Obama Gets Mixed Stats

There is no loyal American who is not anxious for this economy to bottom-out, stabilize and begin to move forward toward prosperity. Liberals want national economic success for all the same reasons conservatives do except for their unshared desire that a good or at least better economy gives Obama a better shot at reelection. Unfortunately for our President the ugly face of economic reality is already nose to nose with him. With his popularity slipping and his programs floundering, the last thing Obama needed was more bad news and particularly bad news that carried no stigma of political partisanship or governmental bias. Before discussing the bad news it is appropriate to acknowledge what could be good news.


The Obama Administration released a statistic indicating that "only" an additional 250,000 American lost their jobs in July. The resulting national unemployment figure actually dropped to 9.4%. Three facts must be considered before this data can be truly classified as "good" news. First, it is a government release and is therefore immediately suspect. Second, the calculation of unemployment rates are complicated and subject to government "balancing" factors. Third, we know that citizens who have exhausted their unemployment benefits fall off the list of the unemployed regardless of their real work status and that also in this unreported sector are part-time workers looking for full-time jobs and those who have simply stopped all employment seeking efforts. It is a strange that the loss of 250,000 jobs in a month could ever be "good" news but it could be just that and the White House will promote that interpretation.







The bad news. The Deutsche Bank released a most pessimistic outlook for the American housing market. The end result of this analysis was that the economic image of the American home has "morphed from piggy bank to albatross". The figures disclosed that a full 48% of all United States home owners would by January of 2011 possess a house that was worth less than the principal amount due on the outstanding mortgage lien. A further breakdown projected that this "albatross" would apply to 46% of all prime jumbo loan homes; 69% of all sub-prime loan homes; and 89% of all adjusted rate option homes. These bank number-crunchers also reported that 90% of all homes in Florida, California and Las Vegas would fall into this negative asset valuation by 2011. The implications are vast and not attractive.





The ability to market a home to a value that would cover the lien, the closing costs and put a profit in the pocket of the seller would fall drastically. Refinancing would be impossible without the owner contributing cash to the transaction. The concept of "buying" a home would in reality become an exercise in "renting" a house. New home construction would again grind to a halt as the inventory of available pre-owned properties, title now held by the mortgage lender, become increasingly available. Foreigners with Euros, Yen or Yuan to invest expand their economic influence in America. Obama, who will still be in office in 2011, will invent a federally funded [that means paid for with higher taxes] primary home bailout by which houses are reappraised and the shortfall between mortgage debt and appraised value paid by Washington with appropriate reductions by the mortgage company and a complicated potential homeowner repayment program.





That albatross just became a noose.