Faster Inflation May Unleash `Financial Tsunami'

[marmar]

from Bloomberg:



Faster Inflation May Unleash `Financial Tsunami': Chart of Day

By Mark Gilbert

June 24 (Bloomberg) -- Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a ``financial tsunami,'' according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida.

``Whether it is anecdotal or statistical evidence, I see inflation everywhere, and this is where the financial tsunami cometh,'' Sedacca wrote in a report published yesterday. ``A battered, over-indebted consumer, if forced to retrench, could create even more problems for the banking system as loan delinquencies would begin to rise even further. All sorts of delinquencies are rising. This is now a systemic issue.''

The four-part chart of the day shows how U.S. householders are struggling to pay their home loans. The top white chart shows the surge in delinquencies on all mortgages, while the yellow one measures foreclosures. The green chart tracks delinquencies on subprime adjustable-rate mortgages, and the purple one shows subprime mortgages that are 60 days behind on their payments.

Sedacca wrote that current financial-market conditions remind him of ``someone standing on a lonely beach, armed with only a small bucket, trying to stop a rare tsunami that hits the shores. It is how I feel about our markets and the tools being utilized by the Federal Reserve, the European Central Bank and other regulatory bodies. They are overmatched for what they are facing and, worse yet, they helped create the mess in the first place by being far too easy with money and debt creation.''


http://www.bloomberg.com/apps/news?pid=20601087&sid=a8j2MuFdqA3s&refer=home

[closeupready]

1. That's okay. We'll just bring back debtor's prisons, so

that credit card issuers can get paid back, even if it takes 25 years. Personal responsibility and all that. :) :sarcasm:

[no_hypocrisy]

2. Not to forget that many consumers were living for years on credit, money that they didn't have

except on paper. They now risk defaulting on their home loans, their mortgages, as well as credit card bills. What a cluster fuck.

[Warpy]

3. Easy access to debt was substituted for wages

since the OPEC inflation of the 70s. Wages have been actively suppressed and unions actively destroyed.

You can starve the peasants for only so long before the whole system breaks down completely. When servicing the debt eats into subsistence, your economy is basically fucked. There is nothing you can do individually but try to survive while the men in suits who created the whole damned mess sit around with their thumbs up their asses trying to figure out what to do about it.

We've been here before.

[Mountainman]

7. That's true for me. Take all your monthly debt payments and divide by your montly gross income.

anything over 40% is too high. Lenders look for 28% to 36% for home loans. Now I plan to pay off everything but my mort age in the next two years.

I use to look at it like this, could I squeeze in another payment with my income.

[indepat]

4. But, but, but inflation has been benign all throughout junior's reign: how could it now be a

problem? :D

[Virginia Dare]

5. And the tax cuts are still workin'....n/t

[enlightenment]

6. And the super rich are still getting richer . . . n/t

[applegrove]

8. Yup it is pretty scarry. With house prices falling and wages falling in real terms, the high cost of

food & gas is even more of a burden to people. It is like half the economy is in a depression while the other half is in an inflation. Maybe there will not be the supply shocks of the 1970s. But right now inflation is being fought by working people while the rich get a free ride.

[aint_no_life_nowhere]

9. We just need more trickle down from John McCain to trickle down from above

If tax cuts for the rich are so great, instead of cutting their taxes further let's just stop taxing the rich altogether. Why not just start taking all the money away from the middle class and donating it to the wealthy so that it can trickle back down? We can have a trickle down extravaganza, a mondo trickle down orgy. That'll fix everything. Yeah.