Sunday, January 10, 2016

A Readers Perspective

"The Mortgage Guy” put this letter in the remarks section of my last post. He spent some effort writing it, and it may be a refreshing break to my murder of English grammar and punctuation. Here is his letter:

Jim I've been a lurker here since 2008. I stumbled upon your site while searching for truth in a desert of deliberate media obfuscation at the least and out right propaganda at worst. Your site was one of the many oases of veracity that I came upon both back in 08 and presently.

I had a front line seat to the financial devastation of that time, these times, and early on I might add. I owned a mortgage origination company back then having migrated from the financial planning field. The earliest signs of things to come became apparent shortly after 9/11, a time that witnessed unwarranted easy monetary policy that helped inflate the ill-fated bubble. The initial easing was warranted in light of the terrorists attacks. There was no reason however not reverse that easy policy a couple of years later.

It was around 2003 when we started to see our wholesalers buying ridiculous mortgage paper. Our wholesalers wanted to buy loans that didn't require proof of a job, proof of income or proof of assets. The only things required was a 620ish credit score and a solid appraisal. We also saw demand for 100% loan to value loans, on both a first and second mortgage basis. Purchase money mortgages were equally ridiculous with 103% loan to value loans as well as a plethora of similar offerings.

On a number of occasions, I would come right out and ask my wholesalers "what are you guys doing buying this garbage paper?" The most common answer was "we're not holding it" or "we sell the loans to Wall Street" (Bear, Lehman, etc.). It became apparent that the proliferation of these toxic time bombs was due not to consumer demand necessarily but due to Wall Street's ravenous appetite to securitize debt. It's interesting to note, that had Glass Steagall not been repealed by the signature of Bill Clinton, these toxic loans could not exist and what is erroneously referred to as the Bush recession, would not have happened. It is equally interesting that these loans could not have proliferated without their fraudulent securitization, which is the second biggest reason after Clinton, for the economic meltdown of 2008/09.

Having provided some background, let me state that not only has "depression grade" financial devastation been inflicted all along, very little if anything has changed. That is because nothing has been done to address the problems at hand, rather all efforts taken were to paper over the damage.

The mirage of economic expansion is primarily due to a leftist media meme that brainwashed masses to believe the stock market is the economy as is the unemployment rate. Anyone with any financial acumen will tell you that the stock is one of the poorest economic indicators in existence. They will also tell you that the stock market's precipitous rise isn't due to economic or business fundamentals but to an unprecedented printing of trillions that were funneled into the market via insolvent banks. Thus benefiting the very entities that created the economic woe while starving Main Street of any trickle down.

As for the unemployment rate, that is a statistic rendered useless by its historically skewed shrinkage in the labor force. By some estimates, 80% to 85% of the unemployment rate drop isn't due to job creation but rather labor force shrinkage. This phenomenon is due to the way the unemployment rate formula works. Based on the way the formula works, it is possible to lower the unemployment rate to zero without creating a single job. This is accomplished through the labor participation rate falling to the necessary degree. One can duplicate this phenomenon with the jobs calculator on the Federal Reserve of Atlanta website.

Taking away the two most used economic indicators used by the media to present a false sense of prosperity, we are faced with a majority of indicators that present are more sobering view of the economy. Even the highly touted 298,000 jobs (supposedly) created in the latest jobs report is a sham. All of the jobs were created by the BLS through voodoo seasonal adjustments; and not by actual businesses. The raw numbers show a loss of in excess of 60,000 jobs.

Since the end of Clinton's great recession, job creation has failed to keep up with population growth, an important metric that only lost its importance since the advent of the state owned media. The jobs that have been created are part time and low paying. The kind of jobs you can't buy a house with, as evidenced by the historically low home ownership rate. Not only are these jobs so bad that people cannot afford to buy homes, over half of all U.S. twenty-five years olds live in their parent's basement.

For the first time in history, the middle class is a minority in America. For the first time in history business failures out number new business creation. Half of the working people in the United States earn less than $30,000. Not only are incomes down on a purchasing power basis but wealth is down as well. 62% of Americans have less than $1,000 in savings.

Add to this that one in five children are on food stamps and UNICEF ranks the U.S. 35 out of 41 wealthy countries for percentage of children living below poverty. One in three children do. In 1950 80% of American men held jobs. Today only 62% hold jobs.

We still have the QE time bombs to deal with, bank solvency (papered over now but not in the impending meltdown) as well as the pension plan deficiencies. All of which will rumble through the economy on the days of reckoning.

What you/our detractors fail to realize is that the absence of bread lines (due to ebt and mail) and the lack of tanks in the streets doesn't mean we have not and are not in a depression. Even in Greece, there are no tanks in the street.

Jim, you and I were right all along. Take comfort in former Federal Reserve Governor, Richard Fischer's confession as to what they did to paper over the apocalyptic destruction to our economy. Please keep your sanity when encountering the masses that have been brainwashed with a concerted media effort in order to hide our sad reality and please keep up the fine work.

A Happy and Prosperous New Year to you and your readers.


Dan Mac said...

Yes were right all along.

Lurkingly yours since ~ '08 as well.

Be well in 2016.

AIM said...

None of this has ever happened before. We're in unchartered waters. At least on this planet. No one knows what they are doing. No one knows where this is going. Only thing we know is that, because of debt, corruption and ignorance, it can't be good. Enjoy your life, family and friends in the present and be grateful for what you've had and have. Unknown times ahead.

dearieme said...

Happy New Year to Jimfans.

My eye was taken by "62% of Americans have less than $1,000 in savings". I saw an extraordinary claim recently - I don't know whether it's true but the fact that it could even be entertained struck me. It was this: the median Brit has more wealth than the median American. It has to be "median" not 'mean' (you have more plutocrats than we have). Can it be true? If true, could it be an artefact of how the data are gathered, or what definitions are made?

But still: such a statement would have been unthinkable for most of my life.

Jim in San Marcos said...

Hi dearieme

I plead guilty of not checking his data. A lot of it depends on how it is worded. Owning a home free and clear without any savings tends to fit in the "no money in the bank" group. Plus with interest rates almost negative, there isn't much incentive to even attempt to put money in a bank.

Since the recession began, the 50 and over group got hit the hardest and many have already spent their retirement nest egg.

From looking at some of the credit card data, it could be as high as 70 percent for people that have debts exceeding their net worth. The credit card companies are not used to long time customers dropping dead with large bills unpaid. Fortunately, debts are not inheritable. So if your 95, go out and splurge on the grandkids or that "massage parlor."

Jim in San Marcos said...


I think that once we find out what is going to happen, we will find out that it has happened before. Maybe in a different order.

But you are right, the uncertainty is what is killing us. It's the unknown times ahead that have us puzzled.

In the last depression everyone lost their savings. It only hurt those retiring. This time we have Social Security and food stamps. The game has changed a bit, I'm not really sure what's supposed to go haywire this time around.

I still like Canadian Silver Maple Leafs with a face value of $5 as a good store of value. Of course I can buy twice as many today as I bought two years ago for the same price, so take my advice with a dash of caution.

Jim in San Marcos said...

Hi Dan Mac

Thank you for lurking

Your acknowledgement is my paycheck.

Take care.