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%.
“Yes, Medvedev and Jintao is moving away from the US dollar and will settle this 20-year-deal in their own currencies. You should also move away from fiat paper of the west and move into your own currency: gold. Be your own banker, as a friend of mine says.”
“Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans,” Putin said.
Now that the Fed is buying almost all the Treasury bills since the demand from foreign buyers is almost gone, the only thing that keeps the US dollar from going down the tube is the petrodollar: Currently buyers of oil, natural gas and other commodities have to first buy US dollars to make their purchases. When these commodities are available in other currencies, the End of the Dollar is here.
I’ve been more busy than usual with projects and clients for a few days, so here’s a recap of what has been going on in the last few days:
A lot of things are happening on world currency markets right now. What we are seeing now is a move away from the US dollar, a diversifying by Central Banks as well a move into the only currency with no counter-party risk: gold. The Metal of Kings rose to a new high at 1.060 USD/Oz during the last trading days and today almost 1.070 for a few minutes. Here is a Gold chart from today (14 October 2009): Read the rest of this entry »
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.
Here’s an interesting TV-interview with Max Keiser on the latest developments in The demise of the dollar released by The Independent that I’ve written about here at Mellgren.com. As I wrote earlier I believe the collapse of the US dollar will happen a lot faster than 2018 as The Independent suggests, and Max Keiser agrees on that as well:
Dear readers. This might be the biggest financial news to hit the Internet since Bear Stearns and Lehman Brothers. I, and many other experts with far better understanding than I have, such as Catherine Austin Fitts and Krassimir Petrov, have been saying this for years: Oil will not be priced in US dollars for long. When the move away from the Petrodollar happens, the US Empire will fall. From The Independent: Read the rest of this entry »
Paul Tustain, founder & CEO of BullionVault.com just put out this talk in writing. He has been touring Asia talking to investment professionals in Tokyo, Singapore and Hong Kong. It’s a very well written talk and gives you a comprehensive overview of what might be coming our way. Download the 12 page PDF here. He talks about US consumers and what an increase in interest rates would entail for the tax burden:
The cost of a $20 trillion national debt costing 5% per annum in interest rates would
be $1 trillion, or $10,000 per annum in taxes per year for every American family, just to
pay the interest, i.e. before a single government service was delivered. That is the cost of
maintaining a $200,000 per family national debt.
The unavoidable conclusion is that, on-plan, the US cannot react appropriately to a
developing inflation problem. The G20 pronouncement that interest rates would stay
low for the foreseeable future was true. There is no alternative to permanently low
interest rates on these budget figures.
Johnny Mellgren is a Swedish entrepreneur with a keen interest in macro economics and macro politics. This is his web site where he blogs about the economic collapse of our time, what to do about it and the economic future we create together. Contact Johnny Mellgren.
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I provide advice on investment portfolios for private and corporate clients. I also hold lectures in the history of money and the current economic collapse and how to protect your wealth in a time of transition.
