Depression

I am not talking about a mental state here, I am talking about the financial situation of the United States. I feel that this is now inevitable. With the housing bubble having burst and inflation running rampant, what else can happen?

Let us look at the housing bubble first. For quite a number of years now the price of housing has been rising. This should have priced many people out of the housing market. That is the way things are supposed to work. However, the "gubmint" did not want people priced out of the market. They wanted the illusion of a robust economy. The housing segment was the only factor that was keeping the economy growing at close to the pace the "gubmint" wanted. So what do you do? You have the federal reserve bank (it is not federal, they have no reserves and there is no bank) print more money and keep the interest rates at a false low. Next they encourage bankers to make various types of unorthodox loans. You had interest only loans, balloon payment loans and first,second and third mortgages all taken out at the time of purchase. This was a method of getting the first mortgage for the amount needed for the house, the second mortgage for the down payment and another loan to tide the borrower over until they could make their payments. The percentage of income going to house payments, taxes and insurance was no longer taken into consideration. Now the chickens have come home to roost. Full payment time is kicking in, balloons are being called in and the triple loans are now needing payments all at once. This is causing a giant surge in foreclosures. Large construction firms are closing down as are large real estate developers. There is also a surge of bankruptcies in lending institutions. While some areas of the country are still doing a lot of building, the areas where the most growth was are going down hill fast. When housing goes down hill so do many other industries. The lumber industry, paint industry, landscaping and nurseries, appliance makers and distributors, etc., etc. While it has not yet, this will eventually touch every area of the country.

On to inflation. the "gubmint" tells us that the rate of inflation is 2 or 2.5%. That is as big a lie as anyone can tell. Well, it may not be a lie, it is just that I do not know what they base their figures on. They say that medical costs are rising at many times the rate of inflation, that fuel prices are rising at many times the rate of inflation, that food prices are rising at many times the rate of inflation and that certain items such as insurance and taxes are rising at many times the rate of inflation. If all of these necessities are rising at many times the rate of inflation, what do they use to determine the rate of inflation? The cost of living index is just smoke and mirrors. They use whatever will hold the numbers where they want them in any particular month. One of the sure ways to judge inflation is by the amount of money the fed (not federal, no reserves, not a bank) prints each month. At least that used to be a way to judge inflation. They no longer release these numbers. And why do you suppose that they would stop releasing those numbers? It is precisely so that people cannot determine what the real rate of inflation is. The American public is being screwed every time they turn around.

My next entry will be part two of this discussion.