Housing, housing, housing ... wages, wages, wages
And with the middle class no longer earning enough to pay the mortgage ... or the heating bill ... or the fuel cost of the commute ... the handwriting is on the wall ... banks and GSE's (government sponsored enterprises such as Fannie Mae and Freddie Mac) involved in mortgages are going to continue failing until the economy adjusts to what people CAN afford.
Which is a whole lot less than before because the chickens are coming home to roost in high oil prices exchanged for shipping our jobs offshore.
While the cost of everything has been escalating, the wages paid labor are stagnant or falling. We the people can no longer afford our previous lifestyle. And we don't know yet how low we are going to sink in this recession/depression.
And because there is no end in sight (or even imagined) to the real decline in wages ... this IS GOING TO GET UGLY before it is over.
We are not getting out of this one by printing more greenbacks or extending credit ... creating more instruments of debt aka instruments of death to an economy overburdened with them.
We need the production of goods and services having real value in global trade ... out of which labor earns a fair share to pay for a middle class life.
Anything else is smoke and mirrors.
The fact is that many new homebuyers have lost whatever equity they had even if they made reasonable downpayments with what were at the time reasonable terms ... and then have just been laid off by General Motors or whatever. The chaos being caused by the loss of the purchasing power of home equity PLUS the drop in wages -- both in the aggregate (to say nothing of the pain for the individual family) -- is a double-whammy body blow to the US economy.And what is so disheartening to me at least, is that our fearless leaders have not yet begun to talk about solutions that come close to doing the job of turning the situation around. They are still acting as if all we have to do is take a deep breath, print more money, and issue more instruments of debt to the very enterprises that created this mess ... and the US economy will correct itself on its own ... after they gutted it totally in their globalization schemes.
Kevin Phillips has been giving us chapter and verse on what's been going on ... so we can't say we weren't warned.
