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Chapter 13

-Economic Situation-

By Kenneth D. Nunn

 

   "All great democracies have committed financial suicide somewhere between 200 and 250 years after being founded. The reason... the voters figured out they could vote themselves money from the treasure in exchange for electing them.
  The United States officially became a Republic in 1776, 231 years ago. The number of people now getting free stuff outnumbers the people paying for the free stuff. We have one chance to change that in 2012. Failure to change that spells the end of the United States as we know it."

 

   National Debt: The total amount of money that a country's government has borrowed, by various means.

   Federal Deficit: The amount by which a government's expenditures exceed its tax revenues. The difference is made up for by borrowing from the public through the issuance of debt, also called Federal Debt.

   Gross Domestic Product (GDP): Refers to the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living; GDP per capita is not a measure of personal income. See Standard of living and GDP. Under economic theory, GDP per capita exactly equals the gross domestic income (GDI) per capita.

   Source: Wikipedia

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Overview

   Today as I write this, the national debt is $15,750,000,000,000.00. This calculates out to about $50,000.00 per every man, woman and child in the U.S. or more realistically about $140,000.00 per taxpayer. The national debt has increased more in less than one term of this Congress than in the first 97 Congresses combined. If that doesn't get your attention, then how about the fact that the National Debt is growing at the astonishing rate of $6,500,000,000.00 every 24 hours. Yes, that is billion with a "B".

   Let's look closer at the U.S. unfunded liabilities which are, social security, prescription drugs program, and Medicare. Today the total unfunded liabilities are $120,000,000,000,000.00 or an unbelievable $1,044,239.00 per taxpayer. Total Federal tax revenues for 2012 is $5,100,000,000,000.00. Looking at the figures together, you will see that the U.S. government owes over 15 trillion dollars and is bringing in only a little over 5 trillion dollars.

   Now, it doesn't take an economic genius or CPA to see there is no way this debt can be paid.

   Just think, what would your accountant say if you took these figures to him? I'll tell what he would say; he would say pack it up... you are bankrupted. How is the government staying afloat? Mostly by printing more money which will, at some point, lead to tremendous inflation.

   This was in 2008:

   Since September, the 'monetary base,' which is the measure of currency plus bank reserves, has doubled from about $850 billion to $1.7 trillion, about $600 billion of which is in the form of bank reserves. Meaning $1.1 Trillion is money being printed.

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Here are a few more figures for you to think about and were probably unaware of:

  •  People drawing a social security check: about 45,000,000

  •  People drawing welfare check: 43,600,000

  •  People drawing unemployment check: 12,873,138

  •  Number of bankruptcies in 2011: 1,398,983

  •  People on food stamps: 46,224,722

 

   One other thing, I think we need to understand. Most of us have no understanding of how big a figure a trillion is. Maybe these numbers can put it in perspective.

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Numbers:

  •  Million seconds...12 days

  •  Billion seconds...31 years

  •  Trillion seconds...31,688 years

 

   I think the best place to start will be to look at the history of the GDP and the National Debt. I think this is pretty telling as for where we have been and where we are going.

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A couple of things jumped out at me, in 1930 our GDP was 6.5 times our National Debt, in 1970 GDP was 3 times our National debt and in 2011 GDP is the same as our National Dept. From 1930 to 1970 the national debt grew $365 billion and from 1960 to 2011 it grew a little over $15 trillion.

 

   According to U.S. Rep. Rodney Frelinghuysen, the United States is increasing its debt twice as fast as its economy is expanding. Rep. Frelinghuysen cited growth in debt compared with the increase in the gross domestic product, or GDP -- a measure of the nation's economy -- in the first quarter of 2012 and said, "The U.S. is borrowing approximately $2.52 for every $1 of economic growth so far in 2012."

   Now let's look at the revenue sources of the U.S. government, all of which are taxes:

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   Total Government Revenue in the United States Federal, State, and Local

 

 

 

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Note: Interest paid on the National Debt in November 2011...$21,709,460,451.61

  

 

 

 

 

 

 

 

 

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Percentage of U.S. population living in a household receiving some government benefit

  

   Ok, now you have all the figures. The purpose of this is to let you see what kind of a shape the U.S. is in financially.

   First of all it is obvious that the United States owes more money than it will ever be able to pay. Right now the interest alone is running from $20 to $25 billion a month.

   Now let us look at how the U.S. looks compared to the rest of the world...

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General Gross Debt estimates for 2011. IMF World Economic Outlook. Includes central, state, and legal government debt. U.S. gross federal debt alone , which includes internal government borrowing, amounted to 15.2 Trillion in 2011.

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   Produced by Senate Budget Committee Republican staff. Ranking member Jeff Sessions.

 

   As the chart shows, America's debt is currently $15.1 trillion, (actual 15.7 currently) while the Eurozone (which includes France, Germany, Greece, Italy, Spain, the U.K., and others) has a combined debt of $12.7 trillion. (All dollar amounts are in U.S. dollars, and the data refers to closing 2011 numbers.)

   The Eurozone is larger than the United States, so America's debt per capita also exceeds the Eurozone's. According to the Census Bureau, the U.S. has a population of 313 million, whereas the Eurozone has a population in excess of 331 million.

   As if this is not frightening enough, the following chart shows that this figure is projected to increase over the next five years. While Eurozone's debt is project to increase $1.9 trillion to 15.2 the U.S. national debt is projected to increase $5.7 trillion to $22.3 trillion.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in general government (federal, state and local) gross debt between end of year 2012 and 2017 in nominal U.S. dollars projected by IMF.

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Source: IMF Produced by Republican staff. Ranking member Jeff Sessions http//budget senate.gov

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Value Of The U.S. Dollar

By: Kimberly Amadeo, About.com Guide

 

Dollar Value Compared to Euro:

 

   2012 – The dollar lost value against the euro, as it appeared the Eurozone crisis was being managed. By the end of February, the euro was worth $1.3463.

   2011 – The dollar's value against the euro fell 10%, and then regained ground. As of December 30, 2011, the euro was worth $1.2973.

   2010 – The Greece debt crisis strengthened the dollar. By year end, the euro was only worth $1.32.

   2009 – The dollar fell 20% thanks to debt fears. By December, the euro was worth $1.43.

   2008 – The dollar strengthened 22% as businesses hoarded dollars during the global financial crisis. By year end, the euro was worth $1.39.

   2002 – 2007 – The dollar fell 40% as the U.S. debt grew 60%. In 2002, a euro was worth $.87 vs. $1.44 by December 2007.

Source: Federal Reserve, Exchange Rates

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Includes spending from federal, state, and local government 2011 general government expenders per person in nominal U.S. dollars.

Produced by Senate Budget Committee Republican staff. Ranking member Jeff Sessions.

  

   According to the chart, the U.S. spends $20,000 per person, while Italy spends $16,900, Spain $13,100, Greece $12,500, and Portugal $10,200.

   These dollar amounts "Includes spending from federal, state, and local government," according to a note on the chart. "2011 general government expenditures per person, in nominal U.S. dollars."

   There is a growing chorus of economists who believe the global economy is headed in the absolute wrong direction. Mr. Raoul Pal, who writes for The Global Macro Investor, a research publication intended only for larger institutions, hedge funds, and family offices, believes that a global banking collapse and massive defaults will bring about "the biggest economic shock the world has ever seen" - and there's nothing we can do to stop it."

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Government

   The biggest expenses in the U.S. economy is the Federal Government, as well as the State and Local governments. You have to remember the Government produces nothing.

   I have heard a lot of people say the Government should be run as a business. Well, that would be great if it were possible. However, when you make no product or produce no service to sell, then it would be difficult to use business principals to operate.

   In the first place the incentive to provide quality service or produce a quality product is not there. You have no completion plus you have a captive market. In addition the government has no competition. It can do what it wants when it wants. What you have is a formula for failure.

   Running a business or government in this manner is, to use an analogy, is like a perpetual motion machine. As good as it sounds and as good as it looks on paper it simply does not work. It never has worked it never will. A machine can only run so long on a set power source. This is exactly what has happened in the United States and is happening in Europe. There have simply become more takers than givers.

   The government, makes little difference whether it's federal, state or local, gives money or lucrative jobs, contracts or subsidies to its friends and supporters, we the taxpayers give the government the money it needs whenever it needs it. This is usually through taxes and fees. I know this seems like an over simplification, it's really not. If the Government wants more money they simply increase taxes, invent new taxes or certain fees. A good example that just happened and no notice of any kind was put out. We all know the post office needs money, so in lieu of raising stamp prices they have decided to charge a fee for the remote mail boxes you see in different subdivisions. As you know there are hundreds of thousands of these located around the country. Well now when you move into a neighborhood that has these boxes you must pay $40.00 to get the lock changed. In the past these were free, they had keys that could not be duplicated. This is one of the fees I was talking about you have no choice you have to have a mail box.

   Sure I would like to have free health care for everyone but then it would turn out like the Government... why?... because there would be no incentive to provide the best service, no competition. You can see this in anything the government is involved with. Look at the Post Office. Think about this, they had a captive customer base. They had government backing... government contracts... yet they are failing big time. Now, why are they failing? Two private companies came in and provided a better service. FedEx and UPS came in and offered the same identical service yet both have become very successful while the Post Office is failing miserably. FedEx and UPS are both very profitable while the Post Office is barely hanging on thanks to Taxpayer money.

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Unemployment

   Now let's look at the unemployment situation. It is very difficult to actually get an idea as how the government calculates the number of unemployed. The only thing everyone agrees on is that the figures the government publishes are not a true count of the unemployed. The way I understand it is the unemployed rate the government publishes is the percentage of the labor force that is unemployed. The way the government skews these numbers is in the way they count the labor force. The official number of unemployed is 12,873,595. The real number is actually 22,787,459. The official number of unemployed counts only those folks that are drawing an unemployment check. The unofficial unemployment number includes the number of people who have exhausted their unemployment benefits, people who have taken a part time job, and people who never qualified for unemployed benefits, (people just entering the work force, people who were self-employed & etc.). These people are not counted in the government's official unemployment numbers.

   Using the actual unemployed figures would, of course, increase the unemployment figure from around 8.2% to at least 15.5%. Some experts say the actual unemployment figure is closer to 25%.

   It is reported by the U.S. Census to be a little over 130 million people employed in the U.S. This is the same figures we were looking at in 1999, 2001, and 2003. On the surfaces these figures are bad enough, but when you consider that the U.S. population grew substantially in the twelve years since 1999 the unemployment percentage looks even worse.

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Labor Force Participation Rate

By SJ Leeds

2012 March 18

 

   Why the participation rate matters. Everyone following the markets is aware that the unemployment rate has dropped from approximately 10% to 8.3%. Part of this improvement is the result of job creation (which is a great thing). But, part of the decrease in unemployment is simply the result of fewer people "participating in the labor force." In other words, to calculate the unemployment rate, we divide the number of unemployed people by the number of people participating in the labor force. To be part of the labor force, you need to either have a job or be actively looking for a job. So, if you quit looking for a job, you no longer count as unemployed.

 

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The Labor Force Participation Rate

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   The labor force participation is the proportion of the civilian noninstitutional population age 16 and older that is employed or unemployed and seeking work. Source: U.S Bureau of Labor Statistics

  

   If you are not eligible for unemployment, just entering job market or have exhausted your unemployment benefits then you are also not counted as unemployed. As you can see these numbers are misleading, there are many more unemployed than counted. As you can see on the chart we are now back to the 1988 percentage and dropping.

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The Domino Effect

   The domino effect has begun. Everyone agrees that the United States economy has lost over eight million jobs. Looking at actual figures, the eight million figure is a little misleading. The administration is saying, or actually claiming, that there administration has added 2 million jobs since 2008. Believe it or not they are actually bragging on these numbers. Think about it, in the last four years the economy lost over eight million jobs and gained two million jobs, that leaves over six millions jobs that was lost. It looks to me as if we are going backwards pretty fast.

   To put these figures into perspective, that would be the same as everyone living in, Houston, Phoenix, San Antonio, and Dallas losing their jobs. Now keep in mind that is the entire population of these cities not just the people that work. To look at it another way... the entire employed labor force in New York City is a little over 8.5 million.

   A large number of these jobs lost are jobs that in all likely hood will never be back. These are jobs that were lost when factories shut down, stores closed, home construction stopped and etc. This is six million people that will not be buying car, this is six million people that will not be buying furniture, this is six million people that will not be buying a lap top, wide screen T.V. or buying a house, this six million people that will probably be going on food stamps, maybe moving out of their apartment and moving in with parents, this is six million people that may be going into foreclosure, this is six million people that will be losing their hospital insurance, this six million people that are in a jam.

   Now, add to the six million figure the number of teen agers and college graduates that are just coming into the job market. I can't see any reason the number of entrants are slowing to any great degree, but according to the administration since 2008, say three years, the U.S. economy has added only 2 million jobs. What is troubling is the fact the Administration is actually bragging on these figures. As you can see we have a problem.

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PoliticalFactcheck.com

   Below we list the last five recessions as declared by the NBER, along with the difference in U.S. non-farm employment levels between the official start of the recession and the official end:

 

 

 

 

 

 

 

 

 

 

 

About 850,000 more jobs were lost during the great recession than in the previous four recessions combined.(Notice these figures are only up to 2009)

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   Now let me reiterated why I think this has started the domino effect. When you have six million people not receiving a paycheck you have six million people that will not be buying any type product. That is six million people out of the market place. Take six million people that lost their jobs added to the large number of people that have drastically cut back spending and you will see demand for products have been drastically reduced. Demand translates into sales, when sales go down, production is cut, when production is cut jobs are cut. When jobs are cut then demand goes down, when demand goes down sales go down, decreased sales means decreased production, decreased production means job cuts and on and on and on.

   Now, the difference in this recession and other recessions we have gone through is simple. In past recession we lost say a million jobs. When the economy went into a recover stage then these million jobs were replaced by other jobs. With this recession we lost eight million jobs. As shown before we have about 2.5 million people coming into the job market each year with less than a million jobs created. By looking at these figures you can see that we will never be able to catch up, meaning with the domino effect we will keep losing ground.

   There are an awful lot of economic experts that are saying in order to recover from this "Economic Collapse" the world's economy will have to shrink. I agree with this, my question to these economists is this; if the world's economy shrinks what happens to the millions that will be left unemployed?

   Millions are already unemployed. Millions more will be. Most are estimating that the world will see in excess of 50 million unemployed before this is over. What becomes of these folks when we shrink the world's economy?

   If these economic experts haven't figured it out THE WORLD'S ECONOMY IS SHRINKING. It is shrinking in large part because of high unemployment. People cannot buy the products which means the products will not be manufactured, which means people will not be hired...the domino effect. It has been reported that the world's economy has lost somewhere around 45% of its value and losing more every day. Seems to me this is the problem. When factories shut down, when houses are foreclosed on, when construction companies shut down, this to me equals a shrinking economy. The questions remains, what happens to all these folks that are without a job?

   Is this not what happen in the great depression? The economy hit bottom, or you could say it did shrink. The problem was after the economy hit bottom there were all these unemployed folks to deal with. To solve this unemployment problem the government came up with all these make work projects. These worked fine for a while; until the government ran out of make work projects. This all took about ten years, and then along came World War II this took us out of the depression. How did World War II end the depression?

   The war industries provided jobs for a lot of people. At the same time it helped start a lot of companies that continued on after the war ended. It also ended a lot of unemployment problems by killing off working age people.

   Is this what we are going to have to do... start a war in order to save the economy? I don't know about you but I have no doubt that the powers that be would start a war to save the economy. As a matter of fact it looks as if we are well on the way now.

   Unemployment is one of many things that will and is causing a domino effect in the economy. Another would be foreclosures.

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Foreclosures

Foreclosure: is a specific legal process in which a lender attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by forcing the sale of the asset used as the collateral for the loan.

   Formally, a mortgage lender (mortgagee), or other lien holder, obtains a termination of a mortgage borrower (mortgagor)'s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).

   Usually a lender obtains a security interest from a borrower who mortgages or pledges an asset like a house to secure the loan. If the borrower defaults and the lender tries to repossess the property, courts of equity can grant the borrower the equitable right of redemption if the borrower repays the debt. While this equitable right exists, it is a cloud on title and the lender cannot be sure that (s)he can successfully repossess the property.[3] Therefore, through the process of foreclosure, the lender seeks to foreclose the equitable right of redemption and take both legal and equitable title to the property in fee simple. Other lien holders can also foreclose the owner's right of redemption for other debts, such as for overdue taxes, unpaid contractors' bills or overdue homeowners' association dues or assessments.

From Wikipedia

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   Let's take a few minutes to look at mortgages. A lot of people that I talk with have no idea what a mortgage actually is.

   The great misconception is, most people think when they sign a mortgage they are then the owner of the house. Usually the real-estate agent will say something like; you are now the proud owner of this house. This could not be further from the truth.

   The bank or the mortgage company is the one who owns the house or the property. What the mortgage actually does is allow the buyer to live in the house while he or she is making payments to buy the house. In other words, the buyer is paying the mortgage company a sum of money each month for the privilege of living in the banks or mortgage companies' house. In all actuality a mortgage is actually a rent or lease to own contract.

   Not only are you paying for the privilege of living in the house but also agreeing to maintain the house. Not only do you maintain the house but you also agree to pay for insurance on the property, you pay the property taxes on what is the banks' property. Not only are you obligated to all of this you actually sign a contract agreeing to do this for a certain number of years. If you fail to do any of these then you can be thrown out of the house. If that doesn't make you feel good how about this...when you die your heirs must then pay an inheritance tax on the value of the house or property.

   Now, it is true that while paying for the house you do realize the equity. This is the difference in what you owe on the house and the actual value of the house. However, if the bank forecloses on the property the person that is making payments on the house or property does not get the equity. This is usually consumed in the many different fees involved in a foreclosure.

   This fact has unfortunately become apparent to a lot of folks.

   You probably have been hearing from the news media, the government and especially the real-estate companies, that home foreclosures are slowing. Well, as with most things the media and government are telling us concerning the economy, this is simply not true. As a matter of fact the exact opposite is true. The way the statistics are presented makes it sound that foreclosures are going down. They do this by saying the rate of foreclosures are declining. This statement is true. However the number of foreclosures continues to increase.

   As you can see in the two charts following the number of foreclosures has increase since 2004. The rate of foreclosures started a dramatic increase beginning in 2006. Since 2008 the number of foreclosures has remained over three million a year. If the trend continues then the number of foreclosures in 2012 will exceed four million. The total number of foreclosures from 2006 to 2011... is an astounding 17,659,690 homes. In contrast the total number of foreclosures from 2000 to 2005 was 3,811,563. That number represents a six fold increase in home foreclosures.

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   Total outstanding commercial real estate debt is currently $3.2 trillion
Total outstanding residential real estate debt is currently $10.6 trillion
As of Dec. 2010 Source: Federal Reserve

 

 

 

 

 

 

 

 

 

 

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Source: RealtyTrac, Federal Reserve, Equifax

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Source: RealtyTrac, Federal Reserve, Equifax

Home Sales

   Now let's look at what I feel is an underlying problem and that would be the homes that are for sale but not in foreclosure. There are a tremendous number of houses for sale.

   I am often asked why if the housing market is so depressed are the prices not coming down even more than they are. It is true for the most part the selling prices are staying relatively high. Now, as with most aspects of the economy I make no claim to be an expert on real estate...however, I have drawn my own conclusions.

   Let's say a person owes $250 thousand on a home. With the drop in real estate value the home now appraises for $175 thousand. The owner may have two or even three mortgages on the house. Now let's assume the owner has lost their job or maybe there spouse has lost their job. For whatever the reason the mortgage holder finds themselves in a financial position where they are unable to make the mortgage payments.

   What would be the reasoning for selling the house for the appraised value of $175 thousand when they owe $250 thousand? If they sell for $175 thousand they will still owe the mortgage holder $75 thousand. The results will most likely be the same... bankruptcy. So they keep the price at $250 thousand hoping for a miracle.

   There is another good reason for the high real estate values... it is to the government, banks and real estate companies advantage to keep the real estate values high. You have to realize that once the real estate values come down to realistic values, the mortgage companies, banks and not to mention Fannie Mae, will lose a tremendous amount of value.

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-Real Estate-

How 'Shadow Inventory' Is Killing the Housing Market

By Katherine Tarbox Time Magazine February 8, 2012

   There are many reasons why homes that could be for sale aren't. Some are stalled in the foreclosure process, which can easily take more than a year in some states. Some banks decide against putting certain homes on the market either because they can't process all their distressed inventory, or because flooding the market would drive prices further down. Technically, shadow inventory also refers to homeowners who would like to sell but are waiting for market conditions to improve.

   How much shadow inventory exists? No one knows for sure. Yesterday, the U.S. Department of Housing and Urban Development released the January Scorecard, which reported that the number of homes left off the market decreased from 3.9 million units at the beginning of 2011 to 3.6 million at the end of the year. These figures include homes that defaulted through a Fannie Mae or Freddie Mac loan. While lenders who participated in such loans are required to report data regarding how much inventory is left off the market, other lenders are under no such obligation. Therefore, it's difficult for housing analysts to estimate just how much shadow inventory is out there at any given time. According to the Wall Street Journal, the number could be anywhere from 3 million to 10 million homes.

   About 4.4 million homes were sold in 2011, according to Bloomberg. There are about 3.5 million homes on the market now, and if you were to add millions and millions of shadow inventory homes into the mix, it would take years to sell all these properties to get to a point where the market was "normal."

   Now let's look at another forgotten or hidden aspect of the real estate market...the commercial real estate.

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Mark Bergen in Forbes April 2012

   For many businesses beyond Wall Street and Detroit, economic consequences have hit outside the spotlight. In New Jersey, the continued rise in foreclosures has been most pronounced on commercial properties. State court records show only one commercial business in New Jersey was hit with a foreclosure action in October 2006. A year later, there were 60. For October 2011, the number was 165.

   For all of 2006, there were 173 commercial foreclosures in the state. Last year's total was 1,586.

   Next to residential rates, this is nothing. (The Warren report estimated commercial debt at less than a third of the $10.6 trillion in residential real estate debt.) But the trend is troubling, as the bond markets are pointing out. A further spike in delinquencies would strain banks and then dry up funds for future commercial borrowers.

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Understanding the Commercial Real Estate Debt Crisis

Tanya D. Marsh is an Assistant Professor at Wake Forest Law School.

February 1, 2011

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   It has been estimated that commercial real estate has dropped in value 35-45% since the height of the market in 2007. That decline is the result of two factors: (1) Downward pressure on rent and increasing vacancy rates; and (2) increasing capitalization rate.

   The more significant problem is that borrowers of performing assets are finding themselves in maturity defaults, unable to refinance expiring debt. Unlike residential loans, which normally fully amortize over a 30-year term, permanent commercial loans normally partially amortize over a 10-year term. As a result, every ten years the borrower must refinance a balloon payment. Over $1.4 trillion in commercial debt will mature before 2013. Combining the dramatic increase in capitalization rates with the sluggish capital markets, borrowers and lenders are faced with an equity gap that some analysts have estimated will exceed $800 billion.

   Determining how that equity gap will be satisfied, and by whom, will be a major challenge over the next few years. If borrowers cannot raise the funds, then lending institutions, particularly local and regional banks and thrifts, will be confronted with severe losses. Government action will then likely be needed to prevent commercial real estate debt from derailing our fragile economic recovery.

 

 

 

 

 

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   So what does this mean for the economy? More of the domino effect.

   The first thing that comes to my mind is where are these folks that are having their homes foreclosed going to live? Most will end up renting or leasing. However, for this to happen someone will have to buy the houses that are foreclosed and then rent them. Who will do this with the vast majority of these houses under water? Are the banks and mortgage companies going to take the loss?

   In any event home prices, I believe are a long way from bottoming out.

   I think as far as the economy goes we have just seen the tip of the problem. Once the people that are being evicted are actually evicted, which can take 20 months or longer, then the problems will begin.

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Economic Health

   I recently read that a good indicator of a nation's economic health would be the condition of that nation's infrastructure. Well if this is true, and it makes good sense, then the U.S. is on life support. According to "Report Card for America's Infrastructure" presented by the American Society of Civil Engineers (ASCE) the U.S. infrastructure gets a D. According to The World Economic Forum, the U.S. infrastructure is rated at number 23 in the world. That is pretty bad on its own but considering that as recently as 1995 the U.S. infrastructure was rated as top in the world. Of course this simply means that since 1995 the U.S. government and the State governments have simply pushed infrastructure maintenance to the back burner. Now the U.S. infrastructure is in such condition that it can't be brought back up to standard.

   Why do I say it can't be brought up to standard? It's simple; the U.S. does not have the money. The ASCE estimates that it will take over 2 trillion dollars to get the infrastructure back in shape, it ain't going to happen.

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World Situation

   We are not in this situation alone, far from it. Today there is political turmoil throughout the Middle East, Economic turmoil throughout Europe, political turmoil in Russia, China's economy is starting to regress, Japan's economy has been in trouble for the past few years and then there is also North Korea. All of the world's Governments seem to be in about the same position. Some are just more open than others about their situation.

   There have recently been high level meetings in Asia as well as Mexico where the world leaders have met trying to solve or slow the world's economic collapse. Spain, Greece, Ireland and Italy are all on the verge of collapsing. Make no mistake the world is in an economic collapse. Just because the world governments don't call it an economic collapse does not mean it's not happening.

   At the G20 meeting in Mexico June 6 2012:

   David Cameron Prime Minister of the United Kingdom said:

   "If the Eurozone is to stay together then it has to make at least some of these difficult decisions. The alternatives to action are either perpetual stagnation or a break-up that would have financial consequences that would badly damage the world economy."

   He went on to say: "instability in the Eurozone is one of a number of 'big threats' to the global economy. The others are 'muddle-headed thinking that over-indebted governments can spend their way out of the crisis', and the failure of nations to intervene in their markets in the short term, combined with structural reform in the long term".

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G20 Leaders fear second Meltdown

By Robert Winnett, Alex Spillius - The Telegraph

 

   The prospect of a second credit crisis to rival the "once-in-a-lifetime" economic meltdown of 2008 and 2009 is now a real possibility. Back then, global leaders were able to agree on a global rescue package, worth hundreds of billions of dollars, which helped to shore up the banks and kick-start world trade. But this time there are significant barriers to history being repeated, leaving the Eurozone facing a defining few weeks that could, in David Cameron's words, determine its "make-up or break-up".

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Policy 'paralysis' hits global recovery ahead of G20

By Chris Giles - Financial Times

 

   As fears mount that the G20 summit will be another damp squib, Bob Zoellick, the outgoing president of the World Bank, said the world was facing a very dangerous moment. "If people don't come to the fundamental decisions, first at a national level, but work it out internationally, very bad things could happen."

   The FT/Brookings Tiger index showed world growth stalling after an initial rapid recovery from the 2008-09 economic crisis. Growth in the US was slowing, much of Europe is in recession, China's growth outlook has weakened, the reform processes in India have stalled and other large emerging economies have slowed dramatically.

   Prof Prasad of Brookings said: "The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession".

   In recent years the world has become, in many ways, a one world economy. By this I mean each country's economy is dependent on the other country's economy. If one countries economy fails it has a direct effect on other countries. This leads to a similar situation that we saw back in 2008 when we were told that certain banks or business were too large to allow them to fail. It would, we were told, have a detrimental effect on the economy. Now we see the same effect with countries. These countries are considered too critical to be allowed to fail. Thus, they are bailed out by other countries. This is only going to serve to drag other countries down. In other words, the U.S. taxpayer is bailing out foreign countries.

   Another way of looking at this situation is the fact that the U.S. is borrowing money from China and then giving money to other countries... I ask you does this make sense in any way?

   Along with the economic unrest there is also political unrest in most of the world. The Middle East, Africa, North Korea, Russia, and even the U.S are all experiencing political unrest.

  •  In the Middle East, Syria is in what is now being called a civil war. Russia is warning the U.S. and NATO not to interfere with the Syrian civil war while they are sending in arms as well as war ships. Russia, with the support of China, is saying Iran shouldn't face threats over its nuclear program.

  •  Iran is threatening to attack Israel while Israel is threatening to attack Iran. Most experts believe that war between Israel is eminent.

  •  Tensions between Egypt's military and the Muslim Brotherhood are rising. Muslim Brotherhood is convinced that its candidate, Mohamed Morsi, won but fear that the military intends to hand victory to his rival. This situation has the potential of escalating into a civil war.

  •  North Korea is facing its worst drought in decades, the head of a relief organization has been told during a visit to the communist nation. A U.N. Food and Agriculture Organization reported North Korea was in urgent need of international food assistance.

   This news comes as the U.S. extended sanctions against North Korea as it poses an "unusual and extraordinary threat. A presidential statement to Congress said the "existence and risk of proliferation of weapons-usable fissile material" and the behavior of the North Korean regime to destabilize the region "constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States."

   Following the election of Putin, Russia has been busy rattling its saber whenever possible. Russia is warning the U.S. and NATO not to interfere with the Syrian civil war while they are sending in arms as well as war ships. Russia, with the support of China, is saying Iran shouldn't face threats over its nuclear program. Earlier this year Russia's Chief of General Staff Nikolay Makarov stated, in reference the European missile shield, that Russia might consider a pre-emptive strike an option in certain circumstances. Now Russia is sending three warships to Syria. While at the same time Russia, with the full support China, is warning the U.S and NATO on expanding its forces.

   China recently completed construction of one of the largest aircraft carriers in the world. Along with they have announced a large increase in its defense budget.

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Economic Collapse

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   Understand that I make no claim to be an economic genius, as a matter of the opposite is true. However, I can however balance a check book and live on a budget; this places me far ahead of the government. There are a number of facts that indicate to me that the United States, as well as the rest of the world, are in the first stages of economic collapse:

  •  The financial state of the United States.

  •  The unemployment.

  •  The residential housing situation.

  •  The commercial situation.

  •  The condition of the national infrastructure.

   The United States of America as well as the rest of the world is in "Economic Collapse". To be truthful, like most people, I have suspected this for quite a while. It really hasn't been a secret. This has been all over T.V., newspapers, and the internet since 2008. It's just that no one has actually said it. I guess we have hoped that like the proverbial ostrich, if we keep our head buried then the problem will go away. If we ignored it would go away. We have all been hoping and praying for some sort of miracle. Well, I am here to tell you it ain't going to happen, there are no miracle on the horizon. We have been hoping for a miracle for four or five years now and conditions have gotten progressively worse.

   Many economic experts say that we are in danger of an economic collapse. They say that if thing don't change the world economic system is in very real danger of collapsing. They have been saying this ever since 2008. If I am not mistaken since that time things have only gotten worse. Has anything improved? Let's see the debt has continually grown since 2008... January 8, 2008 the National debt was a little over 9 trillion dollars... the national debt today is a little over 15 trillion dollars... unemployment in December of 2008 was 5%... the unemployment rate in May 2012 was 8.2% Now look at the housing market. It is much worse than it was in 2008 and according to experts it is expected to get much worse.

   Like I have said I make no claims to be an expert on economics, but I am also not an idiot...looking at the numbers I just gave, coupled with going to the grocery store and buying gas I have a news flash for these so called experts...we are in an economic collapse.

   Now the only arguable point with that is in how you define economic collapse. By my definition I would say we are in an economic collapse. What does the U.S. owe now...something in the neighborhood of $16 trillion? Looks to me like if you owe trillions of dollars more than you can ever repay then I would say that we are collapsing. If we are printing money at the same time we are borrowing money we are in an economic collapse.

   I know a lot of people would say we are not printing money but we might as well be. The U.S. is responsible for the dollar. If we owe $16 trillion then it is assumed that there is $16 trillion dollars somewhere. Think about that... do you realize how big a figure a trillion is? Looking at it another way... if every man, woman and child in the U.S., figuring there are 350,000,000 of us, were to fork over $50,000.00 dollars then we could pay our debt $16 trillion. Now, how does the government pay its debts... mostly through taxes...that means each one of us, every man, woman and child would owe $50,000.00?

   We have reached the point; actually we have gone way beyond the point of being able to pay what we owe.

   Another way to look at it is, the government owns 650 million acres in the U.S. If they decided to sell all the government owned land to pay off the debt then they would have to get over $20,000.00 per acre.

   I am always talking about the dominion effect; well I think we are seeing the dominion effect. We are seeing the dominion effect in almost every aspect of our lives. Take for example the unemployment. We have reached the point where there are so many long term employed, that unemployment is now creating unemployment. What I mean by that is, the unemployed people have withdrawn from the market place, they are no longer consumers, to the contrary the unemployed are now taking from society instead of giving. This is causing more and more industries, manufacturers, stores and etc. to lay off people or in many cases close their doors. When these business slow down or close it not only affect the employees of the business closing but also it effects the companies that provide services to these companies such as truck drivers, mechanics, office supply, maintenance people and etc.

   Yes I do believe we are in an economic collapse, it is just not happening over night as many of us had in mind. But I don't think there is any doubt that it is happening right now.

   In summary... I don't know what the official definition of an economic collapse would be. I don't care how the governments of the world skew the numbers; we are in an economic collapse. We owe more than we make. There is absolutely no way the U.S. can repay the national dept. Printing money will sooner or later catch up, meaning super inflation making matters even worse…again the domino effect. Things can only get worse.

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