Friday, January 11, 2008
Location: Lost in the Colorado Rockies

Ever since I've arrived in the U.S. I've been hearing Americans talk about how their economy is in serious trouble, and how many people feel that serious U.S. economic instability is just over the horizon.

Now I'm not an economist, but I can share what I'm hearing.

I hear the United States housing market is set to further collapse as Americans have simply borrowed too much money they don't have, and the mortgage balance of their homes is now far above the current actual value of their property. On top of all this, they borrowed money from major banking institutions that didn't really have the money either, so essentially the entire market has been propped up upon credit, credit and even more credit. U.S. Housing Bubble

This idea of a credit-based false economy is interesting, since individuals, companies, and governments are now able to invest and propel economies without any real money. Ever since we left the gold standard in favor of fiat currency it's as though we've all been playing make-believe. This on top of the fact that money is now digitally moving around the globe at rates impossible for humans to track. Money has become information in this digital age, and those who control the information, control the economy and hence control our reality.

I've heard this coming week some of the major economic players (Goldman Sachs, Wells Fargo, Bear Sterns) are going to come out with some major announcements regarding how far up the debt creek they've floated without paddle. The people I'm hearing from think this will result in some of the major banking institutions either declaring bankruptcy or filing for chapter 11 reorganization. Now at this point it's purely speculation, but the writing is on the wall, and it seems to no longer be a question of IF, but a question of WHEN?

Regardless of the uncertain future, most of the Americans I've met are rapidly losing faith in the U.S. economic juggernaut, and this, in and of itself, is a very bad sign.

Has the U.S. outsourced itself to death, increasing it's dependence on foreign economies? China the biggest player is now in turn using it's economic wealth derived from outsourcing to buy up U.S. treasury bills, giving them huge influence over the American economy, the U.S. economy is growing at best 3% while China pushes on a 11%. This Chinese growth of course requires huge amounts of coal, water, and natural resources.

Others here are talking about the mortgage market and how everything, since the internet bust in the late 90's, has been built upon this continued extension of liberal credit: money that no one really has, including the banks.

"Think of the number of people and companies whose livelihoods are tied to the health of the housing industry - real estate agents, title company employees, interior designers, manufacturers of PVC plumbing pipe, lighting fixtures, and carpeting, and all of the people who distribute, sell, or transport the products - the list is close to endless."

The issue here is what happens when the major lending institutions come clean with the fact that the money lent isn't really there. And this in the wake of today's economy where people everywhere are struggling to pay mortgages, lines of credit, and even phone bills according to AT&T.

(LINK)"The US consumer has hit *yet another* new low. Besides mortgage defaults and astronomical credit card debt, the US consumer is stretched so thin that he can no longer afford to pay his phone bill.

That is what AT&T is reporting:

'AT&T Inc.’s stock slipped 4.5% yesterday after the phone company’s chief executive blamed the weak economy for a rash of landline and high-speed Internet customers not paying their bills."

What does it mean when people across the nation are defaulting on $50 phone bills, in favor of food and gas in the tank of their SUV (probably also purchased on credit)?

I'm not sure what any of this means, but if the U.S. economy gets into trouble, my biggest fear is where will the money then go. Will it head overseas to all the emerging markets that are trying to pull investment dollars out of the U.S., places like Hong Kong, Europe and Dubai? What would this mean for a country that is already up to it's ears in war-debt, mortgage debt, and individual personal debt?

Maybe while the United States is off in Iraq, the rest of the world is laying the foundation for this future of economic warfare. Are we entering an age of global economic warfare? I don't know, after all I'm no military strategist or economic guru, so it's all empty speculation, but we've definitely arrived at interesting times.

In the end, I can't help but wonder if it's all part of a global transference of power that is about to take place... or not.

And... it makes you wonder how safe your money is in the bank.

peace,
d




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1. The Mortgage Lender
2. Bank of America Credit Risk Increases on Countrywide Purchase : Bloomberg.com
3. Bear Stearns Companies: The New York Times
4. Bank of America boosts finance M&A: Financial News