Tuesday, August 28, 2007
U.S. Economy in Foreclosure
What a great economy, eh? The only thing keeping it from utter collapse right now is the steady price of oil, hovering a couple clicks above $70 for weeks now. If that takes off again...or I should say, when it takes off again this fall, look for something like real panic to set in.
The first signs of panic are already apparent. The Dow fell over 280 points today, apparently in response to the Fed's refusal to bail out the Big Money Boyz more than they have already, and lower the prime interest rate.
"There had been some hope on the Street that Fed policymakers might have sent a stronger signal that they were more willing to cut interest rates to help calm turbulent market conditions," said the radically understated AP story reporting on the free-fall.
"The task of people holding power now in the finance sector (which itself may be a conceit at this point) is to manage the rapid dissolution of hallucinated wealth in such a way that as few people as possible notice that x-trillions in dollar denominated pixels have vanished from the hard drives," says Jim Kunstler, describing the "turbulent market conditions" alluded to in the AP story with a little more gusto.
The Big Money Boyz are the ones who are going to lose all those trillions. They're the ones left holding the bag, and they should be. They're the ones who made the "sub-prime" loans, and bundled them, and sold them to people who would bundle them into securities and sell them again.
All that money isn't going to disappear without repercussions.
What's driving it? 100 Homes a day are getting foreclosed on in Southern California right now. That's the regional story anyway -- each region has its own.
The other shoe is about to drop. "(E)ven the optimists," says the LA Times story, "predict that the problem will soon get much worse."
"'We know it's coming,' said Tina Hess, the assistant Los Angeles city attorney who handles housing enforcement and problem properties."
In LA, Orange, San Diego, San Bernardino, and Riverside counties, abandoned pools in foreclosed back yards are breeding mosquitos. People are afraid of West Nile virus. Plagues are descending on our unhappy, decaying country.
"(T)he damage may not occur all at once but be stretched out into the Fall of this year. Anyway, the massive amounts of adjustable mortgage resets coming down through Christmas, will blow out many more cell walls in the ailing body politic," Kunstler says.