Thread: Economic Duplicity: Recession and Record Profits

Economic Duplicity: Recession and Record Profits
The Real Estate Bubble is Not Over


by Rev. Richard Skaff
Global Research, September 18, 2009


In December 14, 2008, in his interview on the CBS sixty minutes show, Whitney Tilson an investment fund manager predicted that the subprime collapse was only half way of the total real estate bubble, and that the second half will begin take place around 2010 and will continue until about the year 2013. Tilson also discussed the two fancy Wall Street terms for bad mortgages namely Alt-A (Alternative-A paper) and option arms mortgages. These loans lured borrowers with teaser rates that will begin to reset this year.

Tilson has also predicted that seventy percent of these loans will eventually default, based on existing evidence of pre-reset default rates [1].

A mortgage reset is when the homeowner who bought a house with a low "teaser rate" and planned to refinance as soon as the house price went up suddenly gets a new payment that is usually far higher. Often, homeowners can't afford these resets.

The first wave of resets, as we recall was subprime. However, Alt-A is actually a much larger category of mortgages, and the big Alt-A reset boom is just around the corner.

Karen Weaver of Deutsche Bank observes that Alt-A mortgages are already mostly underwater. The combination of resets plus severely underwater status will likely exacerbate defaults and foreclosures. [2].

Ironically, Federal Reserve Chairman Ben Bernanke said on Tuesday September 15, 2009 that the worst recession since the 1930s is probably over, although he cautioned that pain especially for the nearly 15 million unemployed Americans will persist. [3].

So while unemployment keeps rising, consumer spending is slumping, inflation is creeping up (food, gasoline, and other commodities), the commercial real estate is plunging into the abyss, the dollar is weakening, and the other half of the housing bubble is exploding, Bernanke remains hopeful!

Could it be that Mr. Bernanke is anticipating the occurrence of a contrived international incident that will trigger an invasion of Iran ? A new war is always good for a military based economy! Or maybe Bernanke’s optimism on the economy is strictly founded on the performance of the global corporations and their profit margins?

Many of these transnational organizations have benefited from the recession. They have gobbled up bankrupted entities for pennies and made record profits, while others have consolidated and merged with weakened organizations to produce the largest monopolies in history. The end result was price fixing, and a total control of the US and the global markets.

Let’s take a moment to analyze this situation by discussing one of these global corporations like “Chevron of California,â€

Glenn Beck was right when he said that the biggest problem in Washington is corruption. We need to start impeachment proceedings and clean up Washington.