When reminiscing about the almost forgotten post 2007 decline, many – with a feeling of relief and nostalgia – consider the 2008 decline to have been the perfect storm – emphasis on “have been.”
Aside from a few bad memories and lessons to be learned, that storm left fertile ground for tons of green shoots to sprout and propel the major indexes to new recovery highs.
To the dismay of Main Street, the green shoots seen on Wall Street haven’t really carried over to the average consumer just yet. Even though it’s not visible on Wall Street, there are repercussions. You don’t even have to look too hard to find them.
The Bureau of Labor Statistics (BLS) reported that the real number of jobless workers (called U-6) is 17.5 percent. As long as you are one of the lucky 82.5 percent, this number may not mean much. But even banks are feeling the consequences of high jobless numbers.
Due to falling real estate prices and falling incomes, fixed-rate loans made to people with good credit account now for nearly one third of all foreclosures. This is more than just an unfortunate statistic. Courtesy of our selective memory and the recent rally, we may have forgotten that toxic assets, or bad real estate loans, were the root cause of the 2007 – 2009 collapse. If the root problem continues to worsen, how can the overall situation improve?