Great Recession Leaving Tracks
At his rented home in Lehigh Acres, James Mould sells items that families in the area tossed out before moving
As the Great Recession/Depression II plays out, it’s leaving tracks almost everywhere imaginable. How this event impacts any particular person really depends upon how leveraged (indebted) one was and whether or not one was able to retain gainful employment.
Like the Great Depression of the late 1920’s, our current economic malaise is really a story of speculation and excessive leverage combined. Leverage when asset prices are rising can magnify gains but when asset prices drop, what was formerly a lever turns into a hammer and debt becomes particularly burdensome to service when the underlying asset price collapses and income declines. In addition to the trail of tears that individuals and businesses have encountered, the “hammer” also drives legal activity and as evidenced by New York State’s courts having closed 2009 with a record 4.7 million cases involving bad debts, failed business deals, real estate tax appeals and foreclosures. Apparently, the New York’s experience is representative of what’s occurring in other states around the nation as well.
Meanwhile homeowners in Florida who purchased at the peak almost feel as if they were victims of a Ponzi scheme as the real estate market has literally crashed in certain counties. Median home prices in Lee County Florida in 2007 were $ 278,000 and now the median is about $ 90,000; a drop of nearly 70%. Anyone who has seen such a dramatic drop off will simply choose to walk away and allow the mortgagor to foreclose. Apparently, the employment picture has dimmed so badly in this area, that parents were going to school with their kids to share in school breakfasts. The states that lead the boom (California, Florida, Nevada and Arizona) now lead the bust.
Bankruptcy attorneys and real estate agents specializing in selling foreclosed properties are experiencing a boon in business. There are some real estate agents who been able to cut exclusive deals with mortgage companies to sell their inventories of foreclosed properties and there are some investors who are snapping them up in all cash deals.
Without food stamps we’d probably be starving,” said Rex Britton, who has had trouble finding paving work and lives with his girlfriend, Amy Freeman.
Food security is becoming a concern for many people, including those who formerly enjoyed six figure incomes. Isabel Bermundez was formerly a high earning realtor who now has no cash income and she and her two daughters now survive on food stamps. In Florida, the number of people on with no cash income beyond food stamps has doubled. The growth in the number of people using food stamps is also mirrored nationwide.
Ignacio Sanchez, a day laborer who has a wife and children in Mexico, in the Queens freight train underpass where he found shelter.
Even illegal immigrants who work as day laborers have felt the heat. Many are homeless and hungry as the work they were formerly doing has dried up. This has spawned a reverse migration as many illegals have just gone back home. The thinking is that things are better at home than they are here.
Governments have not been exempted from the problems of individuals and businesses. The state of California is a prime example of a government in crisis as it seeks help from the federal government to close a $ 21 billion budget gap and threatens that it will have to cut social services if it doesn’t get help. The federal government’s fiscal condition is no better. It’s merely masked by the ability to run deficits and print money. Government solvency issues aren’t limited to problems here in the US as the Eurozone faces a debt crisis as well.
One thing is for sure, this is not your daddy’s relatively benign and quick “V-shaped” recession. Make no mistake, this is your granddaddy’s Great Depression and the shape of the letter that would accurately characterize it is an L; a recovery won’t come in sight until the excess is wrung out of the system. It will be a long time coming.
The best thing we can do as individuals is cut spending and, if necessary, secure one’s own food supply. I think this is particularly important for anyone getting food stamps. Those who find themselves dependent on government largess will soon find that there’s a limit to what the government can pay for as it encounters its own problems with solvency.