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Wednesday, March 24, 2010

Debt has a body count

The truly shocking news here is that a bank actually dared to foreclose on a property. These days, they usually prefer to pretend that the loan is still performing.
The foreclosure crisis in Philadelphia is now becoming a matter of life and death. Eyewitness News has learned that in the past month, two homeowners took their own lives before sheriff's deputies arrived to tell them that they were being evicted. On March 5, deputies arriving to post an eviction notice on Lynda Clark's South Philadelphia home found she had hanged herself.... Less than three weeks later, owner Gregory Bellows shot and killed himself shortly before deputies arrived to evict him from his Roxborough home.
It seems unlikely that this violent despair is going to remain self-directed for long. A lot of people still believe the news; I have people tell me every day that they see this sign or that sign that the economy is recovering. The economists, meanwhile, cite the GDP and unemployment numbers. But the statistical mirage is entirely transparent to those who understand how the statistics are constructed and how they have been manipulated by the $2 trillion increase in debt-funded government spending over the last 18 months. Extend-and-pretend was a gambit, an entirely rational gamble for those who subscribe to Neo-Keynesian economic theory and thought that recovery was predicated on resparking the all-important animal spirits. Unfortunately, because it was based on a false premise, it failed.

I was interviewed on a radio station last night and the hosts seemed a little surprised when I told them in no uncertain terms that there is nothing to be done. But it's not that hard to understand; what would you tell someone who makes $15k a year, spends $25k per year, and is $75k in debt? That's only part of the problem, as you also have to keep in mind that 42% of reported bank assets are literally worthless.

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