Archive for February, 2012

Is America Going Greek?

Friday, February 17th, 2012

The federal deficit of $1.327 trillion for 2012 marks the fourth straight year in which the deficit has exceeded $1.29 trillion.

The U.S. Debt Clock is now above $15.3 trillion, which comes out to just over $49,000 per American, but a whopping $135,776 per taxpayer.  If your family has four taxpayers, your total portion of the federal debt comes out to more than a half million dollars!

The Congressional Budget Office estimates that U.S. debt will double over the next decade to just under $30 trillion, so your family of four will become millionaires in reverse.

That figure does not include the estimated $56 trillion in unfunded obligations that The Peterson Foundation estimates is committed for Medicare and Medicaid, and pension obligations for government workers.  It also excludes trillions in state and local government debt.

Our total debt now exceeds our gross domestic product.  On an annual basis, it has exceeded 24% of GDP for each of the past four years, up from under 19% a decade ago.  At the same time, with a weak economy, tax revenues are below 16% for the fourth consecutive year.

As the chart from The Wall Street Journal shows, America is on target to become the next Greece.

Attempts at austerity measures in Greece have led to widespread rioting with buildings being burned to the ground.  Debt in Greece, Italy and a handful of other European countries had a bigger impact on the U.S. stock market than any other factor last year, even though Greece’s economy is about the size of the economy of the Dallas-Fort Worth area.

What impact will American debt have on the U.S. economy and the world economy when America becomes the next Greece?

The “Mortgage Deal From Hell”

Thursday, February 16th, 2012

In a deal with the U.S. Justice Department, the Department of Housing and Urban Development, and 49 out of 50 state attorneys, five of the country’s largest lenders have agreed to a $26 billion settlement – that’s more than $5 billion per lender.

Their crime, as nationalmortgagesettlement.com put it, is that “they routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct.”

Dick Bove, bank analyst for Rochdale Securities, called it “the mortgage deal from hell.”

“Homeowners who made large down payments on their homes or made the terrible mistake to pay down the principal on their mortgages do not qualify,” he said.  “Homeowners who made minimal or no down payments will get the windfall benefit of a lower principal repayment or a cash payment.”

If the deal is from hell, the devil must be in the details … except that there are no details, because, as American Banker reported, “a fully authorized, legally binding deal has not been inked yet.”

Yet, as zerohedge.com points out, the settlement agreement appears to have been “robosigned” as well.  Keep an eye out for the settlement document on nationalmortgagesettlement.com, which says
it is “coming soon.”

It’s yet another example of “do as I say, not as I do.”

As President Obama said, the settlement is just “a start.”  Stay tuned for others.