The government and media continue to play games with public employees, debt and the evaluation of programs past. We have been hearing more about the mass reduction in public employees over the last few years. According to the Bureau of Labor Statistics, 221,000 jobs were lost by state and local governments between December 2007-December 2010, and another 234,000 have been lost this year. A Census Bureau study has shown that the full-time state and local employment rose by 200,000 between 2007 & 2010 (per www.investors.com). We don’t know what the truth is, since we don’t know which of the two departments used different methods. It doesn’t matter as the BLS estimate of a 2.3% decrease in the public sector is dwarfed in magnitude by the 5.4% decline in the private sector. Governments are becoming more efficient than businesses.
Washington D.C. has the highest average income in America. This is not Silicon Valley where new technologies are being introduced constantly, nor Texas, where there are so many energy companies. It’s also not in the farm belt, or any other center of manufacturing. Washington D.C. is a city full of lawyers, lobbyists and other similar people who have no value to society. This is where the big money is being made.
This activity is part a larger pattern in the country’s growing debt problem. According to the Treasury Department, federal spending for the first nine months of 2011 was $120 billion (5% more than last year) and deficits were $23.5 billion more. The overall state spending increased by almost 10% between 2008 and 2010, while the general fund spending is forecast to increase 5.2% this year, and 2.6% next.
This money appears from where? It comes from nowhere. It comes from the future as the Feds pump money through government bonds holders and taxpayers. Even the government super-committee, which is supposed provide substantial debt reductions by November 23, are making matters worse.
The Federal Reserve is considering buying more mortgage-backed securities to reduce mortgage rates. It is not clear that the recent historic lows in rates have had any discernible effect on sales or values. According to Wall St. Journal, September saw a 3.5% drop in the national median price of existing homes from $165,400 a year ago (Wall St. Journal 10/21/2011). Let’s assume Betty Buyer buys a house for that price and receives a 30-year FHA loan at 96.5%. Betty would pay $762 per month at a 4% rate. Betty’s monthly payments will rise to $716.72 if the Fed manages to lower the rate to 3.5%. Is it really possible to believe that a decrease in the monthly payment amount by just over $45 would affect home sales?
Now that the robosigning scandal is over, foreclosures and mortgage defaults are on the rise again. Foreclosures will continue rising and home prices will continue falling for a couple of more years, if the feds keep meddling.
California mortgage note investor Adam Mcbrian. He is a note investor and keeps an eye on economic trends and real estate to ensure his readers are up-to-date.