Mortgage Meltdown: $2.5 trillion and counting

You must read Floyd Norris’s article in today’s New York times if you want to get a grasp on the risks facing the economy, everyday living, and virtually all U.S. investing. See “Credit Crisis? Just Wait for a Replay.” 

The article itself was very good in describing the real depths of the risks facing us, the difficulties in assessing how bad it will get, and the difficulties arising from another, larger round of this stuff, although the absence of fraud does make a difference as you point out. 

What is needed here is a clear statement of what COULD happen if this mess continues on its current path. No amount of covering up and manipulating the D.C. numbers, no amount of of bailouts, from foreign or domestic sources could save us from a round of catastrophes lasting for decades. 

Hyperinflation, not known in our lifetimes, is a very likely outcome here and it could last for years. In fact, the collusion between government and business could result in encouragement of hyperinflation. A lot of money can be made. The articles in financial magazines and newspapers are slowly turning to strategies to “hedge” against inflation. But if you read them, they are not hedges, they are investment strategies for high growth.

Extreme social unrest, already becoming a familiar scene in Europe and other places, is likely to pierce the Oceanic veil. The danger of violence is far greater from within the U.S. than it is from outside. Men are dropping out — where are they going with all their testosterone? Real income is dropping. While people with money move into small palaces, the rest of the population is struggling to get themselves into a manufactured house, which it turns out is sometimes built better than the stick houses that are sold for half  million or more U.S. dollars.

Most of the country could get caught in a hyperinflation economy they don’t and can’t understand. Their employers, the stores they shop in, and the operators of services they need will understand full well and tie the payment for goods and services to inflation. But the average Joe and the small shopowner is going to try to pay and get paid in old devalued dollars and not quite understand how the numbers are the same or even better but they are slipping further into the abyss.

As more and more people have trouble putting food on their table. As illegal immigrants run out of options funding legal ways to make money, those who “have” are going to be ripe targets painted on their backs and homes. “It can’t happen here” is a dangerous delusion in terms of assessing the risk. Recession, depression, violence and riots are a high possibility, although perhaps not yet a probability.

If you agree, people should be advised of these risks. And the press should stop listening to those who are saying “Don’t start a panic.” People are plenty worried already. If you present them with the truth and some ideas on managing in the face of the truth, and some ideas on how they become effective in changing it politically and economically, they will respond. We have underestimated and pulled the wool over the American citizen’s eyes too long.

The government, the rating agencies, and regulatory agencies, and the trustees of our economy have all failed us, deceived us and led us into temptations and foolishness not seen since the days of tulips over 100 years ago, only on a scale that is unimaginable. The fourth estate is our last hope.

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  1. […] Mortgage Meltdown: $2.5 trillion and counting in encouragement of hyperinflation. A lot of money can be made. The articles in financial magazines […]

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