As reported in an April 12 CNBC article: Mortgage Defaults May Be Driving Consumer Spending
People have apparently decided that since the government has decided to make sure that no bank suffers at all due to the housing collapse they will
just take matters into their own hands. If you owe a ton more than your house is worth and you can no longer borrow against your house to take a
vacation or upgrade your X-Box you might as well just stop paying your mortgage.
Thanks to numerous news stories talking about how people who can afford to pay their mortgage are choosing not to the number doing it is on the rise.
In fact so many people are doing it that they are adding a considerable chunk to the good news about consumer spending, to the tune of a $3.7 billion boost per month. If you suddenly have an extra $1000 or $2000 a month because your not paying your mortgage then you can afford to do more shopping at the GAP and Old Navy.
Does anyone else not see another giant bubble that's going to blow up in our face? When those people eventually get kicked out of their houses in
12-24 months what do you think will happen to consumer spending? Is this the kind of economic recovery we were hoping for?
Here's another question to ponder. At what point does our government look at our national debt a come to the conclusion that we owe more than
we are worth? Will they do what we are now doing and simply stop paying? Sure you'll piss off the Chinese, Japanese and a few million Americans but
our military can handle that threat.
The rest of Europe has decided that they should bail out poor old Greece after all. You see what happened in Greece is that they have such a huge
national debt that people rightly started thinking they could never pay it back. The interest rate on the new bonds they needed to issue jumped to 7%
and were set to head even higher. At that rate Greece cannot afford to pay the interest and would be in danger of defaulting.
So what the compassionate European nations like Germany have agreed to do is lend Greece about $40 billion at 5% interest. The IMF is also going
to lend them another $15 billion at an even lower rate.
The markets cheered and the rates on new Greek bonds dropped all the way to 6.5% in one day. I've got a few questions though that no one seems to be asking.
The European nations all run budget deficits so they need to borrow the money in order to lend it to Greece. The good news for them is that they pay
a lot less than 5% on their bonds so they get to keep the difference. In reality though what they've done is sold their citizens German or English debt
that is really just Greek debt. Does anyone believe the Greeks can actually pay back the money at the 5%? What happens when they don't?
This is just more delaying the inevitable and national money laundering. Does anyone believe that the broke lending money to the really broke is
going to solve anything?
April 13 - Where do we go from here
April 12 - Youth of the Nation
April 9 - Turning the Tables
April 8 - New Age of Discrimination
April 7 - Thank You Kind Stranger
April 6 - The Cost of Compassion
April 5 - Happy Days are Here Again
April 2 - Of Course We Can Do a Better Job
April 1 - The New Normal
March 31 - Take a Deep Breath
March 30 - Metaphors and Blinking Lights