Sep 6 2010

The privateers of education – How banks collude with the government to inflate college costs. Student loan debt now surpasses total credit card debt.

One of the more ominous statistics coming from this recession is that student loan debt has now surpassed total credit card debt in the United States.  The reason for this is based on the deep impact of the recession.  Credit card debt peak at $975 billion back in September of 2008 and is now down to $826 billion.  This is good news right?  Well the main reason for the decline has been through the rise of bankruptcies.  As this number decreased student loan debt has continued to soar and is now larger than total credit card debt.  Part of it has to do with the fact that you are not allowed to discharge student loan debt through bankruptcy.  The government is the biggest player in the student loan market but the banks are the folks dishing out the loans.  Similar to the housing bubble, when banks and government combine you usually end up with inflated prices and very wealthy bankers.  The working and middle class end up paying for the bad bets in the end with inflated prices and giant amounts of debt.

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Sep 3 2010

Submarine housing markets – Negative equity map and the 7 metro areas where mortgage balances outweigh the entire stock of housing. Examining underwater housing across the U.S.

Negative equity at such a large scale is a rather unique phenomenon from this housing bubble.  Even just a decade ago, a person got into a negative equity position due to a really significant shift in a localized market.  For example, a city lost a major manufacturing company that supported most jobs and home values subsequently collapsed.  You can think of places like Detroit that were already facing falling home values even before the bubble hit.  The trump card however was always the down payment.  It was extremely rare for any market niche to fall by 20 percent all of a sudden.  So at the very least, there was a buffer to support a needed quick home sale.  Another important aspect of the housing market before was that home prices were cheaper so people actually built up more equity quickly and the vast majority of loans paid principal in each payment.  Yet the market radically shifted from the late 1990s to 2007 and one of the most pervasive problems we face today is that of negative equity.

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Sep 1 2010

FDIC holding banking system by a thread – $13.2 trillion in assets backed by -$15.2 billion Deposit Insurance Fund. 19 Banks hold 50 percent of all banking assets out of 7,830 institutions. What needs to be done to restore the banking system for the American public.

It was interesting to see the spin regarding the FDIC quarterly report this week.  The report was largely a reflection of the way we now categorize profits in the banking system.  Banks made a nice amount of profit through trading securities (on bailout leverage) while at the same time cutting back the amount of capital available to the American public.  The number of institutions decreased by 104 but interestingly enough, the number of employees grew in this sector.  Why?  The too big to fail banks are simply getting bigger and stepping in where other smaller banks have failed.  The amount of assets held at the 7,830 institutions is a stunning $13.2 trillion and who really knows if it is even that amount.  To a bank, a loan is an asset and with mark to market suspended they can value these things at absurd bubble level prices.

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Aug 30 2010

How we lost 1.3 million households from 2008 to 2009. New Census figures show a large decrease in U.S. household count.

Preliminary Census data is now coming out showing the effects of the recession on a macro scale.  The 2008 Census figures don’t highlight the deep capital loss that was experienced by middle class families over the last two years.  We now have data showing how deep the recession has gotten.  From 2008 to 2009 the U.S. actually lost 1.3 million households.  Most would probably assume that this loss came from the vast amount of foreclosures in the market.  Although this is true and probably would reflect a slower growth rate for owner occupied households, the big drop came from those that rent in the country.  There are a variety of reasons for this to happen but first let us look at the new data figures.

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Aug 28 2010

The Struggling Class – The emergence of consistent poverty. How the other half live financially. 40 million Americans on food assistance and large unbanked population. Family Dollar up over 80 percent through the recession.

It is disturbing to see many articles published in foreign newspapers and magazines highlighting the plight of the middle class in America.  You would think that our own media would want to cover this issue which should be at the top of the list for everyone.  Instead, our mainstream media systematically attempts to keep everyone financially in the dark and shell shocked into spending money (assuming they still have disposable income).  They do this by pumping out inane show after inane show to keep people numb to the deeper problems of the day.  The middle class is giving way to a new struggling class.  This is a class that is defined by a constant struggle merely to chase the middle class carrot on the stick while the large banking sector becomes ever more powerful and the resource pie shrinks.  The recovery never even appeared for millions of Americans.

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