Living on Borrowed Time..

I understand that today’s economy is on every ones mind.  The question that most comes to mind, is how would a Obama Presidency effect our already fading economy?  The answer is clear, it would be devastating. 

The clear comparison between today’s failing economy and the “Great depression”, are to similar to ignore.   During the 1920’s there was a period of unequivocal spending.  This was a very prosperous time, the automobile was becoming affordable for every American family.

Much like the dream of owning a home today. The housing bubble that is bursting as we speak, has and will be devastating for the American economy.  The Meir reality is that it is only getting worse.  Many think that a “depression” is unlikely.   I however, am a realist.  I believe it is very possible, and very likely.

No economy can continue on the path we have been on for so many years, without repercussions. We are living on Borrowed time, literally.

For the most part, economists now know that the stock market did not cause the 1929 crash. It was itself a symptom of wildly erratic shifts in the nation’s money supply. The Federal Reserve System was the primary culprit, having stimulated a boom with dirt-cheap interest rates and easy money in the early ‘ 20s. By 1929, the central bank had jacked up rates so high that it choked off the boom and forced a reduction in the money supply by one-third between 1929 and 1933.

Sound familiar?  Easy Money?  Our the past few years, anyone with a heart beat could by a home.  The prices were inflated to unprecedented levels.   Credit cards, bad credit loans for anything you could wish for were dished out, like ice cream on a scoop.   I know, because my day job is mortgage servicing. 

The amount of ignorance and greed I have seen it unexplainable.  A single man 19 years old with no co-signer, who is employed at Walmart, can buy a 170,000.00 home.   That’s right, even if he has only been working at  Walmart for 3 months.    And even if he only makes 20,000.00 a year!  

I am sure many of you, who have not been involved in this scam, find this hard to believe.  This is how it works, a broker attempts to sell a home to this young man who works at Walmart, the home price is inflated due to rising markets.  In other words, in a few years the property will not be worth what is owed on it.  The broker will be paid for a sale, not the quality of the sale.

The buyer fills out a credit application, and does not have to verify any of the information.  No employment verification, no references, nothing.  If the new buyer does not have enough income, that’s OK.  The broker can clearly help out with that.  If you receive Child Support, add that in.  It does not matter if it is not always there.  If you babysit, add that in, be sure to add some extra to ensure you have enough income to qualify for the loan.

In other words, say you have more income than you really have.  It was fine, cause no one checks, remember?  No Money down was also a easy fix, these lenders just gave them a second mortgage for that. This makes the investment from a new buyer $0.00.

These loans are then signed, much to the buyers surprise, at a really high monthly payment.  You see, the lenders do a financial analysis for them.  Then tell the buyer you can afford a $800.00 a month payment.  Now remember, this is based on false income information. 

Some buyers attempt to tell the lender, this is not possible, but pushy brokers, simply tell them its OK.  In a year, we will refinance you and lower your payments.  That refinance, never comes.  So, what we have, is many, many buyers would should not have qualified. They struggle for a few years, just trying to get by. 

Then the single man, gets married and starts a family.  This is a problem, mainly beacuse he could hardly afford the mortgage before.  Now, he has two more mouths to feed, and also a car and truck payment.   He applies for credit cards, and begins to pay his bills with his credit cards.  By now, this is all that’s keeping him from being homeless.

Circumstances such as the example above, are common in today’s mortgage world.  Once these loans are finished, they are sold in bulk to financial institutions.  Most servicers, trust that they are “good paper”.  (good credit, good job) But in the reality, most are not.  It is only when the servicer begins to attempt to collect, that the truth comes out.  By then it is to late, and they end up with a note that is only worth a foreclosure. 

Now that lenders are trying to tighten things up, due to all the problems the lies have caused.  So once these loans are foreclosed on, they sit unsold.  Now, with inflated prices, and tightening up the lending practices, many buyers cannot qualify.  Why?  cause they really have to qualify.  No more lies, about your job, income or anything. All of a sudden you have to prove what is on your credit application. 

This causes a trickle down effect, no credit, no more living on borrowed time.  No more, three or fours cars, or houses that you can’t afford.  This effects all of the economy, banks close, jobs are lost and everyone stops buying cars, houses, and many other items.  So, now comes the government to bail us all out.  In  other words, its a band aid on a mortal wound.

In 1930, Congress took a recession and turned it into a Great Depression. It raised tariffs so high they virtually closed the borders to imports and exports. It doubled income tax rates in 1932. Franklin Roosevelt, who campaigned on a platform of less government, actually gave America much more. His “New Deal” raised taxes (he once proposed a 99.5 percent tax rate on incomes over $100,000), punished investment, and smothered business with red tape and regulations.

If you think it can’t happen, think again.  Obama wishes to raise taxes, and slow international trade.  More government is his plan, again all we have to do is look to the past to see the future.   Needless to say, to raise taxes and add more government could lead to another “depression”.   Not to mention the fact, that Obama has no idea how to fix this problem. The thing is, it may not be a fixable problem.   He took funds to do nothing, now what is it worth to fix it?  We will find out, as our taxes will pay for it….This only proves the corruption deep within the party.  This party must be stopped at all costs, our future depends on it

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