Welcome to Endrogado Nation…
West Camille Street in Santa Ana, California, has been ‘devastated,’ says the local paper.
House prices rose from an average of US $182,000 to over US $600,000 in just five years – driven higher and higher by the easiest credit conditions ever to fall on planet earth. Lenders targeted Hispanic families, who saw home ownership as a step towards middle class status.
Alas, not every step takes you in the right direction.
Most of the mortgage loans were of the adjustable rate variety and most of the houses they were used to buy had prices that were also adjustable – but in the opposite direction. Now, prices are said to be falling by 10-12% per year… with many of the houses on West Camille in foreclosure. California has 6 of the top 10 foreclosure metropolises – with Stockton, Modesto and Merced particularly hard hit.
“Bank Owned” is a polite way of describing the new status of the foreclosed houses…while a Spanish word is most often applied to their former owners – endrogado (from ‘to drug’ oneself).
Endrogado means, in this context, hooked on debt. It describes the poor homeowners of West Camille Street… and much of the rest of the nation… from the most modest family, to the U.S. federal government itself.
David Walker, Comptroller General of the U.S. Treasury, has read our book, Empire of Debt. We know because he told us so. And now he’s using some of our own Daily Reckoning ideas to describe the jam the nation is in. We have to learn from history, says he… particularly the history of Rome, which has similar themes to those we see in today’s news. He goes on to say that it is as if the whole country were on a “burning platform” of fiscal deficits, under-funded healthcare and retirement programs, and military commitments far beyond our means.
The new capitalist gods must love the poor – they are making so many more of them. From the doublewide in Bakersfield to the banks of the Potomac and everywhere in between the country is ‘endrogado.’ The people who took out the ARMs now have barely a financial leg to stand on. And the people who stuck the ARMs to them are going broke. Today’s news brings word that Atlanta’s largest mortgage provider, Homebanc Mortgage (NYSE: HMB), has filed for bankruptcy.
Still, the endrogado ones are becoming even more endrogado. Retail sales in July went up! And federal spending races ahead.
But don’t worry. Credit expansions are followed by credit contractions. Debts get paid off, defaulted, written off, written down, worked off or inflated away. All debts go away…
The Daily Reckoning Australia