The big numbers of American homeowners who are struggling to make their mortgage payments provides new evidence that government should not rig the housing market — or any market — to pursue poorly defined social aims such as “fairness” and “affordable housing.”
The latest figures from the Mortgage Bankers Association show that a shocking one in 10 U.S. homeowners has missed one or more mortgage payments.
While not every neighborhood is “typical,” look around your own neighborhood and imagine what it would be like if, in fact, one of every 10 of your neighbors — perhaps you! — had missed at least one house payment and could be on the path to foreclosure.
Foreclosures have already been skyrocketing. If very many of the homeowners who have missed one or more mortgage payments actually went into foreclosure, that would harm not only them directly but other homeowners indirectly, by making their homes worth far less because of the glut of troubled homes on the market. That would not be “fair” to anybody.
The Chattanooga area is fortunate to have Volkswagen and some other big economic developments coming, which will help stabilize the local housing market. But the very high nationwide rate of foreclosures and the huge numbers of homeowners who are having trouble scraping together their payments are alarming nonetheless.
They also show why the federal government was wrong to encourage and sometimes pressure banks to make home loans — particularly adjustable-rate loans whose payments increased sharply after an introductory period — to people who were poor credit risks.
That was done in the name of “affordable housing” and “fairness,” but we doubt that people who are losing or may lose their homes to foreclosure think the government’s actions were either “affordable” or “fair.”
The various bailouts,first Bushs',then Obamas',have all been about propping up the banking system,not about helping defaulting homeowners. Effort after effort has been to try to keep housing prices from falling because that undermines the mortages held throughout the financial sector. Should home prices continue to fall,more and more banks will fail.
In the final analysis,the stimulus isn't about jobs,it isn't about helpimg people avoid foreclosure,it has all been about saving the banks. Now,trillion$ later,our government is running out of credit and contemplating the nuclear option...massive new money creation.
Money creation will solve the governments problem at the simplest level. It's really a form of backdoor bankruptcy which,if large enough,would leave the citizens stunned at their loss of purchasing power and economic well being.
The resultant inflation would make debts easier to repay if you still have a job. Everything you buy,however,would cost more,probably much more,because the US$ would be greatly devalued against other currencies. Imports would cost much more.
So what would be better than US$s during heavy inflation? The list is pretty short: gold,silver,food,some real estate,oil,mining stocks,a few foreign currencies...that's about it. If you don't think the US is about to print massive amounts of new money,don'worry about it. If you do,the time to prepare is short.
NC
What's your take on the dollar remaining the reserve currency?
SM,
I think we have passed the tipping point where the dollar will remain the reserve currency. Too many agreements for direct trade bypassing dollar payment have been signed. Countries are scrambleing to find alternatives and avoid the economic hit of a big US$ devaluation.
The US abuse of it's unique position began in 1973 and has continued at an accellerating pace.
There are,however,no clear alternatives and world bankers want to remain on a fiat system. The US$ could maintain it's reserve status for longer than logical,because it may remain the least bad. We could have competitive devaluations for quite awhile before the BANKOR,or whatever the IMF tries to implement,happens.
My personal opinion is that the Fed's behavior over the next few years will determine how soon US$ reserve status is lost.
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