Weather Forecast: Is The Recession Just Beginning?

In a time when foreclosure rates are steadily rising, unemployment tops 10% and the federal administration is drawn into the market of saving business designated 'too big to fail,' are we seeing a crisis in its death throes or the coming maturity of the bastard child of corporate interest and government intervention? Given the current state of affairs in this nation the outcome is hard to forecast, although to refuse the possibility of a savage storm is to deny nature.

The wave of foreclosures that has swept from the Pacific to the Atlantic might be primed to make a more devastating return trip across the country, rather than dissipate in the shallow waters of the East Coast. The same factors that eroded the foundation of the residential mortgage sector is fast at work in the commercial real estate industry as well.

High-risk commercial loans causing negative amortization, a period where the mortgage payment doesn't cover the interest produced and the principal of the loan actually increases, are coming to term now and over the next few years, resulting in the foreclosure of large industrial properties and strip malls alike. The damage done to the economy from this development can only be imagined at this point, but once the swell is formed you can only clear its path.

Despite the severity of the matter, this is not the only cloud on Americas economic horizon. After amassing a substantial budget surplus over the past decades, Social Security (SS) will operate at a deficit of $10 billion for 2009 and $9 billion for 2010, a situation not seen since the 80's. Although payments will not be interrupted for recipients, the looming disaster for SS is the coming of age of baby-boomers, a demographic that will cause the system to pay out more benefits to retirees than taxation from the workforce currently provides, eventually depleting its reserves and becoming a financial liability for the government, requiring whatever administrations lap it falls in to make sweeping policy changes: disbanding the SS system, increasing tax rates or some compromise of the two.

In addition to these tropical storms approaching hurricane status, rumblings in the international marketplace regarding currency reserves could be the catalyst that starts a chain reaction. On the heels of Iranian President Mahmoud Ahmadinejad's announcement that Iran would conduct the calculation of its oil reserves in euros instead of American dollars, World Bank President Robbert B. Zoellick commented on the development, saying:

"The greenback’s fortunes will depend heavily on U.S. choices,” Mr. Zoellick said. “Will the United States resolve its debt problems without a resort to inflation? Can America establish long-term discipline over spending and its budget deficit?” (1)

The change in currency could signal a general distrust in the future and stability of the American economy, an outlook that many would be advantaged to consider rather than the fair winds and following seas that are commonly spouted from your evening weatherman.



(1) Andrews, Edmund L., September 28, 2009
"World Bank Head Sees Dollar's Role Diminishing," New York Times

Main Stream Media?

The usage of media blackouts seem to have gained in popularity as of late, replacing adamant denial with outright claims of ignorance. As reference, a recent undercover video of two individuals, posing as pimp and prostitute, received advice on how to evade taxes, legitimize an illicit business, obtain home loans, etc. from employees of the community organization ACORN. This incident would be small time at best, but considering that 40% of ACORN revenue comes from government funding, a person could easily expect headline news, although there was little beyond the broadcasts of Fox News.

The emphasis here is not on the short comings of competition or to lavish praise on a successful news outlet, rather the intentions of each side. Why would some groups ignore a breaking news story while others would trample one another to be first in line? The simple answer is motive: agencies tend to marginalize subjects viewed as damaging while approving of those that are profitable.

But here is where there is confusion: if an agency holds stock in 'truth,' the organization is obligated to follow it where it may lead, regardless of the implications it may reveal. So why is there hesitation on the part of some if a story is truthful? The answer of course is that the agency does not hold interest in 'truth,' but rather in advocacy. The honesty of a subject is often disregarded if the outcome is not in line with the agencies policies.

The end result is this: if we gain our information from sources that take pride in advocacy in lieu of honesty, the conclusions we make will be the culmination of ideological entrenchment as opposed to a firm grip on reality.