today those values are down to roughly $3 to $3.5 trillion depending on what metric you believe.  How is it possible for a market that has lost $2.5 to $3 trillion to become largely hidden in the dark from the mainstream media?  We constantly hear about $3 billion deficits or other issues but is the trillion dollar figure just so enormous that they don’t even bother investigating?  It is probably more likely that the Federal Reserve has concealed massive failures in CRE by allowing banks to play a game of extend and pretend that continues today.  The shadowy problems of empty shopping centers, vacant car dealership lots, and misplaced strip malls is largely a taxpayer problem now.  Banks made these irresponsible loans but had the Fed hand over taxpayer loot in exchange for worthless real estate.

“Another empty strip mall”

CRE bringing down FDIC banks

Source:  MIT

CRE values are still hovering near their trough and are likely to move lower.  The only reason these prices haven’t moved lower is because banks are more generous with the borrowers of CRE debt since these holders are grappling with multi-million dollar cuts in each deal.  Banks would rather pretend a mall is valued at $100 million instead of marking it to a real value of $40 million or less.  The fact that the Federal Reserve allows this to happen is financial chicanery.  Can you pretend to the government that you really don’t make $100,000 a year so instead you will act as if you make $30,000 a year and act accordingly?  This is what is happening here.  Banks are essentially allowing these toxic loans to be laundered through the system in exchange for taxpayer dollars.  The Fed is betting that the public doesn’t wake up to this scam.

CRE is a giant and pernicious problem.  With residential real estate it hits directly home and many American families are considered home owners.  This bubble has garnered most media attention as it should.  Yet CRE debt is enormous, larger than every state budget deficit combined by many times!  In fact, the losses on CRE loans is larger than the state budget issues.  Of course the Fed wants the public to look away from the real culprit behind the decline of the American middle class.  The scheme was to build junk and pawn off the loans to average Americans whether they wanted to accept the debt or not.

The cost of CRE problems

Banks have no faith in this recovery.  Look at the above regarding commercial loans.  Banks continue to claim that the reason for the taxpayer bailouts was to help the American public weather the economic storm and for banks to continue lending to average Americans.  Instead, as you can see above, commercial loan lending has collapsed and banks have hoarded money and speculated on the stock market casino on the taxpayer dime.  This money was used to shore up bad balance sheet problems and for gambling on the stock market to boost profits.  In short it was one giant swindle perpetrated on the public.

And think about the supposed recovery we are experiencing.  If we were truly growing and expanding don’t you think there would be healthy demand for loans as businesses expand their workforce?  Wouldn’t it be logical to conclude that commercial loans would reflect the supposed increased demand from a booming American economy?  Of course the only boom occurring is for the top 1 percent who are siphoning off the wealth from average Americans to spin their continuing speculation in the stock market.  Many are starting to wake up from this collective sleepwalk where taxpayers were robbed in open daylight.

The problems are coming up

Source:  ZeroHedge

What is even more problematic is many of the CRE loans are going bad in the next few years.  Just like residential real estate is now experiencing a second collapse, CRE will have another move lower.  Banks can only carry fantasy paper for so long.  So far we have been paying for it through QE1, QE2, TARP, and other convoluted programs to launder money and devalue the U.S. dollar and decrease the quality of life of average Americans.  The public did not sign up for this.  The banks talk about shared responsibility and many are paying for it by losing their homes and going bankrupt.  Millions are facing this economic “responsibility” on a daily basis.  What penalty for the banks?  Instead, they get bailouts and continue to pretend the junk loans they made on concrete disasters are worth inflated values only to shovel them off to taxpayers.  How is it that there are no buyers for these supposedly highly priced items?

CRE debt exposes the worst aspect of the bubble.  Pure profit motive by supposed sophisticated investors on both sides of the coin with no financial responsibility or ownership.  This isn’t some poor family in a low-income neighborhood taking out a subprime loan.  This is actually a supposed responsible bank and a supposed financially savvy investor.  There is no justification for one penny of a bailout here.  Yet the Federal Reserve continues with their hidden bailout where they support malls in Oklahoma to Chick-fil-A.  Don’t expect to hear about this on your nightly news.

My Budget360

In the WSJ no less….

In accounts of the political unrest sweeping through the Middle East, one factor, inflation, deserves more attention. Nothing can be more demoralizing to people at the low end of the income scale—where great masses in that region reside—than increases in the cost of basic necessities like food and fuel. It brings them out into the streets to protest government policies, especially in places where mass protests are the only means available to shake the existing power structure.

Wow, it’s being recognized!  Money printing is a problem?

And when the Fed sneezes money, the weak economies of the world, and the poor masses who are highly vulnerable to price rises in the necessities of life, catch pneumonia.

Would pursuing policies that lead to starvation be considered an act of war?

Would such be considered something for which one could be indicted and tried as a war criminal?

Hmmm…… I wonder if Bernanke recognizes the (rather delicious) irony that could come from this, given what ethnic and religious group he belongs to?

The Fed is financing a vast and rising federal deficit, following a practice that has been a surefire prescription for domestic inflation from time immemorial. Meanwhile, its policies are stoking a rise in prices that is contributing to political unrest that in some cases might be beneficial but in others might turn out as badly as the overthrow of the shah in 1979. Does any of this suggest that there might be some urgency to bringing the Fed under closer scrutiny?

Actually, what it suggests is that we need to add a 20 year prison term to The Federal Reserve Act for violating “stable prices”, then enforce it the next afternoon against one Ben Bernanke.

A law without an “or else” is no law at all.

The Market-Ticker

Have you heard the news?  The stock market is absolutely soaring and according to the U.S. government and the Federal Reserve we are in the beginning stages of a robust economic recovery.  Yippee!  The S&P 500 is up 6.8 percent so far in 2011, and the stock market recently hit a two and a half year high.  So shouldn’t we all be celebrating?  Well, if stock market performance was an accurate measure of economic health, then Zimbabwe would have had one of the healthiest economies on the entire globe during the last decade.  But just like Zimbabwe’s stock market was artificially pumped up with “funny money” that was rapidly being devalued, so is ours.  All of the “quantitative easing” that the Federal Reserve has been doing is pumping plenty of money into the financial markets and is helping to inflate a false stock market bubble, but it is doing very little to alleviate the suffering of the U.S. middle class.  In fact, when you take a closer look at the numbers you quickly find out that the suffering of the middle class is getting even worse.

According to Gallup, the unemployment rate is now over 10%.  The number of Americans that have given up looking for work recently set a new all-time record.  The number of mortgages in foreclosure tied a record high during the fourth quarter of 2010.  Gas and food prices are rising rapidly.  The number of Americans on food stamps continues to increase every single month.

Yes, right now the economic situation is not in free fall like it was a couple years ago.  We should be thankful for that.  Periods of relative stability such as we are enjoying now will be few and far between in the years ahead.  This “bubble” of economic calm is a great opportunity that we should all be taking advantage of.

However, those that are hoping that this is an economic “turning point” and that things will soon be back to “normal” are going to be greatly disappointed.  This is about as “normal” as things are going to be ever again.

Even during this time of relative economic stability, the U.S. middle class is still being ripped to shreds.  If there are those among your family and friends that are somehow convinced that the U.S. economy is recovering nicely, you might want want to show them the following 18 very sobering facts….

#1 According to Gallup, the U.S. unemployment rate is currently 10.3 percent.  When you add in part-time American workers that want full-time employment, that number rises to 20.2 percent.

#2 According to the U.S. Bureau of Labor Statistics, the number of job openings in the United States declined for a second straight month during December.

#3 There are currently more than 4 million Americans that have been unemployed for more than a year.

#4 The number of Americans that have become so discouraged that they have given up searching for work completely now stands at an all-time high.

#5 Gasoline prices in the United States recently hit a 28-month high.

#6 During the 4th quarter of 2010, 4.63 percent of all U.S. home loans were in foreclosure.  That matched the all-time high, and it was up significantly from 4.39 percent in the 3rd quarter.

#7 It is estimated that there are about 5 million homeowners in the United States that are at least two months behind on their mortgages, and it is being projected that over a million American families will be booted out of their homes this year alone.

#8 Almost 14 percent of all credit card accounts in the United States are currently 90 days or more delinquent.

#9 The average credit card rate in the United States had increased to a whopping 13.44 percent at the end of 2010.

#10 Americans now owe more than $890 billion on student loans, which is even more than they owe on credit cards.

#11 Average household debt in the United States has now reached a level of 136% of average household income.  In China, average household debt is only 17% of average household income.

#12 U.S. life expectancy at birth is now three years less than Canada and four years less than Japan.

#13 New home sales in the state of California were at the lowest level ever recorded in the month of January.

#14 43 percent of all mortgages in south Florida are currently underwater.

#15 Prior to the most recent economic downturn, there were usually somewhere around four to five million job openings in America.  Today there are about 3 million.

#16 When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

#17 One out of every seven Americans is now on food stamps.

#18  One out of every six elderly Americans now lives below the federal poverty line.

You know things are bad when articles start popping up in the mainstream news instructing us how to interact socially with the hordes of unemployed Americans that are out there today.  A recent USA Today article entitled “What not to say to someone who is unemployed” listed some of the things that you should not say to someone that does not have a job.  The following are some of their suggestions on what NOT to say….

“Hey, have you found anything yet?”

“How’s the search going?”

“You just have to pound the pavement.”

“Something will turn up.”

“It’s tough out there.”

“Other people are going through the same thing.”

“Maybe you’re asking for too much money.”

“Maybe you should go back to school.”

“There are plenty of jobs out there.”

I am sure most of us have heard things like this at one time or another.  It can be a soul-crushing thing to have others like at you in pity because you don’t have a job and you can’t pay the mortgage and feed your family.

Most unemployed Americans are not lazy.  The vast majority of them desperately want jobs.  But the U.S. economy is not producing nearly enough jobs today.  As noted above, the U.S. economy currently has about 3 million job openings, but approximately 20 percent of the workforce wants to find a full-time job.  The demand for jobs is far, far, far greater than the supply.

Unfortunately, this is the legacy of decades of bad economic decision-making.  The U.S. economy should be able to provide work for every single person that wants it, but because of the choices that have been made that will never be the case again.

The middle class in America is being ripped to shreds right in front of our eyes and very little is being done to stop it.  Desperation is rising across the nation.  More Americans slip into poverty every single day.  It is almost as if a cloud of gloom and despair has descended upon the U.S. economy and every single month the situation only seems to get darker.

The Economic Collapse

Essex South Register of Deeds John O’Brien announced today that he will be seeking over $22 million from the Mortgage Electronic Registration System, ‘MERS’ which represents several major banking conglomerates.

READ IT HERE