MarketWatch has an article looking at the fact that many Americans are one or two paychecks away from financial ruin:
“A MetLife study released last week found that 50% of Americans said they have only a one-month cushion — roughly two paychecks — or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs.
And it’s not just low-income earners who would find themselves financially challenged. Twenty-nine percent of those making $100,000 or more a year said they would have trouble paying the bills after more than a month of unemployment.
Meanwhile, more than four in 10 respondents told pollsters in a recent Pew Research Center study that job-related issues were the nation’s most important economic problem.
“Since October, mentions of other major economic issues have declined, as the public is increasingly focused on the job situation,” according to the Pew study.
Since July, the study noted, there was been a striking spike in the numbers of families making $100,000 or more who said it was difficult to find local jobs — 73% compared with 40% eight months ago.”
Read the above carefully. 1 in 2 Americans are 2 paychecks away from massive financial trouble. 1 in 4 would be on the financial edge after 2 weeks only. These are fully employed people. This is what I talked about in the silent depression that many are facing. If you look at the 8.1 percent headline unemployment number things don’t look so bad. But when you dig deeper into the data, you realize something is amiss. In fact, the study above highlights what many are feeling. Things are much worse than we are being led to believe. Why else would the Fed be printing money to the tune of trillions of dollars? You will also see in the survey that those with relatively good incomes are also worried about the economy. Over 1 in 4 with incomes of $100,000 said they would have trouble paying their bills after one-month of unemployment. How can that be you say? Well think about the bubble homes here in California. Say you bought a $500,000 home in California and make $100,000. You went no money down on some toxic mortgage that is now recasting. What does your balance sheet look like?
Monthly Net Pay: $6,022 (Married with no kids)
PITI: $3,000 to $3,500 depending on interest rate
Let us assume each person makes $50,000 a year. What if one person loses their job? That is it. You are now in the negative with only your PITI! What about your car payment? Food? Health insurance? Utility bills? You get the picture. And now that we know the bigger picture of the California employment situation, you can see why prices will now be falling because of more historical measures like the health of the economy instead of low interest rates.
Let us take a quick glance at the current situation:
February 2009 California employment data:
116,000 jobs lost in month (biggest number in 19 years)
1,950,000 million unemployed (up 824,000 from 1 year ago)
768,762 collecting unemployment insurance (up from 480,504 from 1 year ago)
You tell me how this is good for the housing market? The government through bailouts, fiscal stimulus, monetary programs, and every other imaginable bailout has committed over $9 trillion to the cause. You know how many $50,000 a year jobs we can buy with that for one year? 180,000,000. Even with the $1.2 trillion committed by the Fed with the TALF and buying treasuries to lower the interest rate, we could have literally bought 24,000,000 jobs at $50,000 for one year. We could have put everyone back to work for the price of making mortgages go back down to 4% and giving Wall Street another crony capitalist present. Money well spent right?
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