Friday, April 23, 2021
Tuesday, October 30, 2012
American's Financial Inflation Bubble
In 2006, while no one was looking the White House, the Federal Reserve, Treasury, and not even Congress noticed that the American economy started a catastrophic descent. All the while, the early signs of the real estate crisis started taking shape. In 2008 the devastation was crystal clear, as the stock market collapsed, the credit markets dried up, banks melted down, and unemployment began to soar.
America was thrust into a recession not seem since the Great Depression. No one knew how bad the damage would be.
While we all know this story by now, why were the people in Washington whose sole responsibility was to prevent this kind of meltdown incapable of protecting us from this crisis? So, now what does the future hold for our great nation?
What would happen when America's end game is near? Had the "Powers That Be" heeded economists warning, the lives of all Americans would have been better. Are the rumors true that the "Powers That Be" do not care about their fellow man?
According to a CNN pole, 48% of Americans see we are headed into a second Great Depression. Many economists like David and Bob Wiedemer and Cindy Spitzer, predicted that we are past the point of no return in a double-dip recession. A few simple decisions can determine we are either headed for a economic obliteration or financial prosperity.
How does our financial economy look? Imagine a balloon, you start with a dramatic artifical increase in home values and the stock market cause this basically puts all the air into the balloon. From 2001-2006, home prices accelerated faster than earned income. People were just not making the kind of money needed to justify these increases.
We all know that housing price growth was due to the mortgage madness, where people could easily take loans with no documentation. Some lenders blatantly looked the other way. Others repackaged these trash loans into toxic investments.
Between 1980-2001, home pricing rose in the step of the inflation and then in 2001 ridiculously exploded. And we all saw this problem happening in the stock market too. From 1982-2005, earned income only grew about 10% while company earnings grew to about 300%. As a result, the foundations behind these market gains was very fragile. And the balloon became massively inflated.
Now our economy is basically full of hot air. Now, the real estate market collapse supplied an enormous amount of pressure already on an overly inflated stock market. Foreclosures began to grow and banks became weaker. As as result, it became harder to get credit. As you can imagine, this was a total shock to the system.
In fact, to drive the point home here with my article, between 2001-2005 an estimated 2.5 Trillion dollars in wealth was created from the refinancing of mortgages and home equity loans. This money was ONLY available because of the artificially estimated housing prices. This caused a massive explosion.
Most Americans don't understand that 70% of the US economy is built upon Consumer Spending.
$16.4 Trillion dollars, it is estimated, in household wealth disappeared. This was felt in our investment portfolios, real estate holdings, salaries, and retirement savings. Gone poof! And hardly anyone was waving the red flag.
All the while, Barack Obama while in office, piled on another 3.7 Trillion dollars onto our own already dangerously federal debt. Come on!
Serious monitors like Bill Gross believes the real debt figure is $75 Trillion dollar or more; when you consider social security and medicare. He's even gone as far as to say the US will default on its debt while picking the pocket of every American through inflation, dollar de-valuation, and interest rate gains.
So, I invite you to protect yourself and investments the best you can during this tough financial meltdown.
America was thrust into a recession not seem since the Great Depression. No one knew how bad the damage would be.
While we all know this story by now, why were the people in Washington whose sole responsibility was to prevent this kind of meltdown incapable of protecting us from this crisis? So, now what does the future hold for our great nation?
What would happen when America's end game is near? Had the "Powers That Be" heeded economists warning, the lives of all Americans would have been better. Are the rumors true that the "Powers That Be" do not care about their fellow man?
According to a CNN pole, 48% of Americans see we are headed into a second Great Depression. Many economists like David and Bob Wiedemer and Cindy Spitzer, predicted that we are past the point of no return in a double-dip recession. A few simple decisions can determine we are either headed for a economic obliteration or financial prosperity.
How does our financial economy look? Imagine a balloon, you start with a dramatic artifical increase in home values and the stock market cause this basically puts all the air into the balloon. From 2001-2006, home prices accelerated faster than earned income. People were just not making the kind of money needed to justify these increases.
We all know that housing price growth was due to the mortgage madness, where people could easily take loans with no documentation. Some lenders blatantly looked the other way. Others repackaged these trash loans into toxic investments.
Between 1980-2001, home pricing rose in the step of the inflation and then in 2001 ridiculously exploded. And we all saw this problem happening in the stock market too. From 1982-2005, earned income only grew about 10% while company earnings grew to about 300%. As a result, the foundations behind these market gains was very fragile. And the balloon became massively inflated.
Now our economy is basically full of hot air. Now, the real estate market collapse supplied an enormous amount of pressure already on an overly inflated stock market. Foreclosures began to grow and banks became weaker. As as result, it became harder to get credit. As you can imagine, this was a total shock to the system.
In fact, to drive the point home here with my article, between 2001-2005 an estimated 2.5 Trillion dollars in wealth was created from the refinancing of mortgages and home equity loans. This money was ONLY available because of the artificially estimated housing prices. This caused a massive explosion.
Most Americans don't understand that 70% of the US economy is built upon Consumer Spending.
$16.4 Trillion dollars, it is estimated, in household wealth disappeared. This was felt in our investment portfolios, real estate holdings, salaries, and retirement savings. Gone poof! And hardly anyone was waving the red flag.
All the while, Barack Obama while in office, piled on another 3.7 Trillion dollars onto our own already dangerously federal debt. Come on!
Serious monitors like Bill Gross believes the real debt figure is $75 Trillion dollar or more; when you consider social security and medicare. He's even gone as far as to say the US will default on its debt while picking the pocket of every American through inflation, dollar de-valuation, and interest rate gains.
So, I invite you to protect yourself and investments the best you can during this tough financial meltdown.
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