What is wrong with the US economy? Part 2

[mgb_phys]

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit
http://bloomberg.com/apps/news?pid=20601109&sid=arEE1iClqDrk&refer=home

 

[Ivan Seeking]

Another big rally today; up almost 400 points right now.

 

[Astronuc]

Permanent? Oh no! According to the second chart on this page http://www.cedarcomm.com/~stevelm1/usdebt.htm" , the gov't has been on temporary revolving credit since 1791.

Yeah - I should have said escalating revolving credit.

 

[mgb_phys]

the gov't has been on temporary revolving credit since 1791.

That's why we keep getting those annoying loan ads on TV aimed at countries that are in debt:
<sing>If you own your throne - you can get that loan - call 1-800-get...<.sing>

 

[Ivan Seeking]

Bloomberg says this will be the biggest two-day rally since 1987.

 

[jal]

The financial system has already consummed 40 - 50% of all the savings to cover their ***.
Now they will take the remainded.

http://money.cnn.com/2008/11/25/news/economy/paulson_consumer/index.htm?cnn=yes
Fed bets $800 billion on consumers
Central bank and Treasury announce a massive plan to jumpstart lending.
-----
When you lend money to a mining operation, (buy shares), you know that its for operating expenses that will generate a product that will generate revenues.
When you lend money to a the banking system, such as the bail out plan and buying shares, ask yourself, what operating costs are you covering and what will be the product that will be produced that will generate an income.
If the banking system is not covering its operating cost in the spread between borrowing and lending rates then it needs to raise/take money from your saving plans.

jal

 

[mheslep]

The financial system has already consummed 40 - 50% of all the savings to cover their ***.
Now they will take the remainded...

Who is 'they'? The recently proposed stimulus does not go financial institutions.

 

[Art]

Who is 'they'? The recently proposed stimulus does not go financial institutions.

From the new package, $100 billion is going to buy doubtful/bad debts from Freddie and Fanny and a further £500 billion is to be used to buy mortgage backed securities. How do you figure this money is not going to the financial institutions?

The remaining $200 billion is to be used to promote lending to consumers. Presumably this too will be through the existing banking system and so again primarily helps the banks especially if the banks, like the last lot of 'stimulus' cash they received, just stuff it under their mattress.

 

[mheslep]

From the new package, $100 billion is going to buy doubtful/bad debts from Freddie and Fanny and a further £500 billion is to be used to buy mortgage backed securities. How do you figure this money is not going to the financial institutions?

The remaining $200 billion is to be used to promote lending to consumers. Presumably this too will be through the existing banking system and so again primarily helps the banks especially if the banks, like the last lot of 'stimulus' cash they received, just stuff it under their mattress.

I mistook the above post to be about the 'new' $500B stimulus plan announced Monday Nov 25 by the Obama transition people; though the details are not out yet, that $500B I take to be real money out the door spending to municipalities and individuals, out of reach of any eventual treasury recovery. The money.cnn link from Jal is indeed more financial institution injections as you detailed, though there's a good chance the US treasury will recover part of that (TARP money).

I don't subscribe to the Keynesian stimulus game; the last US stimulus months back accomplished little or nothing. If the stimulus suggestion means that greater deficits can be tolerated (and I don't know that they can), then I'd favor an across the board temporary tax cut instead. Indeed the Obama people stated 'tax cuts' would be part of their new stimulus package.
http://online.wsj.com/article/SB122747905110751527.html?mod=todays_us_page_one"

 

[CaptainQuasar]

I don't subscribe to the Keynesian stimulus game;

Does that mean that you only believe in Reganesque "trickle down" stimulus or that you don't believe it's possible for the government to stimulate the economy at all? I'm curious because by specifying "Keynesian" there it seems like you're leaving yourself an out to favor some sort of stimulus in the future if you designate it as "non-Keynesian."

⚛​

 

[Astronuc]

U.S. Details $800 Billion Loan Plans
http://www.nytimes.com/2008/11/26/business/economy/26fed.html

WASHINGTON — The Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they would print as much money as needed to revive the nation’s crippled banking system.

So much of the prosperity over the past two decades has been an illusion - given that many trillions of (virtual) $ in the equities and financial markets seems to evaporated.

'Trickle down' was more like 'tinkle down'.

 

[mgb_phys]

So much of the prosperity over the past two decades has been an illusion

You mean a $10T growth in economic activity and a $10T deficit at the same times wasn't just a coincidence?

 

[mheslep]

Does that mean that you only believe in Reganesque "trickle down" stimulus or that you don't believe it's possible for the government to stimulate the economy at all? I'm curious because by specifying "Keynesian" there it seems like you're leaving yourself an out to favor some sort of stimulus in the future if you designate it as "non-Keynesian."

⚛​

'Stimulus' of late pretty much implies a direct government invention; I believe 'trickle down' is generally considered an action of the private economy.

I believe the only real factors in economic growth are productivity increases, infrastructure, education and the rule of law, then perhaps tax cuts after all the above. The federal government can directly fund infrastructure to positive effect, though often inefficiently, but that takes some time.

 

[Office_Shredder]

'Stimulus' of late pretty much implies a direct government invention; I believe 'trickle down' is generally considered an action of the private economy.

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

 

[mheslep]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

Ok, call it what you will, I'd favor an across the board tax cut before simply mailing checks, though other than for the capital gains and corporate tax rates, I don't think that would help much with jobs either. Those cuts should go along with spending cuts - there are some areas like Obama's just mentioned farm credits to the rich - that not even the most stimulus minded could claim actually stimulate.

Productivity, infrastructure, education, rule of law.

 

[turbo]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

It is an entirely disingenuous form of "intervention" because it is premised on the notion that when the wealthy get tax cuts, they plow the money right back into investments that create jobs for the poor and middle-class of the US. That has proven NOT to be the case - it is a neocon fiction used to justify welfare for the wealthy. The people who benefit most from the US economy should pay a proportionately higher share of taxes - an idea floated again and again by Warren Buffet. Reagan and W did their level best to destroy progressive taxation in the US, and it's going to be a tough road for Obama if he wants to reverse the damage.

 

[Office_Shredder]

It is an entirely disingenuous form of "intervention" because it is premised on the notion that when the wealthy get tax cuts, they plow the money right back into investments that create jobs for the poor and middle-class of the US. That has proven NOT to be the case - it is a neocon fiction used to justify welfare for the wealthy. The people who benefit most from the US economy should pay a proportionately higher share of taxes - an idea floated again and again by Warren Buffet. Reagan and W did their level best to destroy progressive taxation in the US, and it's going to be a tough road for Obama if he wants to reverse the damage.

I used the word intervention not to imply it was a good way of fixing the economy, but to simply indicate that it is government meddling in the economy in an attempt to fix it

 

[mheslep]

...The people who benefit most from the US economy should pay a proportionately higher share of taxes ...

They do pay a much higher share now as you know, overwhelmingly so. Of course they benefit, but one could also argue that those people do the most to create the economic growth.

 

[kronon]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

 

[OmCheeto]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

I've never heard of him before, but I think I like this Peter Schiff.

http://www.financialsense.com/fsu/editorials/schiff/2008/1121.html"
by Peter Schiff, Euro Pacific Capital | November 21, 2008
...
This transformation will not be fun, but it is necessary. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base. Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow.

This seems to mirror my "wheelbarrows full of cash" statement a few weeks ago.

He must be brilliant.

 

[kronon]

yep, he was able to predict your statement 3 years in advance - he must be brilliant!

what gets me most about the clip is actually seeing the madness of crowds in action. Its pretty scary and shows just how way off things can get.

He almost reminds me of the first guy who dared say, "erm , maybe the sun won't actually care if the first born is not sacrificed".

 

[OmCheeto]

yep, he was able to predict your statement 3 years in advance - he must be brilliant!

what gets me most about the clip is actually seeing the madness of crowds in action. Its pretty scary and shows just how way off things can get.

He almost reminds me of the first guy who dared say, "erm , maybe the sun won't actually care if the first born is not sacrificed".

I would like to say, that with 6 billion people on the planet, someone is bound to get lucky and make a correct prediction of what is going to happen 3 to 6 years down the road.

But as far as I can tell, Mr. Schiff wasn't guessing. He knew.

It's good to know that there is someone that I can now trust enough to listen to regarding economic matters. I would guess that my previous disinterest in the subject was because I recognized that the world has been far too full of "experts" pushing their opinions around as fact.

I wonder how far back his predictions go. Right after the start of the 2nd gulf war(5.7 years ago), I decided(based on many factors) the the US government should raise taxes on gasoline so the total cost would be around $4.00 per gallon. We should use that money to build an alternate fuel infrastructure. Of course, people have been saying similar things since the mid 1950's from what I've read. But I thought it was funny how my $4/gal number came true, in a roundabout, not so funny, capital sucking, economy crippling kind of way.

Unfortunately, http://www.financialsense.com/fsu/editorials/schiff/archive.html" only go back to 2005. I'll have to email him and see if he thinks the idea is still viable.

 

[Al68]

Trickle down usually refers to cutting taxes for rich people in order that they spend it and the money 'trickles down' to the lower classes. Cutting taxes to get this effect is as much government intervention as anything else

Trickle down usually refers to a fictional economic theory, which no politician has ever claimed to believe in. Which makes it a strawman argument.

And letting people keep their own money instead of confiscating it is "government intervention"? Wow. Just wow.

 

[Astronuc]

Trickle down usually refers to a fictional economic theory, which no politician has ever claimed to believe in. Which makes it a strawman argument.

'Trickle down theory' is considered a pejorative term synonymous with Reaganomics, and various people in the Reagan administration used the term to justify the tax and spending policies of the Reagan years. Reagan believed it, and so did David Stockman in the early 80's.

. . . Yet he was conceding what the liberal Keynesian critics had argued from the outset—the supply-side theory was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects "trickle down" through the economy to reach everyone else. Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. "It's kind of hard to sell 'trickle down,'" he explained, "so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."
. . . .

The Education of David Stockman (Dec, 1981)
http://www.theatlantic.com/doc/198112/david-stockman/5


Meanwhile - Meltdown far from over, new mortgage crisis looms
http://news.yahoo.com/s/ap/20081128/ap_on_bi_ge/meltdown_coming_soon

WASHINGTON – Black Friday's retail shoppers hunting for holiday bargains won't be enough to stave off what's likely to become the next economic crisis. Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages.

That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

. . . .

It appears that the next problem in the US economy is the wave of defaults and foreclosures on commercial property. I've already seen that locally. Some commercial properties are going for half their previous value.

 

[Al68]

'Trickle down theory' is considered a pejorative term synonymous with Reaganomics, and various people in the Reagan administration used the term to justify the tax and spending policies of the Reagan years. Reagan believed it, and so did David Stockman in the early 80's.

Every time I've heard "trickle down economics" described by democrats, it's not even remotely similar to Reaganomics or supply side economics as they would be understood by their adherents, or anything that actually happened in the 1980s.

I've never heard a politician say "Gee, we, as government, should just give all the money to rich people so that it will trickle down to the rest". That's too absurd to even be worthy of discussion.

Claiming that their opponents believe such nonsense is obviously not an attempt to sway the opinion of smart people. It's to stir up hatred in the rest.

 

[turbo]

It appears that the next problem in the US economy is the wave of defaults and foreclosures on commercial property. I've already seen that locally. Some commercial properties are going for half their previous value.

Maine is a bit ahead of the curve, there. If you have enough money to start a business, you can find vacant commercial space anywhere. You can buy such properties for a song, or you can rent at VERY attractive rates.

Unfortunately, the only segment of the economy that has grown here in recent years is call-centers. The problem with those jobs is that they are portable. The people operating the call center lease some commercial space, wire it for lots of phones (overhead cable trays and drop lines to workstations) set up cubicles with PCs and hire some bodies. If it becomes financially advantageous to operate elsewhere, it is a simple matter to set up another call-center, get it running, and close the existing one. Local folks found that out when MBNA closed its huge call-center in the Belfast area, throwing thousands out of work. It's safer going to work for a company that has made a significant capital investment at a location, though even that is not a guarantee of stability. The businesses with the largest capital investments (pulp and paper mills) are shutting down production lines or shutting down the mills entirely due to poor market conditions and unpredictable costs of energy and materials.

Combine this with the shut-down of all but one of the states large sawmill operations, and the fate of land-owners, wood-harvesters, truckers, etc is clear. Bad times for years to come - it takes a long time to turn something this big around.

 

[Office_Shredder]

And letting people keep their own money instead of confiscating it is "government intervention"? Wow. Just wow.

Uh, yes? Changing the tax rate for the purpose of economic stimulation is in fact government intervention. Feel free to tell me how that's not true, or how cutting taxes for rich people to stimulate the economy isn't cutting taxes for rich people to stimulate the economy

 

[Al68]

Uh, yes? Changing the tax rate for the purpose of economic stimulation is in fact government intervention. Feel free to tell me how that's not true, or how cutting taxes for rich people to stimulate the economy isn't cutting taxes for rich people to stimulate the economy

I would never use the word intervention to mean a lack of or a reduction of a govt action. That's just not what the word means.

Tax cuts "stimulate" the economy in the same way that I could "stimulate" the population of flies in my house by swatting less of them. Would you say that the resulting flies in my house were caused by my "intervention" of swatting less of them? No, swatting less flies is a lack of intervention.

 

[Astronuc]

Dying of Consumption
http://www.nytimes.com/2008/11/28/opinion/28roach.html
Stephen S. Roach, NYTimes Op-Ed Contributor, Nov 28, 2008

It’s game over for the American consumer. Inflation-adjusted personal consumption expenditures are on track for rare back-to-back quarterly declines in the second half of 2008 at a 3.5 percent average annual rate. There are only four other instances since 1950 when real consumer demand has fallen for two quarters in a row. This is the first occasion when declines in both quarters will have exceeded 3 percent. The current consumption plunge is without precedent in the modern era.

The good news is that lines should be short for today’s “first shopping day” of the holiday season. The bad news is more daunting: rising unemployment, weakening incomes, falling home values, a declining stock market, record household debt and a horrific credit crunch. But there is a deeper, potentially positive, meaning to all this: Consumers are now abandoning the asset-dependent spending and saving strategies they embraced during the bubbles of the past dozen years and moving back to more prudent income-based lifestyles.

This is a painful but necessary adjustment. Since the mid-1990s, vigorous growth in American consumption has consistently outstripped subpar gains in household income. This led to a steady decline in personal saving. As a share of disposable income, the personal saving rate fell from 5.7 percent in early 1995 to nearly zero from 2005 to 2007.

In the days of frothy asset markets, American consumers had no compunction about squandering their savings and spending beyond their incomes. Appreciation of assets — equity portfolios and, especially, homes — was widely thought to be more than sufficient to make up the difference. But with most asset bubbles bursting, America’s 77 million baby boomers are suddenly facing a savings-short retirement.

Worse, millions of homeowners used their residences as collateral to take out home equity loans. According to Federal Reserve calculations, net equity extractions from United States homes rose from about 3 percent of disposable personal income in 2000 to nearly 9 percent in 2006. This newfound source of purchasing power was a key prop to the American consumption binge.

As a result, household debt hit a record 133 percent of disposable personal income by the end of 2007 — an enormous leap from average debt loads of 90 percent just a decade earlier.

These last two statements indicate an unsustainable situation.

So what's the solution?

Fix the wage crisis, help the big picture
http://marketplace.publicradio.org/display/web/2008/11/25/whats_the_fix_madrick/

Commentator Jeff Madrick says a lot of our economic problems root from a wage crisis that's been troubling the average worker for 35 years. He shares a list of solutions for our "What's the Fix" series.

Jeff Madrick: We've had a wage crisis in America for 35 years. One number tells it all: The typical man in his 30's today earns less after inflation than a man in his 30's did in the 1970's. The main reason typical family incomes have risen at all over the past 30 years is that women have gone to work.

The wage crisis is a big reason why Americans borrow so much. It's a big reason why rising health care costs are so painful, why a growing number of mortgages end in default. And it's a big reason why Americans want their taxes cut even more.

. . . .

Marketplace Series - "What's the fix?"
http://marketplace.publicradio.org/projects/project_display.php?proj_identifier=2008/10/24/whats_the_fix


Income growth a matter of perspective
http://marketplace.publicradio.org/display/web/2008/11/25/wolfers/

Steve Chiotakis: There are myriad of economic stimulus packages floating around Washington, and you'll likely hear about one issue in the debate: wage growth. But like everything else in D.C., there are two sides to the debate. The Democratic side -- wages are down for the poor and middle class. And the Republican side -- wages are up for the middle class. Who's right? Economist and commentator Justin Wolfers says it's all about the data.

--------------------------------------------------------------------------------

Justin Wolfers: The Republicans describe the income of the average person, and that average income has risen by 10 percent since the year 2000 -- which is an OK, if not stellar rate of progress.

The Democrats focus instead on the typical household. Think about lining up all the households from poorest to richest, and choose the income of the household in the middle.

Economists call this median household income. You might call it middle-class income. Unfortunately, the income of this middle household has fallen since 2000, and it is now about $50,000. It's pretty unusual for the living standards of the middle class to decline like this.

Now, you might have a different definition of the middle class. But I have sliced and diced the data, and unless you want to start counting millionaires, you can't escape the conclusion that the middle-class incomes have declined.

How can the typical household be suffering economic decline, while the average rose? It's simple arithmetic: if someone earns 20 times as much as you, the average income statistics give them 20 times greater weight than you. Since 2000, the average income of the bottom 99 percent of taxpayers fell, while the incomes of the richest 1 percent grew. But the richest 1 percent are 20 times richer. So their rising incomes largely offset the falling incomes elsewhere.

So it turns out that Republicans and Democrats are each telling the truth -- just different truths. Which truth you care about may depend on where you stand in the pecking order.

As long as real incomes of the majority decline, so will the economy.


More families turning to food banks
http://marketplace.publicradio.org/display/web/2008/11/28/mm_food_banks/

and

The Worst Is Yet To Come: Anonymous Banker Weighs In On The Coming Credit Card Debacle
http://executivesuite.blogs.nytimes.com/2008/11/25/the-worst-is-yet-to-come-anonymous-banker-weighs-in-on-the-coming-credit-card-debacle/
By Joe Nocera

A few weeks ago, I published an e-mail message sent to me from an executive who works in the banking industry — and had become disgusted by what he sees all around him. This weekend, that same banker sent me another e-mail message, which he has also agree to let me publish. It’s another wake-up call. Too bad nobody is listening.

Today, we are bailing out the banks because of their greedy and deceptive lending practices in the mortgage industry. But this is just the tip of the iceberg. More is coming, I’m sorry to say. Layoffs are being announced nationwide in the tens of thousands. As people begin to lose their jobs, they will not be able to pay their credit card bills either. And the banks will be back for more handouts.

I received a catalog today from Casual Living and in big bold print on the front page, it said “BUY NOW, PAY NOTHING”. Then in significantly smaller print underneath, it said, (until April). That mantra has been sung throughout the credit markets over the last 10 years. The banks waive a carrot in front of the consumer and reel them in and encourage them to go deeper and deeper into debt. They do this by prescreening customers through credit reporting agencies, mailing offers to apply, and to transfer balances at teaser rates or zero percent financing. They base it on credit score and not on capacity to repay. A good credit score does not equate to the ability to repay debt.

Over my career, I have seen thousands of consumers that have credit card lines in excess of their annual salaries. Some are sinking under their burden. Some have been fiscally responsible and have minimal amounts outstanding. My 21-year-old daughter, who’s in college, gets pre-approved offers all the time. She has no ability to repay debt, yet the offers flow in just the same. We all know how these lines are accumulated. The banks, in their infinite stupidity, keep upping credit lines because the customer pays the minimum payments on time. My daughter’s credit line started at $1,000 and has been increased over the last two years to $4,400. She has no increased earnings to support this. But the banks do it without asking. And without being asked. The banks reel in the consumer, charge interest rates higher than those charged by the mob, increase lines without the consumer asking and without their consent, and lure them into overextending. And we can count on the banks to act surprised when they aren’t paid back. Shame on them.

As a banker, let me describe what we do wrong when we accept and review an application for a credit card. First, we don’t verify income. The first ‘C’ of credit: Capacity to repay, is completely ignored by the banks, just as it was in when they approved subprime mortgages. Then we ask for “household income” — as if other parties in the household could be held responsible for that debt. They cannot. And since we don’t ask for any proof of income, the customer can throw out any number they think will work for them. Then we ask if they rent or own and how much they pay. If their name is not on the mortgage, they can state zero. If they pay $1,000 in rent, they can say $500. (Years ago we asked for a copy of the lease to verify this number.) And finally, we don’t ask how much of a credit line the consumer is looking for. The banker can’t even put that amount into the system. There isn’t any place on the application for that information. We simply put unverified information into a mindless computer and the computer gets the person’s credit score and grants them the biggest line that score and income (ha!) qualifies for.

. . . .

The previously published email

Peeking Under the Kimono: A Big Banker Speaks Out
http://executivesuite.blogs.nytimes.com/2008/10/30/peeking-under-the-kimono-a-big-banker-speaks-out/
By Joe Nocera
A banker at a large bank sent the following to Nocera.

I’m a 35-year veteran in the banking industry. And I’ve spent the better part of my career working for the big banks as a small business banker and credit underwriter. Small business lending, in industry terms, is defined as a business that has less than $20 million in revenue and that borrows less than $5 million. I’ve been a lender for most of those years and I’ve been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. They lunch with small business owners at Rotary Clubs and Chamber meetings. They learn, first-hand, about their businesses and the challenges they face. They go to their stores and factories and “kick the boxes.” And most importantly, they learn about the ways in which those business owners are making the tough decisions in cutting back expenses to stay ahead of this economic crisis.

Big banks like the one I work for typically have an aversion to lending to companies whose sales and profitability trends are deteriorating, even in tough times like these. Thus, very credit-worthy businesses are having their lines cut back or closed down. Not only are banks not making new loans, they are systematically withdrawing from the loan commitments they already have in place.

. . . .

 

[russ_watters]

That statement on incomes is still misleading. Incomes have not "fallen since 2000", they fell for 4 years, then rose for 3 years. And didn't you read the source you quoted?

As long as real incomes of the majority decline, so will the economy.

"The majority" is not a term used there. The sound byte the democrats used is one data point representing the median. It doesn't tell you anything about the majority. In fact, since one person who has seen a large drop (say, due to unemployment) will skew the data downward, it is almost certain that "the majority" have seen an increase in income since 2000.

 

[russ_watters]

This will surprise a lot of people:

Early data show strong Black Friday

http://www.usatoday.com/money/industries/retail/2008-11-29-blackfriday-results_N.htm

 

[edward]

Commercial real estate is also facing a crisis.

Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.

Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

http://www.msnbc.msn.com/id/27928745/

One large resort and two Malls are in trouble locally. The companies are unable to get financing to pay off the large balloon payments that are due.

 

[Art]

This will surprise a lot of people: http://www.usatoday.com/money/industries/retail/2008-11-29-blackfriday-results_N.htm

So the fundamentals of the economy are still strong?

 

[mgb_phys]

So the fundamentals of the economy are still strong?

Yes, the trouble is that the fundementals are buy now, worry about credit card later!

 

[mheslep]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

...But as far as I can tell, Mr. Schiff wasn't guessing. He knew...

Note that a couple of months ago when gold was just over a $1000, people should invest in gold and Schiff said on CNN it was going to several thousand as the US economy tanked. It is now at $816. Also Schiff has been predicting this crash since 2002 when the Dow was at ~8000, and kept doing so while the Dow climbed to ~14000.
5:00 -
http://www.youtube.com/watch?v=drJ6QxSO5gw&feature=related