Monday, October 31, 2011

Barack Obama and the Economy - #3375 -Slouching Toward the 1930's - American Thinker (2) Home Prices Headed for Double Dip - CNN Money

The current economic crisis rivals the one of the 1930s. Despite shameless propaganda by government and its cronies in the media, people understand that the situation is getting worse. Consumer confidence continues to decline as does confidence in the future.  We are headed for an event that history will record as worse than the Great Depression. It is unavoidable. The Level of Debt The principal reason for the dire prediction is the level of debt outstanding. Current debt levels are simply not sustainable. Assets and cash flows cannot support or service this debt. No economic recovery can occur without massive debt reduction. As shown in this chart, current debt is much higher than the 1930s: As a percentage of GDP, debt is at an all-time high. Immediately prior to the Great Depression US debt was about 200% of GDP. It rose briefly to 300% as a result of massive government interventions to combat the Depression.  At the beginning of the current downturn, debt was about 370% of GDP. It is about 400% currently.  Eyeballing the chart from 1870 forward, debt levels are generally in the range of 150% of GDP. That appears to be the norm for the last 140 years. Only in the 1920s and recently did debt exceed 180% of GDP. Even funding World Wars I and II did not drive debt above 180%.  To return to 150% requires a reduction of about $30 Trillion in debt. That represents about two full years worth of GDP!
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Home Prices Headed for Triple Dip - CNN Money - The besieged housing market has even further to fall before home prices really hit rock bottom.  According to Fiserv (FISV), a financial analytics company, home values are expected to fall another 3.6% by next June, pushing them to a new low of 35% below the peak reached in early 2006 and marking a triple dip in prices. Several factors will be working against the housing market in the upcoming months, including an increase in foreclosure activity and sustained high unemployment, explained David Stiff, Fiserv's chief economist.  Should home values meet Fiserv's expectations, it would make it the third (and lowest) trough for home prices since the housing bubble burst.  The first post-bubble bottom was hit in 2009, when prices fell to 31% below peak. The First-Time Homebuyer Credit helped perk prices up by mid-2010, but by the time the credit expired, prices fell again.  In the second dip, which was reached last winter, prices were down 33%before staging a mild rally that was artificially spurred as banks slowed the processing of foreclosures following the robo-signing scandal, which found that loan servicers were rapidly signing foreclosures without properly vetting them.  Read more.......

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