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Though mainstream media would have legal US residents and legitimate voters believing that the economy is improving, the inconvenient truth is that it isn’t. The end of housing crisis is being pitched to Americans with the smooth shrewdness of a seasoned used car salesman at the end of a slow month.  Only in this case, slow has gone well beyond one month.

Because some of the ARMs that are anticipated to reset are 7 year loans, this suggests that next year has the potential to be rather ugly. In fact, a Madison, Wisconsin real estate news blog is suggesting that the nation may not even be able to hope to see the beginning of the end until 2017 or 2018. It reasons that the lengthy recovery is not only the result of 2 million homes that will be going into foreclosure over the next several months, but also all the  massive overabundance of inventory at a time when people are unemployed, underemployed, or just don’t have the savings available to put toward a purchase.

But the next round of resetting sub-prime ARMs aren’t the only reason for 2013 being an ugly year.  When the Democrat-controlled congress passed Obama’s Wall Street Reform bill in July of 2010, one of the bill’s authors, Chris Dodd, proclaimed with joyous tears in his eyes that his monstrous 2300 page creation was a, “great moment” and that “no one will know until this is actually in place how it works.”  He also declared that, “it will take the next economic crisis, as certainly it will come, to determine whether or not the provisions of this bill will actually provide this generation or the next generation of regulators with the tools necessary to minimize the effects of that crisis.”  The bill’s other author was Barney Frank, hence it’s alternative name: The Dodd-Frank Act.

Well, the time has come to reveal just exactly how it is beginning to work.  Though the new government regulations won’t fully kick in until 2013, the regulations that are required now are bringing about a significantly increased work load without boosting the economy in such a way that new jobs and the employees to fill them can be added, according to CBN.

Not only will everybody’s favorite payday lenders be affected by the bill, but so will anybody using a debit card.  Republicans are calling it a “vast federal overreach that will drive financial-sector jobs overseas.”

Back in 2010, a Wall Street Journal article outlined some of the destructive aspects of the Wall Street reforms. Some of the more scary things noted are that, “The legislation would redraw how money flows through the U.S. economy, from the way people borrow money to the way banks structure complicated products like derivatives.  It could touch every person who has a bank account or who uses a credit card” (emphasis added).

Another deeply concerning thing that the Wall Street Journal mentioned about the Wall Street reforms is that, “It would erect a new consumer-protection regulator within the Federal Reserve, give the government new powers to break up failing companies, and assign a council of regulators to monitor risks to the financial system. It would also set up strict new rules on big banks, limiting their risk and increasing the costs.”

Moving right along, the Securities and Exchange Commission will be granted, “new powers to regulate Wall Street and monitor hedge funds, increasing the agency’s access to funding.”  Also, there will be new government programs introduced because of the bill, and the way that these programs will be paid for (besides by the tax dollars of American citizens) is that the bill “would allow the government to charge fees to large banks and hedge funds to raise up to $19 million spread over five years.”  Guess how the large banks will offset those government fees.  They certainly won’t be absorbing them into their own cost of doing business!

Another interesting bit of information about the Wall Street reforms from 2010 was reported by The Hill It noted that the Wall Street reform legislation was intended to provide “a ‘frame’ for the new regulatory landscape, but the full force of the rewrite hinges on how regulators interpret their new powers in the coming months and years.”  It also mentioned “the creation of a new council of federal regulators to oversee broad financial risks; new regulations of the $600 trillion derivatives market; and a new system for the government to wind down failing financial firms.”

The Hill also stated at the time that Obama, “will be nominating an inaugural head of the consumer bureau, which will have broad power to write and enforce rules over home loans, credit cards and other products across the financial system” (emphasis added).

That economic crisis to which Dodd referred may not be limited to the US.  Especially since Italy and Spain have declared that they will not be able to balance their budgets by 2013.  And the shaky conditions of the eurozone combined with the shuttering US economy has the Fed contemplating another round of quantitative easing here at home.

Interestingly, back in 2010 Investors.com reported that the Congressional Budget Office projections were suggesting that the US could have its credit rating downgraded sometime between 2013 and 2018, depending on how adverse the situation becomes with interests rates and the US debt.

The article went on to quote a recent Societe General economics team report: “While we see limited risk of a US sovereign debt downgrade in the next 2-3 years, beyond that we cannot be so certain.”  Keep in mind that Societe General has locations in about 40 countries and has been advising its clients about safe investment options to assist them in avoiding wealth destruction for at least a year now. The US downgrade actually ended up happening last year – which suggests that an economic crisis may be much closer than anyone actually wants to admit.

Even so, another threat that is far more daunting to the global economy than the sub-prime one is the derivative industry, according to a Washington Times article from 2011.  It describes the difficult to understand item as follows: “Essentially, they are bets for or against the house – red or black at the roulette wheel. Or betting for or against the weather in situations in which the weather is critical (e.g., vineyards). Forwards, futures, options and swaps form the panoply of derivatives. Credit derivatives are based on loans, bonds or other forms of credit. Over-the-counter (OTC) derivatives are contracts that are traded and privately negotiated directly between two parties, outside of a regular exchange.

All of this is unregulated. What happens between two parties – notably hedge funds – is like what happens between two individuals who bet on the final score of a football or baseball game. Congressional committees have been warned time and again about ‘ticking time bombs’ and ‘financial weapons of mass destruction’ – to no avail, demonstrating that both the U.S. government and the U.S. Congress are dysfunctional.”

One other type of loan that is in a massive bubble and about ready to burst is the student loan bubble.  According to a National Inflation Association article from 2011, “Student loan debt in America is now larger than credit card debt, but unlike credit card debt, student loan debt can’t be discharged in bankruptcy.”

Since only about half of all college graduates are finding employment right now, it’s obvious why Obama is trying to get the same student loan bill passed on which he avoided voting back when he was a senator.  Especially since, according to Politico, student loan interest rates are expected to shoot up this July, only months ahead of 2012 elections.  If this bill doesn’t get passed, it will be interesting to see whether it will be defaulted student loans or one of the other many options noted above that will be the catalyst to set off the next economic crisis that Dodd said he was sure is on the way, but that he also seems to think the government is ready to fix.

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