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Deindustrialization and Home Foreclosures
Carl Bloice, Black Commentator
Economic opportunity, said Ben Bernanke, chairman of the US Federal Reserve ‘should be as widely distributed and as equal as possible”. That was the first of three principles he spelled out for economic policy in a recent speech. Further, he said, ‘economic outcomes need not be equal but should be linked to the contributions each person makes to the economy’ and ‘people should receive some insurance against the most adverse economic outcomes, especially those arising from events largely outside the person’s control.”
If there are people in need of the third of Bernanke’s principle it is the people of Detroit. They haven’t been hit by a natural disaster. Rather, they have fallen in the path of an economic tsunami of devastating proportions. Right now they are being hit hard by the forces of globalization and technological change. The city of less than a million people, over 80 percent of who are African American, in a metropolitan area of over 4.5 million, has become something like the epicenter of the crisis of deindustrialization adversely affecting black communities around the country.
Last week the city was delivered a new blow when DaimlerChrysler announced it will cut 13,000 jobs in North America. …This is only part of the bad news visited upon the city over recent months.
In 1996, metro Detroit was cited as having the lowest home foreclosure rate of any of the large metro areas surveyed in the country. Over the last three months of 2006, the Motor City led all U.S. metro areas in the percentage of homes entering foreclosure, at more than four times the national average and 43 percent larger than the same period in 2005. Over the course of the first two months of this year, the Detroit- Wayne County home foreclosure total more than doubled reaching the nation’s highest for a metropolitan area – one new foreclosure filing for every 124 households
Wayne County has moved past Greeley, Colorado to recording the highest rate of home foreclosures among major metro areas in the nation – seven times more than the national average.
(26 Feb 2007)
The second Great Depression
Mike Whitney, Online Journal
The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.
Congress is now looking into the shabby lending practices that shoehorned millions of people into homes that they clearly cannot afford. But their efforts will have no affect on the loans that are already in place. One trillion dollars in ARMs (adjustable rate mortgages) are due to reset in 2007, which guarantees that millions of over-leveraged homeowners will default on their mortgages putting pressure on the banks and sending the economy into a tailspin. We are at the beginning of a major shake-up and there’s going to be a lot more blood on the tracks before things settle down.
The banks and mortgage lenders are scrambling for creative ways to keep people in their homes, but the subprime market is already teetering and foreclosures are on the rise.
There’s no doubt now, that former Federal Reserve Chairman Alan Greenspan’s plan to pump zillions of dollars into the system via “low interest rates” has created the biggest monster-bubble of all time and set the stage for a deep economic retrenchment.
(22 Feb 2007)
A Gathering Perfect Storm?
David Chapman, 321 Gold
…Recall that Iran now accepts only euros for oil and gas and is actively encouraging others to follow. On March 21, 2007 Iran will no longer officially accept US dollars for any transactions. Iran has entered into discussions with Russia to form a gas cartel. Russia and Iran are the world’s number 1 and number 5 gas producers, and they are numbers 1 and 2 in natural gas reserves (holding possibly half of the world’s natural gas reserves). The currency moves threaten the US dollar’s position as the world’s reserve currency, and a cartel would be anathema to US interests in the region.
…An explosion in the Mid East would be a shock to the markets, as the markets do not appear to be taking the possibility into account. The markets wavered slightly on February 22 when Iran failed to meet UN deadlines to suspend uranium enrichment. Naturally, oil and gold prices jumped. Granted, we are nowhere near an actual conflict and we suppose there is a chance it may not happen, but the build-up and the sharply rising rhetoric from the US (coupled with heightened denials) are saying that something is going to happen. All it needs is a spark.
When it happens, what will be the response of Russia and China? They have billions of dollars of interests in Iran and will not idly stand by, faced with the risk of the world’s fourth-largest oil producer also falling into the US sphere. That is clearly against China and Russia’s interests particularly China with their huge energy needs.
A US housing market in sharp decline; rampant speculation in a bubble-like mania in China; growing clouds of war over Iran. These are the elements of the gathering “perfect storm.”
(24 Feb 2007)
This is the conclusion of an article which explores several reasons for economic instability. -AF
U.S. economy leaving record numbers in severe poverty
Tony Pugh, McClatchy Newspapers
WASHINGTON – The percentage of poor Americans who are living in severe poverty has reached a 32-year high, millions of working Americans are falling closer to the poverty line and the gulf between the nation’s “haves” and “have-nots” continues to widen.
A McClatchy Newspapers analysis of 2005 census figures, the latest available, found that nearly 16 million Americans are living in deep or severe poverty. A family of four with two children and an annual income of less than $9,903 – half the federal poverty line – was considered severely poor in 2005. So were individuals who made less than $5,080 a year.
The McClatchy analysis found that the number of severely poor Americans grew by 26 percent from 2000 to 2005. That’s 56 percent faster than the overall poverty population grew in the same period. McClatchy’s review also found statistically significant increases in the percentage of the population in severe poverty in 65 of 215 large U.S. counties, and similar increases in 28 states. The review also suggested that the rise in severely poor residents isn’t confined to large urban counties but extends to suburban and rural areas. ..
(22 Feb 2007)
