It wasn’t supposed to be like this. For three years, two successive U.S. administrations have made “fixing the housing sector” explicitly a top priority. Since that time, we have been assured by a plethora of politicians, housing “experts”, and media talking-heads that the U.S. housing sector had “bottomed”, and (like the U.S. economy itself) had begun a “recovery”.
It was all fiction.
New numbers show that roughly 27% of all U.S. mortgages are currently “underwater”, worse than the (supposed) “bottom” of the original collapse, when that number soared to a previous record of 25%. This single number exposes a multitude of myths.
For three years, Americans have been told by both politicians and bankers that they were “working hard” specifically to eliminate/alleviate the blight of underwater mortgages. In fact, what this number proves is that these charlatans were “hardly working”. Their “progress” after three years is less-than-zero.
For two years, Americans have been told by politicians and bankers that there is a “U.S. economic recovery” underway. Two years ago, the U.S. housing market was in the worst shape it had ever been in, after a collapse more severe than the worst years of the Great Depression. And now after two years of a “recovery”, it’s in even worse shape?
Quite simply, one could spend their entire life scanning the annals of economic history, and would never find another example where a housing market which was already at a multi-decade bottom has deteriorated after two years of “an economic recovery”.
There is no “U.S. economic recovery”. There never was a recovery. Rather than debate this obvious point, as the saying goes “a picture is worth a thousand words”.
Looking at that chart, the obvious question is not “when did the recovery start?” but rather how could any rational adult ever have believed this government propaganda? Note the tiny "peak" in 2008: this is when Americans were told that the economy had "bottomed".
Equally important in this overall propaganda scheme has been to pretend that “job gains” were taking place within the U.S. economy. I have spent countless commentaries attacking the ridiculous jobs-lies of the U.S. Bureau of Labor Statistics, backed up by the more methodical, scientific research of John Williams of Shadowstats.com. The patterns of distortions are large and unmistakable. Any pretense of valid “adjustments” has been abandoned.
Illustrating this point, the BLS has had to invent an entirely new branch of statistical fiction in recent months to cover-up the increasing magnitude of its fraud in its monthly “non-farm payrolls report”. The BLS has taken the tool known as “seasonal adjustments”, and created a “permanent season” where it simply erases 100,000 to 200,000 “weekly lay-offs” every week, in order to hide the fact that U.S. job losses are once again accelerating. Remove the lies of the BLS, and this is not a “job-less recovery” but a “less-jobs recovery”. Both phrases are economic self-contradictions, and thus just more government fiction.
There is one more fundamental myth which has been dispelled by the latest, disastrous news about U.S. underwater mortgages. For well over a year, we have been assured by politicians, bankers, and media talking-heads that “churning through” these underwater mortgages (via bankers foreclosing on them as fast as possible) would “help to heal” the U.S. housing market.
Zillow.com, itself little more than a mouthpiece for the housing industry, acknowledges that “underwater mortgages” are the second-leading cause of foreclosures. It is also just simple arithmetic (along with empirical evidence) that dumping foreclosed real estate onto an already over-supplied market causes prices to fall, directly creating more underwater mortgages, followed by more foreclosures, followed by a further collapse in prices, leading to even more underwater mortgages…precisely where does the “healing” take place in this vicious circle?
Along with the unequivocal evidence that more foreclosures only cause more foreclosures - harming everyone except government-subsidized bankers – we have a concurrent catastrophe in the U.S. housing market: banker-fraud totally undermining the legal validity of the entire U.S. land-title registry, a legal nightmare unprecedented in the history of any modern economy. It is thus very fortunate that there is a single policy which would simultaneously address both of these nightmares.
A five-year, nation-wide moratorium on all foreclosures would seem to be an appropriately strong “medicine” to heal this ailing market. For the housing market as a whole, a moratorium of this magnitude immediately accomplishes two things: it dries-up supply and encourages nervous potential-buyers to enter the market – since they are guaranteed not to lose their homes for the next five years. The combination of higher demand and lower supply automatically means firmer prices than would have otherwise existed – reducing underwater mortgages, and reversing the “vicious circle” I just described.
For the foreclosure-fraud crisis, five years allows each and every state to methodically audit their entire registries, and to once-and-for-all purge this massive Wall Street fraud from the U.S. housing market. As I have pointed out in previous commentaries, allowing the entire land-title registry to be polluted with millions (10’s of millions?) of fraudulent titles not only means endless/infinite litigation over this fraud, but a permanent discount on all U.S. real estate.
For the millions of American homeowners who are victims of Wall Street’s housing-bubble, and sit with hopelessly underwater mortgages, the five-year moratorium gives them five years to live rent-free while they try to rebuild their lives financially.
As the cause of this entire crisis, and the recipients of $15 trillion in hand-outs, government guarantees, loans, and tax breaks it is only the absolute minimum of “justice” that Wall Street banks should now be forced to subsidize U.S. homeowners in this manner – rather than fraudulently stealing their homes through rubber-stamped foreclosures. Fortunately, with Wall Street banks once again boasting about their “fat profits”, and continuing to pay out $10’s of billions per year in “bonuses” (and with access to infinite amounts of 0% “loans”), these banks can easily afford such mandatory “charity”.
For the smaller, U.S. “regional banks” whom would also be harmed by such a policy, it’s only fair that they finally got their own turn to suck on the Federal Reserve’s “0% teat”. Indeed, why aren’t American homeowners getting their own opportunity at 0% financing? As an alternative to a five-year foreclosure moratorium, perhaps a mandatory reduction of all U.S. mortgages to 0% (for the next five years) could also be considered?
A reduction in interest rates to 0% also automatically makes potential buyers much “richer” (since their monthly payments would be much, much lower), meaning more total buyers and the ability to pay higher prices. Like a five-year foreclosure moratorium, this also reverses the vicious-circle of underwater mortgages which has been created by the bankers and the politicians. The draw-back to this solution, however, is it does nothing to address Wall Street foreclosure-fraud.
The facts are crystal-clear. Everything the bankers and the politicians claimed they were “doing” to fix the U.S. housing sector they have not done. All of the “progress” the bankers and politicians claimed they were making in fixing a catastrophe they created has been fiction.
Americans have to decide whether they want to continue to passively sit back like chumps, and allow the politicians to keep making phony promises, while Wall Street bankers continue to back-stab them at every opportunity; or they must demand real solutions which will actually make their own situations better, rather than merely fattening the bottom-line of Wall Street banks.
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