Sometimes It Can’t Always Be Worse

By TRB

The U.S. is out of its non-war with Libya. Just in case you don't know it, the U.S. has not been to war - meaning war has not been declared against another nation - since December 8, 1941. All of these military excursions that have filled in the spaces were either presidents exercising powers they often really didn't have, or Congress refusing to put itself out on a limb.

This non-war with Libya cost a lot though. Thirty to 100 million a week just to patrol the no-fly zone. And the shelling from our Navy - that cost $400 to $800 million. Now that NATO has taken over maybe we can put some of these funds to work in our other two non-wars. We might also ask ourselves why no other nations have offered to take over these military operations for us, as they did in Libya.

But war is just one of our problems. The mortgage crisis in America continues to deteriorate. At this moment 23 percent of mortgaged homes are in the "underwater" status. That means the owners of 11.1 million homes in the U.S. owe more on their mortgage than their house is worth on the market. (All of these housing figures come from Realtytrac which publishes the largest database of auctions, bank-owned and foreclosed homes.)

There were 2.9 million filings for foreclosure in 2010, a new record. This figure however also included default notices, auctions and repossessions. When all was said and done, one million homeowners were thrown out on the street last year. Compare that figure with 2005, when only 100,000 people lost their homes through foreclosure in the U.S.

It is now believed by some economic experts that this unemployment and foreclosure mess that has held the U.S. economy back since at least 2007, might possibly last another decade or so. Does that mean two decades? Does that mean three decades?

Maybe.

It is instructive to remember that this foreclosure mess we are in today is not like the one we were in last year or the year before. Those foreclosure problems were almost exclusively about sub-prime lending, i.e., banks and other financial institutions giving mortgages to individuals whose credit history or lack thereof should have warned the bank off.

But as you might remember, this came at the height of the "anything goes decade" on Wall Street, when bad mortgages could be "bundled" together and sold as triple A "investments" to pension funds and 401ks across the nation. Some of these phony triple A packages are still out there right now just waiting to blow up in some worker's retirement. But, what the heck, that was forgiven.

The Fed made trillions more dollars for the banking and financial industries, much of which found its way to off shore banks or for overseas investment. You couldn't get a loan here. The banks were dying to sell mortgages to deadbeats just a few years before, but when the real motivation behind that was discovered, they quickly took themselves out of the loan-to-Americans business.

Now it doesn't matter who you are. If you have a great job, great pay, 20 percent down. Still, they might laugh you right out of the bank before they will give you a mortgage. In other words, the mortgage system only worked for banks when they could work with Wall Street to steal billions and toss families on the street. Apparently, that is just not as much fun as it used to be.

As stated earlier, this latest foreclosure crisis has nothing to do with sub-prime loans, and everything to do with unemployment. We are experiencing an unforeseen housing and unemployment crisis, which is also turning into a food and fuel price crisis. Partly this is due to all that money the Obama administration printed up for the banks. The U.S. currency was basically trashed during that period - it lost value on the world market. And you can't have a weak currency and a recovery. It just doesn't work that way.

As Steve Forbes, the editor and publisher of the financial magazine of the same name recently said, "If printing money is the way to wealth, why don't we allow counterfeiting and then we can tax it." Forbes said this obviously only to illustrate how unrealistic and unworkable our responses have been to the massive downturn in our overall economy.

The unemployment rate, the figure given by the government is theoretical at best because of the manner in which the figures are gathered. For example, the government claims that 16 percent of U.S. citizens are underemployed or no longer looking. Many believe that figure to be closer to 18 percent. The government then claims that 6 million people have been out of work for longer than 27 weeks. That is also believed to be a conservative estimate. It is common practice for the government, and governments before it to stick to conservative estimates of unemployment.

Now come the people who are new to the workforce, many just graduated college or some other form of higher education. The government states that 1.3 million of these new people can't find work. That is also believed to be a conservative figure.

Some guess that as many as one in five Americans might be closer to the truth of the unemployment rate in the U.S. That would be 20 percent unemployment, or more than twice what the government has admitted to so far.

Obama and this Congress has to find a way to stabilize the dollar on the world markets. One way might be to simplify the tax codes. Take the over-spending out of the health care plan, which was basically written by the large drug and insurance companies.

If fiscal integrity could be managed in any U.S. markets, housing, finance, etc, the other parts of the economy might just fall into place. It is that interdependency, which used to be an economic strength and could become one again if the U.S. could just find a way back to it.