Economic Collapse

- “You should be in wealth-protection mode, not in trading mode”
John Williams

Very good audio interview with John Williams of Shadowstats.com released today. Listen carefully:
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/2/6_John_Williams.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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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%.