Economy emerging as key election issue
Will trade, immigration, AMT and healtcare become key issues in 08?
MSN-Americans have turned markedly gloomier about the economy in recent months, a shift that is reshaping a presidential campaign long dominated by the war in Iraq and national security concerns.
Higher prices for gasoline and home heating oil, stock market volatility and rising mortgage foreclosures all account for some of the pessimism, in the view of political pollsters.
Significantly, they also cite the recent drop in real estate prices as a major worry for millions who have long viewed their homes as a source of retirement income.
[...] Read the rest of this great post here [...]
The Human Side of the Current Crisis
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Marriages, families, tax revenues fall victim to wave of foreclosures
The national surge in mortgage defaults is claiming more victims than just the thousands of subprime borrowers facing the prospect of losing their homes.
Social service agencies say homeless rates are on the rise not only as families lose their own homes to foreclosure but also as renters are evicted after their landlords default. Financial analysts warn that state and local governments will soon feel the pinch of sharply reduced property tax revenue. And counselors say divorces and reports of abuse are rising as families burdened by impending foreclosure take their stress out on one another.
The ripple effect illustrates the wide-ranging impact the subprime mortgage crash has had not only on the U.S. economy but on society at large, said Robert Reich, who was labor secretary during the Clinton administration.
http://www.financialarmageddon.com/
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Even renters are being tossed out because they were renting homes that are being foreclosed on, according to the article.
In another news blurb today, I heard them “predict” that after the 1st of the year, a series of poor sales reports, lower profits due to the impact of these things, maxed credit cards, fewer equity loans, layoffs in financials and housing related business, etc. and other bad news will plague the nation.
If true, no wonder the Fed and Congress is in a panic to stem the tide of this “credit crunch.”
Which candidate in each party understands economics and what the long term effects of policies will be?
In each party?
When only 6% of all mortgages are affected by the subprime mortgage fiasco (that would be 20% of subprime mortgages) and an estimated home depreciation of 4% (which only effects those intending to move or acquiring home equity loans), I fail to see how this is as catastrophic as it is being made out to be. Granted, the squeeze on mortgage lending will effect new home buyers and those with borderline credit histories, but, our economy has proven itself resilient and I believe the “ripple effect” as predicted by Reich, is purposely overstated during this election year.
Sure there will be some impact to the overall economy from the subprime mortgage fiasco but, I see this as a market correction where the heyday of the subprime lender is coming to an end as well it should. These “creative financing” schemes were analogous to pyramid schemes within the mortgage industry and now they will have to revert to applying standard risk ratios to mortgage loans instead of exploiting a window of low interest rates intended to stave off inflation after the Bush administration inherited a recession in conjunction with the impact of 9/11 and Katrina.
And all the talk about the exponential rise in homelessness should be taken with a grain of salt. The groups who report these numbers have no accountability and use over inflated numbers to pressure more government spending just because they have learned to use the word “homelessness” to pull the heartstrings of government. And when they can’t get the government to allot more tax dollars to the futile “eradication of homelessness”, they pull out all the strings and attach “veterans” to homelessness in an attempt to garner support from patriotic Americans and obfuscate their true motivation to extort money from the coffers of government towards social spending instead of defense spending.
Hoads
This is my world trust me this is a big problem. Anyone in the money business will tell you that.
Correct John. The 6% has contaminated much more and called into question any package of securities that has in of the subprime in it. However, it is no longer just subprime loans. The lower home values has cause “good loans” to now be higher than home value and that is causing a loss in home equity loans so many consumers were using to keep spending. Then you have the $900 billion lost tax revenues from declining property taxes as homes sit empty, are vandalized and burned and cities having to keep weeds down due to city regulations where with no home owner doing it, the city has to.
Then add the 900,000 new realtors that were added during the boom, losing their income and because they are “contract” workers, they don’t get to apply for unemployment which helps employment look better, when really it is having problems too.
Now, city pension funds and other pension funds that invested in securities with toxic securities in them are at risk and having to be reduced in value below what they are allowed to be in quality in order to be in the fund, but, can’t be sold at what they were purchased for.
Add that loan qualifications for corporations that want to expand and hire more people may now have to meet such high standards or collateral demands that even though the money is there to loan, they won’t loan it. In some cases they won’t even loan it to other banks because they don’t trust the assets now that bank uses as it basis for borrowing.
Remember we depend on billions in foreign loans for homes, corporations and government (city, state, as well as federal) and foreigners are getting tighter on who they loan to. Cities are especially vulnerable now because due to lost tax revenues from property, they are being classified as “high risk” for the muni bonds they want to sell.
It centers around a “lack of confidence,” and that is why the Fed is trying very hard to restore confidence so banks will be more willing to lend to each other and the customers they serve. However, the problem is that even if confidence is restored, the home value loss means there is no collateral to base loans on for people who have the ARMs and can’t make the payments. With something like 2 million homes or more affected, this will take another year at least to play out. Now, add not only all the home mortgages in trouble but this,
quote:
HELOCs are home equity loans, the money extracted from houses. Many borrowers pushed their debt to as much as 110pc of house values.
Moody’s says 16.5pc of these loans are in arrears beyond 60 days. The HELOC market is roughly $600bn, so add another $100bn to the funeral pyre. These niches add up.
http://tinyurl.com/2z7qcc
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The financial system of the U.S. is at risk. How much risk? Probably not a lot but just being “at risk” has the Fed and Congress in panic mode as well as central banks in other nations. That is why you are even seeing foreign governments using Sovereign Wealth Funds to bail out Citibank and they still don’t know if that bailout will be successful.
It is a huge problem and could send us into a recession if the Fed isn’t able to restore confidence and even it they do, it still could be a consumer driven recession or downturn.
Good news / bad news !
The bad news is that the US ran a $752.4 billion current account deficit over the pst four quarters.
The good news is that a year ago it was $839.3 billion.