THE FUTURE OF CAPITALISM IN PERIL?

It's been a week since I posted anything, so I might as well start back with what is sure to be Barack Obama's top priority throughout his presidency - the economy. An article from Newsmax.com is stating: "The generally gloomy economic news is dramatically raising the stakes for President-elect Barack Obama, and for the future of capitalism."

This is pretty ominous sounding, especially since the guys at Newsmax.com seem to believe "the market" is some kind of magical place that needs to be left alone. They are the last people you would think would be hyping the importance of Barack Obama to the nation's economic health. Here's what prompted the statement.

In the article on home mortgages the author makes it clear that deliquent payments are rising, even for modified home mortgages, where the lender renegotiates the terms of a homeowners loan in an effort to keep them in the house. Things look especially bad when we look at the dollar amount in adjustable rate mortgages that are set to readjust.


As the graph illustrates, we are now in the middle of a small reprieve (of sorts) for adjustable rate mortgages. Modified loans were supposed to help deal with the millions of adjustable rate mortgages coming around the corner. Rising deliquencies in modified home loans are troubling because it tells us that "consumers" and "workers" - rather than "homeowners" - are in real trouble. The housing market may be a red herring.

With unemployment projected to hit 9% by the end of next year, more people will no doubt be leaving their homes - even with creative modified loan programs. All of this tells us that what president-elect Obama faces is nothing short of an economic catastrophe.

So, how bad is it?

Newsmax.com quotes Fareed Zakaria, editor of Newsweek International:

"For Obama to be remembered as a great president, he has to do nothing less than rescue capitalism."

Is it really that bad? I think so. I'll explain why in my next post.

- Mark