Seize-up
Briefly, what has happened is due to greed and carelessness. It starts at the bottom, with real estate sales persons wanting to sell, and inept, poor, exaggerating, lying, bad credit rated, maybe unemployed or making poor wages, would be buyers, wanting a home. The sales person, wanting to make a sale, probably bribes an appraiser into making an appraisal which is far more than the house is worth. Taking that fake appraisal to a mortgage broker, probably working out of an office he has recently rented, ("Last year I cudn even spel morgag brocer, and now I are one,"), he takes a credit report full of glowing net worth, sterling, long time job performance, and extraordinary faked income statistics, and without even checking for accuracy, grants the mortgage, which is instantly sold to a large outfit for a 1% profit. Presto! We now have a new "home owner" who "bought" with nothing down or close, and also presto, a few months later, he is in arrears with his payments and it goes into foreclosure. He also probably hasn't cut the grass, painted or done even the most remotest of improvements or maintenance on 'his' home, so it is now worth far less than the fake appraisal said it was worth.
The large outfit who bought the mortgage from the broker, then bundles up a hundred or so of these, and sells them for a profit to an even larger buyer, maybe a hedge fund. The well known offal hits the fan when millions of homes go into foreclosure, which drags down the prices of all homes. The hundreds of mortgage brokers have long since fled the scene and their offices have "for rent" signs on them. With massive foreclosures, especially in major cities, real estate prices plunge, would be buyers are waiting for the "bottom," and real estate sales people and brokerages fail and lose their jobs. With all the homes for sale, builders stop building new homes, because the know they won't sell. All the home building material manufacturers and laborers become unemployed, and lumber, cement, roofing, plumbing, electrical, and other manufacturers, lay off employees, installers. and truck drivers, who then are also broke or severely strung out. They then cut back on all but the absolute necessary purchases, thereby harming the stores who sell other than necessities. Gas and auto consumption goes way down, as do clothing, TV, electronics, toys, and other purchases, costing those manufacturers and employees their jobs. With more and more layoffs, even the home buyers with excellent credit get behind in payments, further exacerbating the situation.
To stay afloat, credit card cash advances are used as a last resort, at high interest, which only briefly postpones the inevitable. All retailing, wholesaling, and transportation is harmed, costing jobs and income of those laid off. These bundled mortgage packages have been sold around the world, and they have proven to be a very poor investment for those who have bought them, since these portfolios have proven to be virtually worthless. If you were in Germany, and a holder of a hundred failed mortgages all around the U.S., would you try to unload the package for any amount, just to get a small amount of your capital back? These packages are now going for six cents on the dollar, and often times are worth about the value of the paper on which they are printed. The buyers of these now worthless packages or bundles now distrust those who sold them, and consider them un-reliable and un-trustworthy. They won't loan them a single penny. Banks who bought them, will no longer loan, as they have been hit where it hurts, and their capital and trust have vanished. Hedge funds, who have been heavily invested in mortgage packages have lost billions for their holders, and some have gone bust.
Finally, there are millions of un-sold, foreclosed upon, homes, which are deteriorating in condition. No one will loan money to any but the most credit worthy, and they seem to be few and far between. Homes go unsold, and prices plummet even further. The market is at work. Everything is "locked up," or "seized up," with no loans being made, everyone mistrusting everyone else, and trying their best to get out of thousands of bad deals, failed deals, and worthless deals. Capital has evaporated, as has trust. The central banks in Europe or the U.S. then print gobs of money, (300 billion euros last week, and lots of yen and dollars), in an effort to bail out the failing economies. This may work or make it worse, because of inflation, or cause people to think it is even worse than they thought. The result may be to cause total collapse or seizure. In the mean time of course, the stock market has dropped because of the failure of confidence, and I am sure the Plunge Protection Team has been buying like mad...with taxpayer money of course. The fed floods the market with printing press dollars, and the PPT buys stocks at high prices to keep the market afloat...hopefully.
The question is: Will the public at large throughout the world, believe the fake figures and assurances given by governments and central banks? Over the weekend, Asians bought it, and as I finish this, stock futures are up. Will the malarkey about how wonderful the economy is, be bought by the public? Or will they realize that it is pure hokum, and get out of stocks? Will they go to bonds, which are just as bad? Or will they go to true money, (gold and silver), which have been true wealth and security throughout history? Will the economy seize up? Will we get into a huge depression? There are a lot of things to consider. If China sells even more dollars to preserve itself, and other nations do the same, will this cause a massive sell-off and depression here, which may carry around the world? Will they keep their failing dollars to stave off disaster? Is there a bright spot anywhere? The only one I can see, not counting those who get into gold and silver, is that the public will be fooled by the neo-con economists, and will believe that all is well, and that government will protect them, and even provide their health care. The sheeple, which are by far the majority everywhere, might just be fooled into complacency and continue to buy paper with paper, and as all of it gradually decreases in value, they will be unaware of it, and more and more smart people will protect themselves. I can assure you that gold and silver will always be true wealth, and true security. I'd assure you of this, even if I weren't in the business. At 73, I have NEVER had a savings account, own no stocks or bonds, and feel that I am in good shape. Let the world go topsy-turvy and thrash about with their various trusts, bundles of paper, and computer entries. I'll take physical any day, and furthermore, I don't think there is an ounce of silver or gold in those ETF's. I trust the honesty of a CEO of any corporation issuing stocks for the sheeple to buy, as much as I would trust an inmate of the local jail. Only my opinion! Now have a great week. It will be an interesting one!
