The Credit Crisis continues to cause havoc for the USA as well as the rest of the world. Since early 2007, the Credit Crisis has evolved into something far worse than most analysts could have imagined. We have seen sharp declines in property values around the world. Yet, the worst may be yet to come as so many negative factors are beginning to hit all at once. 

To date, many of the U.S. mortgage problems have been related to sub-prime and Alt-A (no income verification prime loans) deals. However, the prime, full doc mortgage loan borrowers are now beginning to default at very high numbers as interest rates begin to creep up, unemployment numbers increase, and as our national recession (or depression) continues to worsen.

In addition, the real near term combination of an economic depression, asset deflation, and currency hyperinflation have yet to hit with their full strength. Once those negative economic issues hit, then we may all experience more financial pain.

In 2008, one in ten American homeowners have defaulted on their mortgages or lost their homes in foreclosure to date. Let me write that one more time for you to better emphasize this point: 1 in 10 Americans in 2008 have defaulted on their mortgages or lost their homes. In addition, nearly 4 in 10 Americans now owe more than their homes are worth. As values continue to plummet, we may expect that 50% to 60% of all American homeowners will be upside down on their properties in the very near future.

By mid-2008, the "Federal" Reserve (they are neither "federal" nor do they have a "reserve") reported a estimated total of $14.8 trillion in U.S. mortgages currently outstanding. This is approximately 40% more than the entire national debt. This figure is also triple the total of all mortgages in America just 10 or 12 years earlier. 

In addition to the $14.8 trillion of combined residential and commercial mortgage loans outstanding, there is appoximately another $20.4 trillion in consumer and corporate debts outstanding. This figure means that mortgages represent just over 40% of all of the private sector debt problems in the USA. 

Wow!!! How bad will the economy get in the near term as the Credit Crisis continues it's descent toward the Abyss. Banks will need cash desperately in the near term so we will do our best to find the best REO foreclosure deals around the nation for all of our clients.

*** A Final Note. R.I.P. Michael Crichton. My favorite author of all time passed away yesterday at the age of 66. He was a brilliant man who wrote books like Jurassaic Park, The Andromeda Strain, Disclosure, State of Fear, and many other excellent novels. I have read no less than 15 of his wonderful novels in my life. He also created the T.V. show E.R.

Michael Crichton's extensive medical background made him one of the most knowledgeable writers out there. His work and life positively influenced me more than any other writer. I was humbled by how brilliant and passionate his writing skills were in his too short life. Rest In Peace, Michael Crichton.

Unsecured credit cards are potentially more risky to the American economy than "sub-prime" or "Alt-A" mortgage loans. Many Americans needed to tap into their home equity lines of credit in order to pay down their various consumer and business debts over the years. For example, homeowners pulled out an estimated $1.2 trillion from their home equity (cash out 1sts or 2nds) between 2002 and 2007.

Since the official start of the Credit Crisis in 2007, many lenders nationwide discontinued "stated income" cash out 1st or 2nd mortgage loans to consumers. In addition, many national lenders stopped issuing lines of credit (2nds) altogether, or they "froze" their existing customers' lines of credit so they could not access any more cash from their HELOC accounts.

As a result of less access to credit, many consumers are now delinquent on their existing credit card accounts. Some financial analysts are now saying that upwards of $850 billion in unpaid credit card balances are now delinquent. This number is supposedly moving closer to $1 trillion, which is equivalent to the total amount of the U.S. "subprime" mortgage market. 

Within the past year alone, CNN is reporting that consumers have charged more than $2.2 trillion worldwide in purchases and cash advances on credit cards alone. Credit card companies are now writing off close to 5% of all of their existing payments as "total losses". 

At present, the percentage of all credit card accounts in the U.S. that are at least 30 days late was up 26% from the previous year ($17.3 billion). Accounts that were more than 90 days late increased by 50% in just the past year. 

Much of this same performing on non-performing credit card debt was also securitized by many of our largest banks and investment banks on Wall Street. This securitized debt was sold off as investment pools to investors around the world just like much of our U.S. mortgage debt over the past decade or so. 

The major difference between non-performing credit card debt and non-performing mortgage debt is that there generally is NO COLLATERAL to protect against credit card losses. At least with a home mortgage default, the investor or lender has real estate as collateral against the debt. The lender can foreclosure on the non-performing mortgage loan, take ownership of the property, and sell the property for a profit or a loss. With credit cards, the lender may end up with zero so the risk of a major default wave for credit cards is potentially more troubling for our economy than any other segment. 

As consumer spending represents upwards of 2/3 of America's entire economy, we need those credit cards available in order to keep our economy moving forward. As the holiday shopping periods are now just around the corner, we need those credit card companies solvent or the economy may get even worse.

"This is the biggest currency crisis the world has ever seen", said Neil Mellor, a strategist at Bank of New York Mellon. Western European banks may be at even greater risk of failure than U.S. banks due to their exposure to America's toxic derivatives (Collaterized Debt Obligations (CDOs), Credit Default Swaps (CDS), Structured Investment Vehicles (SIVs), and other complex financial instruments) as well as their risky "emerging markets" investments.

Recent data from the Bank for International Settlements (they handle most of the derivatives exchanges in the world) seems to show that Western European banks hold most of the exposure or risk to the emerging market bubble. This same emerging market bubble is now bursting spectacularly along with the stock, bond, real estate, commoditities, and derivatives bubbles worldwide.

Listed below are various European banks, and their respective exposure to the emerging markets bubble as compared to their annual percentage of GNP (Gross National Product):

1.) Austria: 85% 
2.) Switzerland: 50%
3.) Sweden: 25%
4.) United Kingdom (UK): 24%
5.) Spain: 23%

As a result of the serious problems associated with European banks, many investors are pulling their cash out of these weakening financial institutions. In addition, many European investors are selling their UK Pounds and Euros in order to find "safer" alternative investments (gold, silver, etc.).

The flight to quality investments is causing many currency values worldwide to plummet in value. One currency that has dropped in value DRAMATICALLY in just the past day or two is the Australian Dollar. One of the articles that I write monthly for the nationally published Creative Real Estate Magazine is entitled the "Stats Page". Within the monthly "Stats Page", I list the most recent values of major currencies as compared to the U.S. Dollar. 

I always include the Australian Dollar within the monthy "Stats Page". It usually trades close to par with the dollar at an even $1 US for a $1 Australian. However, in just the past day or two the Australian Dollar has plunged to just below 60 cents per U.S. Dollar. Australia's Central Bank has tried to provide more liquidity to their financial markets in order to boost the value of their rampantly declining Australian Dollar as well as to improve the value of their equities market. 

Hopefully, the Aussie economy as well as the rest of the world's economy may improve in the near term, or it will be a turbulent time for many of us.

As I have written about for years, hyperinflation is here to stay primarily due to the significant amount of new dollars created each month in order to try to minimize the melting down of the financial markets worldwide. Billions and Trillions are being created "out of thin air" as a "fiat currency". 

A "fiat currency" is not backed by any other hard asset (i.e. gold, silver). It is backed by the full faith and guarantee of the issuing government. Ever since Nixon took the U.S. off of the gold standard back in the early 1970s, our national currency is not backed by gold or any other type of physical asset.

Since the Fed discontinued releasing their M3 data (the broadest measure of all currency in circulation) back in March of 2006, we do not know how much new money is created on a monthly basis. The more money in circulation, the less the current and future value of that same currency (hyperinflation).

A combination of a physical asset and a paper asset is something called COMEX gold. COMEX gold is a form of debt. It is a promise by one party to produce gold for the other party at a future date. A COMEX futures contract is only as valuable as the counterparty who insures the investment (similar to a Credit Default Swap (CDS)). If the counterparty is unable to produce the gold at a later date, then the COMEX gold contract is essentially worthless. 

Many of the largest sellers of COMEX futures gold contracts are many of America's largest insolvent financial institutions. As a result, many of these COMEX contracts may have little to no current or future value. Some people who follow the COMEX industry closely believe that there is not enough gold currently held in storage to cover the existing COMEX futures contracts. In fact, some analysts believe that there may only be 10% of gold available to cover the existing gold COMEX contracts. OOPS!!!

Paper assets are risky. Hard assets like physical gold or silver bars or coins are much safer as the Credit Crisis continues the massive unwinding of the Quadrillion plus (1,000 Trillion) in primarily unregulated derivatives worldwide. Other hard assets like REO property pools priced as low as 10 cents on the dollar seem to make more sense than anything backed by the "full faith" of either an insolvent financial institution or a government. 

In the past quarter, the number of foreclosures in the state of California increased 228% over the same 3rd quarter in 2007. The most amazing part of that 228% increase in foreclosures is that a high percentage of lenders are not even bothering to file the foreclosure paperwork on a timely basis as they can't even keep up with their existing foreclosure inventory. 

As a result of the increasing foreclosures in California and nationwide, banks will be willing to discount their REO properties even more in the near term. These "hard asset" investments are much better than anything backed by seemingly worthless paper!!!

The global financial meltdown continues at an escalating pace. All of these latest "bailout" plans which have passed within the past month are doing nothing to help the average American. In fact, the majority of these plans only help the same Wall Street firms (along with the "Fed")who primarily put us all in this financial mess to begin with many years ago.

The problem that we are faced with here in America is not necessarily a problem with "liquidity". In fact, the Fed and the U.S. Treasury are printing money as fast as they can in order to keep the markets from imploding sooner rather than later. 

Remember, the Fed stopped releasing their M3 data (the broadest measure of all money released in the U.S.) back in March 2006. As a result, we do not know how much new money is released each month. The more money that is released into circulation, the less the value of all of our existing dollars will be in the future. This eventually leads to hyperinflation where our dollars buy significantly less goods and services.

When you typically borrow money, you normally borrow the money as an asset. As an offset, you usually have an equal off-setting liability for that borrowed asset. In today's convoluted financial world, the "Fed" (a private entity), and other Central Banks around the world, are acting as a clearing house for toxic, worthless securities. 

For example, the Fed continues to increase the amount of funds lent to technically insolvent banks and investment banks through their anonymous Term Auction Facilities and the Term Securities Lending Facilities. These anonymous loans to many of the largest financial institutions in the world recently were supposedly as high as $480 BILLION PER DAY. 

As I have written many times in the past, eventually these anonymous loans will have to be paid back, or stocks or bonds will have to be assigned to the "Fed" as a form of an equity consideration for these loans. If and when that happens, the existing stock and bond holders equity and debt values will then be diluted and almost worthless at some point in the near term (if not already).

The Fed initially allowed financial institutions to assign their highest rated AAA paper (usually Mortgage Backed Securities or Collaterized Debt Obligations) as "collateral" for these multi-billion dollar loans. However, the Fed in recent times began to allow financial institutions to assign their BBB (almost junk bond status) paper as "collateral" for cash. 

In addition, the Fed may consider the paper to be valued at 100% of the total dollar amount. What is mind-boggling to me is that much of this debt may only now be saleable in the secondary markets worldwide for as low as 2 to 5 cents on the dollar. 

This financial "house of cards" may eventually cause more financial firms to fail in the near term as well as transfer more ownership of the U.S. financial markets into the hands of less and less companies worldwide. The melting down of the Quadrillion (1,000 Trillion+ Plus) worth of primarily unregulated derivatives (a combination of equity and debt) is what this financial crisis is really all about. 

You may expect our dollar to get weaker as time goes on partly due to the combination of massive government debt and the oversupply of too many dollars in circulation. Also, the lack of true equity and valuable assets for many publicly traded companies worldwide will eventually cause their stock values to plummet even further. I am usually an optimist in regard to life, but I also have been known to be a "realist" after researching this information for too many years.

According to NYU Professor Nouriel Roubini (probably the most accurate U.S. economic forecaster in recent years), he recently was quoted as saying this about the current state of the world's financial system: 

"The rich world's financial system is headed toward a meltdown. Stock markets have been failing most days, money markets and credit markets have shut down as their interest-rate spreads skyrocket, and it is still too early to tell whether the raft of measures adopted by the United States and Europe will stem the bleeding on a sustained basis. 

A generalized run on the banking system has been a source of fear for the first time in seven decades, while the shadow banking system, broker-dealers, nonbank mortgage lenders, structured investment vehicles and conduits, hedge funds, money market funds, and private equity funds are ALL at risk of a run on their short-term liabilities. 

The crisis was caused by the largest leveraged asset bubble and credit bubble in history. Leveraging and bubbles were not limited to the U.S. housing market, but also characterized housing markets in other countries. Moreover, beyond the housing market, excessive borrowing by financial institutions and some segments of the corporate and public sectors occurred in many economies.

As a result, a housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, and a hedge fund bubble are all now bursting SIMULTANEOUSLY".

Many of us are expecting a combination of hyperinflation in which currency values around the world buy less goods as time goes on (think Argentina in the late '80s and early '90s), and massive asset deflation (think Japan of the past 18 years) where stock, bond, real estate, and other hard assets (except gold, silver, and other valuable precious metals) drop in value dramatically. We need more soap in order to solve our bubble problems!!!

Yes, I am finally saying those words ("I told you so") to the rest of the world. For many years, I have been brave and informed enough to go out on a limb and make various statements about all sorts of topics. Some people may have disbelieved me as they didn't hear anyone else on T.V. make the same comments. Others hoped I was wrong, but they at least listened to my logical reasons why I had these opinions. 

In regard to the Credit Crisis, I was telling anyone and everyone who would listen that the derivatives market was going to unwind and "implode" several years ago. As far back as the early '90s, I was writing about the risks involved with the derivatives market. For example, I kept making references to Orange County, California's bankruptcy due to their investments in interest rate options derivatives. 

In addition, I wrote about the Long Term Capital Management (LTCM) hedge fund which imploded in 1998. At the time of the collapse of LTCM, they had about $3 billion in cash which tied up about $124 billion in derivative investments as well as an additional $1.25 TRILLION in off balance sheet investments. This one hedge fund almost took down the world's financial markets by itself. The "Fed" and other investment banks on Wall Street had to come to LTCM's rescue in order to prevent the meltdown of just about every major investment firm on Wall Street.

Back in August '08, I told many people that I believed the U.S. stock market's Dow Jones index would fall between 20% and 25% within a two week time period. I predicted that the collapse would begin the week of September 29th and would continue through the following week or two. Nobody believed me, and no other analyst made this same prediction on the mainstream media or anywhere else on the internet. It looks like I made another wise prediction based upon logical and rational thoughts!!!

As I have written for years in the nationally published Creative Real Estate Magazine, I believed that every major bank and Wall Street investment bank was technically insolvent. I warned many people to sell their stocks or real estate. Many people did listen to my dire warnings, and many continue to thank me to this day for encouraging them to liquidate their assets.

Several years ago, I said that both Fannie Mae and Freddie Mac were "glorified hedge funds" which were about to implode. I also said that WAMU, Lehman Brothers, Merrill Lynch, Bear Stearns, Downey Savings, Indy Mac, Wachovia, Morgan Stanley, the FDIC, and many others may "implode", or be taken over by the government or other entities. 

I also told anyone who would listen that AAA rated Wells Fargo Bank was on the verge of collapse partly due to their exposure to $80 billion in open HELOCs (2nds) primarily in "bubble" states like California, Nevada, Arizona, and Florida. The latest bank bailout plan ($250B) is giving Wells $25 Billion as a government "investment". The spin on this "investment" by the U.S. government is that it is "to help Wells make more loans to consumers". This is simply not true. It is to help them not go out of business. I also warned many stock investors to unload their stock investments in these same firms as I realized that many of the stock holdings would eventually be worthless.

About 5% to 10% of the people who I warned about the severity of the Credit Crisis did not listen to me as they (or their advisors) thought that I was "mistaken". I wonder what the value of their current investments are today after the melting down of the world's financial system? 

My birthday is October 29th. This is a major historical month and date as it is when the Great Depression officially began back in 1929. I have been an avid follower of the Great Depression since high school, and I believe the current meltdown will make the Great Depression seem like the "good old days". 

As the privately owned "Federal" Reserve and the U.S. government continue to "bail out" and nationalize most of our banks, insurance companies, automobile companies, airlines, and other multi-national conglomerants, we will all soon realize that our once capitalistic way of life has changed to a more socialistic way of life.

I will continue to speak my mind. If you don't like my opinions or viewpoints, then please do your own research and prove me wrong. I don't know all of the answers, but I am willing to stand my ground, speak my mind, and try to protect my family and friends unlike the vast majority of "Sheeple" who continue to drink the proverbial fluoridated "Kool-Aid" offered by the mainstream media's "real" news. 

We are now far off the 14,198 Dow Jones index peak within just the past twelve (12) months. Will we soon see Dow Jones index levels close to 50% of the 52 week peak numbers?

For more information in regard to how to prosper from the worsening, downward descending Credit Crisis, please buy my book on this same website!!! Also, my latest article (entitled "Armageddon? What To Do About It") was just released today in the national publication Creative Real Estate Magazine.

I am appalled in regard to how "dumbed down" the mainstream media makes important issues like health, religion, family, education, politics, and the Credit Crisis for most Americans. I have read many articles in recent years that also allege that most Americans read less books than ever before, and are more obese (due to worse nutrition and less exercise) than at any time in our nation's history.

There are approximately six (6) companies who control upwards of 95% of all forms of media in the USA today (print, internet, cable, etc.). These same business conglomerants also control some of the biggest medical, defense, finance, insurance, food & beverage, and other multi-national companies domestically and worldwide. For those of us who believe that there is more real news to be found on the internet, we tend to steer clear of mainstream media. If I am not mistaken, the viewer rates for mainstream print, cable, and regular television are now near all-time lows as well.

The Credit Crisis is NOT a "subprime mortgage" problem as many in the mainstream media make it out to be on cable television. In fact, outstanding delinquent "subprime" loans represent just a small fraction of the problem worldwide debt. 

The Credit Crisis is primarily due to the unwinding of unregulated derivative assets (1,000 Trillion Plus - Collaterized Debt Obligations, Credit Default Swaps, Structured Investment Vehicles, etc.). I have been writing this information for many years about the severity of this complex issue. Finally, more people are beginning to report this derivatives issue as well.

Americans today are potentially less educated and less knowledgeable than in recent years due to our eroding school system (34% national drop out rates in high school, & as high as a 75% drop out rate in some major urban areas). According to some recent studies, only 13% of all adult Americans currently have English and Comprehension skills which are considered "proficient".

Most U.S. employers who are searching for "skilled workers" value these basic skills for potential employees: 1.) Reading, 2.) Writing, 3.) Math, & 4.) Basic Computing. For many employers, they may value "critical thinking / problem solving skills" as the most important traits for people within their workforce. Yet, "critical thinking / problem solving" skills are also near all-time lows. What has happened to the U.S. school system as well as our once multi-talented U.S. population?

Please turn off the "idiot box" (your T.V.), and pick up a book today. Please be one of the few Americans who actually gets past chapter one in your book as the "average" American does not usually even finish the first chapter. Knowledge is power! 

With more and more information available to all of us on a daily basis, you may see the world in a whole new light for both you and your family. Please teach your kids how to read, write, debate, use computers, reason, and how to better use their analytical and creative young minds so their futures are much brighter down the road!!!

According to Reuters, U.S. banks are now borrowing more than $188 Billion PER DAY from the privately owned "Federal" Reserve in order to keep most of the largest banks and investment banks on Wall Street (the one or day who are now left) from running out of much needed capital.

The unwinding of the nearly 1,000 Trillion (a Quadrillion) of unregulated derivatives (Collaterized Debt Obligations, Credit Default Swaps, Structured Investment Vehicles, etc.) is truly the root cause of the ongoing Credit Crisis. This is NOT just a sub-prime mortgage credit problem. In fact, outstanding sub-prime mortgages represent just a small portion of the overall bad debt here in the U.S. as well as worldwide.

The recently passed Banker Bailout Plan ($700 Billion +) does little to help struggling U.S. homeowners or taxpayers. Marc Faber, a world renowned investment advisor, believes that the Bailout Plan may end up costing closer to $5 Trillion dollars rather than $700 Billion. I personally believe that it will end up costing significantly more than $5 Trillion in the near term. I hope that I am wrong about those numbers. 

One of my favorite economists and analysts over the past few years, Nouriel Roubini, had this to say about the Bailout Plan:

"No professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan. The Treasury plan is a disgrace: a bailout of reckless bankers, lenders, and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets close to a systemic meltdown".

The Credit Crisis may continue to get much worse in the near term as most banks and Wall Street firms are technically insovent as their debts far exceed their assets. They continue to borrow money from the "Fed" in order to stay alive. Many saavy bank customers, U.S. and foreign investment banks, and foreign governments are moving their money to safety as many people now realize the true severity of the worldwide financial crisis. 

Remember, I have been writing about the risks of the financial implosion worldwide for several years now. With my background in both Securities and Real Estate, I could see how risky the derivatives market was around the world. In my Credit Crisis book, I write about many of the reasons for the financial implosion as well as many ways to potentially profit.

As I warned my friends, family, and associates, I believed that Wachovia would collapse or be taken over just a few days after Washington Mutual. The "takeover" is effectively part acquisition & part FDIC bailout deal. I think that Citi is responsible for the first $42 billion in "losses", and the FDIC would cover the rest. 

It is a good thing that Citi is covering the first $42 billion in losses becasue it would have completely wiped out the FDIC of all of their remaining cash reserves to "cover" or insure the remaining $1 trillion plus in national insured savings accounts.

The controversial Bailout Plan was defeated as it should have been today. As a result of the defeat today, the Dow Jones index plummeted an unlucky 777 today. Hopefully, the markets may rebound in the future.