QUICK ECONOMIC SUMMARY FOR THE PAST WEEK
- 22.5% of U.S. homes are still underwater (11 million properties) (9/13/11 Housing Wire).
- In August, mortgage servicers began the foreclosure process for 78,800 properties. This is 33% more than July, but 18% less than August last year, right before the robosigning scandal (9/14/11 HousingWire)
- After inflation adjustment (9/14/11 Wall St. Journal), the income of an American family is roughly equal to 1996.
- Record 46.2 Million Americans live below the poverty line (9/13/11 MarketWatch).
Our great nation is moving inexorably towards a major recession, and possibly a depression. It becomes increasingly obvious that the U.S. requires major structural reform. It is not enough to make minor changes to entitlement programs or to adjust tax rates.
Most government programs are still running in spite of the downturn. Budget cuts, as most politicians refer to them, are often a slowing down of cost increases. This only makes our debt worse.
Two articles from the Wall Street Journal in their Sept. 13 issue were excellent examples of government wastefulness and ineptitude. The first was an opinion piece written by James Bovard. It covered the history of federal job training programs over the past 50 year and the failures they have made. The General Accounting Office (GAO), which first found trainees to be fully employed in 1964, later discovered that the program provided poor training and didn’t place them into private jobs. The 1973 jobs program had no effect on placing the trainees in jobs. Notable examples of waste were building an artificial rock climbing wall, teaching nude sculpture classes and running door-to-door food stamp recruitment programs.
Newer job training laws from the 1980’s to 1990’s revealed that former trainees were more likely to be on food Stamps and had 10% lower earnings than a control group. The programs not only were a waste of money but also made many trainees poorer. President Obama is trying to replicate the Georgia Work$ program, which has produced fewer than 200 jobs in this year.
If you have been following this blog for a while, you may remember a June article in which I discussed how student loans were the next big bubble. The Department of Education now admits that student loan default rates are at least 8.8%. While default rates at for-profit schools are higher, they have increased all over the board.
In my June article, I mentioned that 22% of 2010 graduates were not employed and that 22% had jobs that didn’t require a college education. A Rutgers University study found that 53% of Americans who had graduated college between 2006-2010 had full-time employment.
What does all this mean? While no one can solve the economic problems, reducing wasteful government spending is a good place to start. Despite all the political talk about reducing budget deficits, the amount of debt continues to rise. Imagine what it would look like if government waste was eliminated and government bureaucracies were significantly reduced. Our children wouldn’t be left with all our debts.
We all know politicians don’t have the ability to cut budgets. So the country will continue to hope for the best. These are difficult times, whether you’re a stock trader, a mortgage buyer looking to buy a real estate note or just someone trying to make ends meet. Even the most optimistic person would struggle to see this rainbow leading anywhere positive.
ELM Capital is a well-known mortgage buyer. Its president is Adam Mcbrian. A mortgage buyer is also known as a deed-of trust note buyer. It buys mortgage notes.