Reasons Why the US Economy is Not Going to Recover

BusinessLegal

  • Author Aurelia Masterson
  • Published March 9, 2010
  • Word count 862

Mortgages - Mortgages defaulting caused a major blow to the economy in 2007 and 2008. Many of the mortgages out there now are variables rate mortgages that are due to reset at higher rates in 2010. This will cause more mortgage defaults because people who have been tweaking by will not be able to make the new higher mortgage payments. As the ranks of the unemployed grow the mortgage default rate will continue to rise. With property values dropping so much it is more attractive for people to walk away from their mortgages instead of hanging on and making the payments. They can rent a similar house in the same neighborhood for as little as one third of their mortgage payment. They also then do not need to maintain insurance on the house. Flood insurance can be expensive in many regions. It would be decades for the real estate market to return. There is a massive amount of unsold real estate now. More and more people are going to be going into foreclosure and thus more vacant real estate on the market. Many people have poor credit scores and cannot qualify for mortgages. Do not expect to see any strong real estate market for many years to come.

Loss of Jobs - More than 6 million workers had been unemployed 27 weeks or more in December 2009. This does not take into account those who stopped looking for work (over 900,000 people stopped looking for work out of discouragement in Dec. 2009) or those who have taken early retirement or part time work. This is bad. The same figure was about two million in December 2008. In Detroit the real unemployment figures are expected to be as high as 50%. During the 2001 recession the country lost 2% of its jobs and it took four years for the recovery. Now they admit to losing 5% of their jobs and this figure is probably half of what it really is. The time for recovery would be what ten or twenty years? Well it doesn’t work like that when things get this bad. The damage is too great for a recovery of ordinary proportions.

Unemployment Insurance – This is a safety valve to give a laid off worker money until he can find another job. The unemployment is so low it is of little value. Maximum unemployment is about $1100 a month. How will this help a person laid off from a $50,000 a year job? It won’t do much except enable him to buy food as savings dwindles, assets are sold and eventually they face bankruptcy and homelessness. There is no social support network of any realistic proportions and there is no money to establish one. Twenty-five state unemployment funds have gone broke and in next two years fifteen more are expected to follow suit. This will require more loans and bailouts from the Fed who has no money to do this with. Doom and gloom.

Food Stamps – 37,000,000 million people now receive food stamps and this number is rising at the rate of 20,000 per day. The government has no money to pay for this yet keeps doing it and just printing more and more money.

Bankruptcy – During 2009 1,411,000 people filed for bankruptcy. This was a 32% increase over 2008. Please bear in mind people really broke do not bother going through the time and expense of a bankruptcy proceeding. Counties and cities are starting to file bankruptcy as well.

Pension Crisis – Now the baby boomers are coming into retirement age. All the public and private pension funds are under funded. Forbes magazine said the unfunded total of the pension liability is 3.2 trillion dollars. Social security and Medicare are also under funded and there is no money to pay these baby boomers as they start to retire.

US Debt Out of Control – The US debt is 12 trillion and will, soon go to 14 trillion as Obama fixes things with change. What a guy.

Tax Receipts Dropping – Many jobs were lost thus fewer taxes. US corporate income tax payments were down 55% for fiscal year ending 2009 and this figure will be rising. Property tax payments are delinquent and the taxes themselves are down due to lower property values. Sales taxes are down due to reduced retail sales. Capital gains taxes are down due to low interest rates. The income stream going into the Fed is much lower.

Military Spending – No end in sight. They keep on spending like everything is fine just keep the printing presses rolling. The US cannot afford these wars it keeps getting into.

Federal Reserve – This is the beast that caused the problems. Now the Federal Reserve is buying 80% of the US Treasury Securities issued in 2009. This is a ponzi scheme.

As all these factors close in on the USA the government will continue to print more and more money. More countries will be moving away from the USD as a reserve currency. Eventually the USA will go into hyperinflation as the dollar becomes worthless. This will be sooner than later. The best thing to do is to get yourself and your assets out of there while you still have something to leave with. It isn’t going to be getting any better any time soon.

http://www.panamalaw.org

Aurelia Masterson writes for http://www.panamalaw.org

Article source: https://articlebiz.com
This article has been viewed 600 times.

Rate article

Article comments

There are no posted comments.

Related articles