Thursday, November 20, 2008 Posted by Shattered Paradigm
New headlines of business failures and layoffs are now showing up not daily but hourly. Many of the jobs that do remain are quickly being shipped overseas. The investment income and retirement income that many Americans would have been able to fall back on has been devastated by the stock market collapse. The stunning downfall of the housing market has wiped out the home equity of millions of American home owners.
Many middle class Americans are up to their eyeballs in debt. Instead of being able to maintain that debt, many of these middle class Americans are finding their primary sources of wealth - their jobs, their stock market portfolios and their home equity - are quickly vanishing.
So right now there are millions of middle class Americans that are in pain - sharp, throbbing, excruciating financial pain.
And guess what? Things are getting worse not better.....
Liz Pulliam Weston recently posted the following sobering financial statistics:
*Credit card lenders charged off 5.47% of the total amounts owed on credit cards as bad debt in the second quarter of 2008, according to the Federal Reserve. A year ago, the charge-off rate was 3.85%.
*Consumer bankruptcy filings in October topped 100,000, a 40% increase from one year earlier and the highest level since the federal bankruptcy reform law took effect in October 2005, according to the American Bankruptcy Institute.
*More than 2.2 million homeowners are more than 60 days late on their mortgage payments, according to the Hope Now alliance of lenders and credit counselors, and one in six homeowners owes more on a home than it's worth.
*With home prices plummeting, every foreclosure now represents a loss of 44% of the original loan amount, up from 29% a year ago, according to data from LPS Applied Analytics.
So is this as bad as things are going to get?
Not a chance.
The Federal Reserve is now telling us that the economy is going to get worse. When the people who literally run the American economy tell us that things are going to get even worse that is not a good sign.
Consumer prices in October fell at a record pace while builders broke ground on the fewest new homes ever. These are signs that we are entering into the early stages of a deflationary depression. If you don't know what that is, try Googling the term "The Great Depression" to get an idea.
However, we expect this deflationary period to only last for about 6 months to a year. After that, we expect that the massive influx of government money into the economy will turn the deflationary depression into a spiral of inflation that will absolutely crush the value of the U.S. dollar.
So the good news is that eventually we will all have money again.
The bad news is that when that happens the money won't buy what it used to.