Reported By:
| Edited By: Jeff Nielson |Source: DNA |Updated: Mar 29, 2018, 06:14 AM IST
Old habits are hard to break. When the Nasdaq tech-bubble burst, the US government and the Federal Reserve chairman “Bubbles” Greenspan created an even bigger asset-bubble to replace it (the US housing bubble).
It was characterised by a 1% “benchmark” interest rate, ridiculously lax lending standards, rampant fraud — and non-existent oversight.
By refusing to allow its economy to purge itself of bad debt and excessive credit, the US government created a much more damaging bubble — aggravated by Wall Street’s multi-trillion dollar, global Ponzi-scheme.
With the US housing market now experiencing its worst collapse in history as the aftermath of that bubble, and with no “bottom” in sight, the US government is once again trying to take the easy way out — this time by trying to re-inflate the same bubble which has just burst.
This time, the Fed’s benchmark interest rate is at 0%. This time, it’s the US government itself which has lowered the bar with its lending standards. This time, there is even more mortgage-fraud (up 23% from last year) — and there is still no oversight.
Now it is the Federal Housing Administration (FHA), a government agency, which is handing out subprime loans like a financial “Pez-dispenser”. An illuminating article by business consultant David DePhillips provides a long list of ugly numbers.
If this was an otherwise-healthy market, then perhaps the FHA’s reckless expansion into this sector could be seen as “support” for struggling US homeowners. In fact, nothing could be further from the truth.
US banks are holding millions of already-foreclosed/ repossessed homes off of the market. The most recent statistics show that total foreclosures and repossessions are on pace to go well over 4 million units this year.
Meanwhile, sales statistics over the last two months show US “REO” (bank-owned real estate) sales will be less than 2 million units. This adds to the existing glut of 20 million empty homes.
What is worse is that the US housing sector hasn’t even gotten to the peak of its mortgage-resets of bad loans from the last bubble. This upcoming spike in resets begins next year and will continue through 2011, before beginning to tail-off in 2012.
To make this upcoming “train-wreck” even worse still, the US’s spendthrift baby-boomers are starting to retire, and their retirements are grossly under-funded — even if the US’s pension system can remain solvent.
With real estate comprising 75% of the assets for these financial lemmings, and with these boomers needing to come up with trillions of dollars just to come close to maintaining their standard of living, there is no mystery as to what they will be selling — year after year after year.
Adding “insult to injury”, the Obama regime is essentially doing nothing to help out the homeowners themselves — despite loud and frequent claims to the contrary. With 4 million homeowners potentially eligible for aid in his “housing rescue”, less than 5% of that number have received any formal offers of mortgage relief.
Now the FHA is almost broke — joining other government entities like Fannie Mae, Freddie Mac, and the FDIC. None of the hundreds of billions of dollars which these agencies need to remain solvent has been factored into Obama’s fantasy-budget.
Thus, the only real difference between the US housing bubble, “chapter I” and the new “chapter II” is that much of the future trillions in hand-outs, “loans” and other, assorted bail-outs which will be squandered in the next wave of insolvencies will be used to prop-up government entities.
The writer is editor of bullionbullscanada.com and can be reached at j.nielson@shaw.com
