Is the truth gaining currency or is this the patient with lung cancer facing up to the fact that when coughing up half your lung in the morning into the sink you really are screwed?
NEW YORK (MarketWatch) — You want to fix this economic crisis? You want to put people back to work? You want to light a fire under the economy?
There’s a way to do it. Fast. And relatively simple.
But you’re not going to like it. You’re not going to like it at all.
Default. A national Chapter 11 bankruptcy.
The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages and other debts, and millions more file for bankruptcy.
It’s the debt, stupid.
We’re hocked up to the eyeballs, and then some. We’re at the bottom of a lake of debt, lashed to an anchor. American households today owe $13.3 trillion. That has quadrupled in a generation. It has doubled just in the last 11 years. We owe more than any other nation, ever. And for all the yakking about how people are “repairing their balance sheets,” they’re not. From the peak, four years ago, they’ve cut their debts by a grand total of 4%.
Yep. Four years into when I’ve been saying that as well. Of course The Fed Z1 tells the truth although the media has thus far refused to.
American mortgage contracts allow for default. Half of the states in this country are “non-recourse,” which broadly speaking means you can send in the keys and walk away from a bad loan. The other half are sort of “semi-recourse.” The bank can come after you for any shortfall, but only in a limited way. Broadly speaking they can’t touch retirement accounts and basic assets. You can typically keep your car, personal effects, often things like life insurance.
Most of the people who are deeply underwater don’t have that much anyway.
And the banks knew this. When they were lending $500,000 to a bus driver with $1,000 in his checking account, they knew that their loan was only guaranteed by the value of the home.
If they didn’t know it, they should have. Their incompetence is not our problem.
But what’s being missed here is that the banks basically bought the government. And they keep buying it – both Democrat and Republican.
Thus, my screed over the weekend about how it’s over and that you’re nuts if you in any way help, assist, or play “footsie” with the people in the government any longer. They don’t give a damn about the math and they sure don’t give a damn about you.
Everything has been about “saving the banks.” The very same banks who intentionally loaned a guy who had $1,000 in total net worth and a $50,000 a year honest income $500,000 to “buy” a house, knowing full well he couldn’t pay.
They didn’t care because (1) they expected him to come back and refinance, thereby allowing them to asset-strip him further and (2) they fully expected that if something went wrong with (1) they could force you, the taxpayer, to pick up the check.
Unfortunately “you” via the government is the same as “you” the starry-eyed homebuyer with no money. They both go to the same place and neither has the ability to shoulder any more debt.
We either face this truth, as I have counseled since The Ticker began or we go off the cliff exactly as is happening in Greece right here and now.