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$20 Trillion in Losses; 6 Million Job Losses - Troubling times ahead for USA

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posted on Jul, 12 2008 @ 11:37 PM
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I just read a very enlightening article on the impact of the credit crisis mixed with the bursting of the housing bubble. This author predicts nearly $20 Trillion - that's right - TRILLION dollars in over all losses from the fall out of this crisis in the next two to three years and the loss of 6 million jobs from now til 2011.


Now if you think the collapse of IndyMac doesn't affect you, think again. The FDIC estimates the takeover will cost between $4 and $8 billion. Given what I know about government estimates, it's likely to cost much more. Whatever the costs, it's coming from taxpayers. But there's more to it. Indy's insolvency signals that the banking crisis is not only live and well , but only just beginning. Before it's over, I estimate a total of about $10 trillion in losses as a result of Greenspan's real estate bubble - $1.5 to $2.0 trillion in direct losses by banks and mortgage companies (much more than Wall Streets ever increasing estimates that are now up to $500 billion), $7 trillion in paper losses due to real estate devaluations, and $1.0 trillion in lost incomes (and decreased consumer spending resulting in income losses for others) due to job losses and lay-offs in the real estate, mortgage, banking and construction industries, as well as non-real estate related job losses due declining economic conditions attributed to the real estate and banking crisis. In total, I would roughly estimate a loss of around 6 million jobs from 2007 to 2011. Already, an estimated 250,000 jobs have been lost in the residential lending sector alone.


Whatever the end result is, you can be sure that this is only the beginning. So who is next?


Thornburg Mortgage? Do you remember these guys? The CEO was plastered all over television in the summer of 2007 before anyone knew there was a real estate crisis going on. This company did a lot of jumbo mortgages, so when they began to encounter some liquidity problems due to high default rates, Wall Street paid very close attention. After all, at the time, most people didn't even think the sub-primes would experience a washout, so to see a mortgage company that specialized in jumbo mortgages run into problems was very troubling. Since falling from $28 in October of 2007, the stock is now trading at $0.28.


SOURCE




posted on Jul, 13 2008 @ 10:42 AM
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Anyone have anything to to say about these numbers? Too high, too low?



posted on Jul, 13 2008 @ 02:04 PM
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The numbers are highly misleading, just because you mark to market doesn't mean you are actually taking all of that loss. It simply means at the time that you priced those securities on the market, you were only getting 20 cents to the dollar etc etc. It's a paper loss, the problem with it is that it makes it much harder to take on debt and makes your equity collapse, so it leads to financial problems. However, it's completely overblown because most people who are marking down their assets are assuming the credit market will remain frozen, but the past has taught us that eventually it will unfreeze and they may actually mark up the assets. A lot of companies are throwing in everything and the kitchen sink. The government will not buy Freddie and Fanny, because that would destroy the credit market even more. They will if anything offer a treasury swap for their bad debt. Considering only 1-2% of all of the mortgages that Fannie Mae and Feddie Mac hold are defaulting, the government wouldn't be swapping very much debt at all (10-12 Billion). I do think we are going to go into a deep recession, but I think the media is causing a lot of unnecessary panic that will probably make it come on much quicker.



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