More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

“Deflation is set in stone” is what you read sometimes. The argument goes roughly like this: The fiscal and monetary injections amounting to a few trillion are no match for the dozens of trillions of wealth destroyed by the crisis. The underlying logic is that as long as government programs are dwarfed by wealth destruction, only deflation can result.

This sounds logical, but it is not. In particular, some things are badly mixed up. Actually, inflation could probably result with government support being much smaller than wealth losses.

First, real estate, stock, and risky credit were overpriced at the onset of the financial market crisis – their valuations were not backed by an equivalent stream of future production. Note that wealth is nothing else than a claim on future production. Therefore, pre-crisis levels of asset prices did not reflect actual wealth – in fact, there was no chance that these overpriced assets could ever have been converted into future production at prevailing prices. Expectations reflected in asset prices were exaggerated. In order to balance future aggregate demand and supply of goods and services, either consumer prices would have had to rise, or asset prices would have had to fall. The latter happened.

Enter the government. By reinflating prices of worthless assets above their intrinsic value, false wealth is restored. Furthermore, by backing AIG and honouring bets which were not honourable from the beginning, even more false wealth is created. Trying to restore exaggerated expectations is probably a bad idea and could turn out very inflationary.

The second flaw in the introductory reasoning is that apples are compared to oranges. A dollar in wealth (losses) is not the same as a dollar in money supply, which is not the same as a dollar actually spent for goods or services. In particular, wealth and money supply are stock variables, while spending is a flow variable. Simply aggregating the headline amount of government measures and comparing them to estimated wealth losses is therefore useless at best, if not misleading, in order to assess future inflationary tendencies.

In the ATCA briefing, "The Invisible One Quadrillion Dollar Equation" published in September 2008 we discussed the main categories of the quadrillion dollar derivatives market as quoted by the Bank for International Settlements in Basel, Switzerland. Since then the quantum has grown significantly in certain crucial categories and the latest revised numbers follow:

1. Listed credit derivatives stood at USD 542 trillion, about the same as before; however

2. Over-The-Counter (OTC) derivatives stood in notional or face value at USD 863 trillion (UP +44%) and include:

a. Interest Rate Derivatives at about USD 458+ trillion (UP +16%);
b. Credit Default Swaps at about USD 57+ trillion (DOWN -1%);
c. Foreign Exchange Derivatives at about USD 62+ trillion (UP +10%);
d. Commodity Derivatives at about USD 13+ trillion (UP +44%);
e. Equity Linked Derivatives at about USD 10+ trillion (UP +17%); and
f. Unallocated Derivatives at about USD 81+ trillion (UP +14%).
The myth of the single bubble behind The Great Unwind -- manifest as the global credit crunch -- has essentially been dumped in the last few months and subprime mortgage default, a USD 1.5 trillion challenge within the USD 5 trillion mortgage based assets envelope, is seen as a component of a much larger overwhelming global crisis with unprecedented scale, speed, severity and synchronicity. The global crisis has wiped a staggering USD 50 trillion off the value of financial assets — currency, equity and bond markets worldwide — last year, according to the Asian Development Bank.

The truth that there are as many as "Eight Bubbles" [ATCA] at play and in the process of bursting together is understood to a greater extent now than in the past. We have gone from being able to “rescue the world” with less than USD 1 trillion in October 2008 to USD 11.6 trillion commitments in the US alone along with a further announcement of USD 1.2 trillion of quantitative easing by the US Fed in March 2009. There is a realisation worldwide including the G7 + BRIC + MISSAT that this is a USD 20 trillion problem and growing. As time goes by, the full extent of the collateral damage from the Quadrillion Play and 8 Bubbles burst is being revealed.

1. Subprime Mortgage linked Loans & Assets (USD 1.5 trillion) within Mortgage backed Assets (USD 5 trillion);
2. China, India, Eastern Europe and other Emerging Market Loans (USD 5 trillion);
3. Commodities (Commodity Derivatives at about USD 13 trillion);
4. Corporate bonds (USD 18 trillion);
5. Commercial (USD 22 trillion) and Residential property (USD 45 trillion);
6. Credit Cards Outstanding Debt (USD 4.5 trillion);
7. Currencies (Foreign Exchange Derivatives at about USD 62 trillion); and
8. Credit Default Swaps (USD 57 trillion) as a subset of all Derivatives (USD 1,405 Trillion).

So, how much money are we talking about here? Well, the latest figures I have show Global GDP is running a little more than $60 trillion a year, so $1.4 quadrillion would equate to about 23 times world GDP (they show $45 trillion and 31 times GDP... I do not know which is correct - either way is unbelievable).

HSBC faces a meltdown at its US credit card operations where around $50bn (£34bn) has been lent to people with poor credit histories, say analysts.

Write-offs at the credit card arm of HSBC Finance Corporation (HFC), formerly Household, a sub-prime lender, could double to $10bn in 2009, according to brokers. Fears are growing that the bank could be forced to ask shareholders for more cash, on top of the £12.5bn it raised during its recent rights issue designed to bolster its balance sheet.

Analysts at Société Générale said that the strong take-up of the share offer did not necessarily "translate into smooth sailing for HSBC over the next couple of years" as it faced the prospect of rising bad debt and sour loans. The bank is not yet out of the woods, added SocGen.

Of particular concern are loans outstanding at HFC's credit card business, which stood at $49.6bn last year - representing around two-thirds of all HSBC credit card loans. The HFC credit card operation wrote off $5.4bn in bad or doubtful loans in 2008, according to the annual report, but made a profit of $520m. But analysts say that the profit will be wiped out this year and the offshoot will plunge into the red.

HSBC refused to comment on the speculation but said the HFC provisions "would be impacted by factors such as US unemployment and wage growth".

There is no suggestion that HFC's problems will push HSBC as a whole into loss - its businesses outside the US are highly profitable. But the bank, led by Stephen Green, has admitted that its purchase of Household for $15bn in 2003 has destroyed about $10bn of shareholder value.

I'm living with a friend right now who bought the current house at foreclosure auction last year for $200,000. It was valued by several agencies and the government for around $300,000 at the time. Currently, the price is up 10% to about $330,000. The East Durham area in which I reside is up 4-5% YOY still. Our unemployment is quite low (≈8%) with other districts even lower around 4-5%. After graduation, I'm seriously considering getting a part-time job to live around here, hoping things pick up. Overall, this is a great place to live - walkable and bikeable communities (largely), local organic food, good weather, good water supply, relatively low-density, good land, fairly stable economy.

Falling house prices mean that two million households have either negative equity, or too little equity to finance a house move, lenders have said.
...
With lenders still restricting their lending because of a shortage of mortgage funds, few are currently prepared to accept a deposit of only 10% from anyone buying a house...only 106 mortgage deals requiring a deposit of 10% or less, while more than two thirds of the 1,485 deals available asked customers to put up a deposit of at least 25%.

Would you be able to put down 25% towards a house?

I can put up 100% of the price, if you will sell it to me for $1. The problem of course is that the Banks won't sell the properties at the Market value, only the Make Believe value they have on their balance sheets.

Financial expert and investor safety advocate Martin Weiss is most critical of all. He calls bank stress tests “FLIM-FLAM” in accusing Washington of hiding the true condition of the nation’s 19 largest banks.

Key economic indicators like GDP contraction and unemployment are far worse than stress test parameters. “Our own government is clearly cooking the books — using (false) criteria to deceive you; hoping you’ll trust banks that are clearly hanging by a thread.”

On May 4, they’ll announce the results — jerry-rigged to present an illusion of solvency, but clearly a deceptive lie. The economy is sinking, not stabilizing, let alone recovering. The administration is bailing out bankers while wrecking the economy and millions of households. Why isn’t Washington addressing the tough questions, he asks. Because the answers have them “terrified,” so they play for time while home foreclosures are exploding, factories are sitting idle, consumption keeps falling, yet they hope conditions will improve.

No one asks:

what if states and cities can’t provide vital services;
hospitals have to close down “due to disruptions in insurance payments;”
“supermarket shelves are emptied because trucking companies can’t get short-term loans to stay in business;”
utilities “are crippled as the crisis kills the revenues they count on from corporations;” and
“soaring deficits drive interest rates sky-high and gut the dollar, driving the cost of living through the roof.”
What if one day we discover America is no longer America. What if we realize that day is today.

TRIPLE all the TARPs & TALFs etc...etc..? It isn't possible.

I'd like to look a bit forward, if I may, & discuss the next 2 punches in the face our economy is about to suffer. In the last 12-18 months we took a massive punch to the face called "subprime" (that's what the MSM calls it...I call it RMBS). The next punch is comming at us now & that is CMBS (Commercial Mortgage Backed Securities)...Followed by credit card debt.

Sooooooo, in the next 12-18 months we're going to have to TRIPPLE all the bail-outs & stimulas packages?

TRIPPLE all the TARPs & TALFs etc...etc..? It isn't possible.