Economic Collapse

Agora Financial, LLC & The Daily Reckoning interview with Marc Faber:
http://bitcast-a.v1.iad1.bitgravity.com/agorafinancial/DR/faber/indexAF.html

Here is a great article by Bill Bonner on the state of debt of governments sent out today to Daily Reckoning subscribers.
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One of the best reads on Keynesianism vs The Austrian School of Economics, Slavery vs Liberty, Fiat paper vs Real Money, that I’ve come across in a long time: http://www.goldensextant.com/RKLSage.html#anchor1404
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Reuters reports:

U.S. authorities seized nine failed banks on Friday, the most in a single day since the financial crisis began and the latest stark sign that substantial parts of the nation’s banking industry are being crippled by bad loans.

The move brought the total number of failed banks in 2009 to 115 — their highest annual level since 1992 — with analysts expecting more to come. Among the lenders seized Friday was Los Angeles-based California National Bank, in what was the fourth-largest U.S. bank failure this year.

The largest institution to fail in the current financial crisis was Washington Mutual, which boasted $307 billion in assets when it was shuttered in September 2008.

U.S. Bancorp on Friday acquired the nine banks that had been held by FBOP Corp, picking up $18.4 billion in assets and $15.4 billion of deposits.

So another 15 billion to handle by the FDIC. They will need more funds very soon. From whom you ask? From you, dear taxpayer! This will be done through Bernankes printing press and you will pay for it through the further debasement of your currency. Trick or treat?

Since the Commercial Real Estate Mortgage bubble has begun to pop with the bankruptcy of Capmark that I wrote about yesterday I thought I’d give you some background to the events unfolding before our very eyes beginning now. These mortgages are given by lenders to companies building and operating commercial buildings such as malls, offices, hotels etc. With a declining economy these companies find it increasingly difficult to pay interest on their loans as income from rents keep falling. Consider these statistics from this month of October 2009 reported by facilitiesnet.com:

U.S. Office Vacancy Rates Continue Climb, But Are Slowing
“The office vacancy rate increased, by 60 basis points (bps), to 16.1 percent, at the end of the third quarter. Although this was the eighth consecutive quarter of rising vacancy rates, it was lower than the 80-bps increase in 2Q 2009 and was the slowest pace of increase since 4Q 2008.
The national industrial availability rate increased 50 bps to 13.5 percent in 3Q 2009. This result marks the 8th consecutive quarter of rising availability. The vast majority of industrial markets experienced rising availability, with 56 out of 61 major markets showing increases from the previous quarter.”

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The next big thing in the economic meltdown are the Commercial Real Estate Mortgages as many economists, like Gerald Celente of The Trends Research Institute, have been saying now for a long time, and as I wrote earlier:

First to default were the now (in)famous “sub-primes”. Defaulting now are the “primes” and the “alt-A’s”. Next up: “Commercial Real Estate Mortgages”.

Today, the biggest US Commercial Real Estate lender, Capmark filed for bankruptcy.

The US has been building commercial properties since the early 90s somewhere along the lines of 5 times the rate of population growth and up until today Capmark has been lending out money to about 2/3 of all building projects in the US. As you understand, this is a huge event.

The next big thing after this is of course all the derivates based on these loans like “Mortgage Backed Securities” etc. The derivatives bubble is currently about 20-30 times the global GDB depending on who you ask. Yes, in the Quadrillions. It’s such a huge number its almost impossible to grasp. This is one of the many reasons this blog is called “Economic Collapse”. We will need an Economic Paradigm Shift to get out of this one. The system we have now based on dept, fiat currency and Fractional Reserve Banking is proving not to work. Likely we will see an interesting line of events shaping from today and for the rest of the year. By early november the main stream news will probably start talking like they did one year ago when Lehman Brothers went bust. Hold on to your hats, folks, there is a storm coming. Interesting time to be alive…

If the Obama Administration decides that Capmark is too big to fail and bails this institution out, the Quantitative Easing program of the Federal Reserve has to gain momentum. This will further the downfall of the US Dollar, which will mean gold goes further up.

First to default were the now (in)famous “sub-primes”. Defaulting now are the “primes” and the “alt-A’s”. Next up: “Commercial Real Estate Mortgages”. On top of those: “Mortgage Backed Securities” and other derivatives of all kinds. So many different names for paper debt. Here are some stats from Bloomberg for the third quarter of 2009:

• 937,840 homes received a default or auction notice or were repossessed by banks, a 23% increase from a year earlier
• 1 of every 136 U.S. households received a filing, the highest quarterly rate on record
• A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005
• The pace of prime and so-called alt-A loan defaults is accelerating
• The delinquency rate (failure to pay) for prime loans rose to 6.41% in the second quarter from 6.06 percent
• The share of prime loans in foreclosure increased to 3% from 2.49%

Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income. “The best” borrowers are now incersingly defaulting as (official) unemployment in the US goes above 10%. Shadowstats.com puts that number at about 21%.

This video post is almost a month old by now, but the content is timeless. Canadian economist professor Michel Chossudovsky is the author of “The Globalization of Poverty” and “America’s ‘War on Terrorism’”. He is also the Director of the Centre for Research on Globalization. In this video he sits down with The Corbett Report to discuss the real meaning of the “bank bailouts”. A very well summarized overview in just under 8 minutes.

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I love information design. A picture is worth a thousand words. This puts things into perspecive. How much is a “billion”? How much is a “trillion”? How do we use our money? If we were to be visited by an extra-terrestial intelligence and they saw how we organised our economy and how we choose to spend our wealth, how intelligent do you think they would think we are? Click the image to zoom.