"Sub-prime" is a misnomer

The crisis is not about “sub-prime” mortgages. It’s about ALL mortgages taken out during the last five years. The media focuses on “sub-prime” mortgages in order to maintain the illusion that the crisis is restricted to one segment of society. Media companies must do this in order to keep their investors happy.

The whole problem comes down to two simple factors that feed on each other with increasing victiousness, like a snake swallowing its tail.

1. As home prices continue to fall, people across the spectrum will owe more than their houses are worth. Therefore people will default, regardless of income, credit score, interest rate, "prime" mortgages, or "sub-prime" mortgages.

2. Mortgage securities of all types will become increasingly worthless. The mortgage market must have investors, and investors will not touch securities that cost more that the value of assets, since that would be throwing money away. (Literally.) Thus, home prices will continue to fall, which will kill the market further.

3. Result: total meltdown.

That’s it in a nutshell. Borrowers can’t (or won’t) repay loans, and investors won’t give them loans anyway.

Everyone will be affected, even if they took out NO mortgages. Investors who bought worthless securities include pension funds, municipal governments, and so on. Even if the government decided to let the big banks fail (which the government would never do) the government would also have to let pension funds and many mutual funds fail. There is no escape.

“Sub-prime” mortgages began to slow down in 2005. Banksters kept the game going by offering second and third mortgages on existing properties. Only 25% of mortgages are formally “sub-prime." However 75% of all borrowers (during the last five years) are “sub-prime.” Income and credit score are irrelevant. It’s a question of owing more than a house is worth.

Second mortgages are considered “prime,” which is nonsense. They have high interest rates. Nearly every large bank in the nation offered second mortgages up to 100% of a home’s value (!!) with no income or asset documentation. The banks did this to get in make a quick buck, and pass the worthless loans on to other banks farther up the food chain. Second mortgages were best sellers at CITI, Wells, WAMU, Chase, National City and Countrywide. These loans are now completely worthless, because housing prices have dropped. Wells Fargo owns $84 billion of these worthless loans, but the media doesn’t count them in the “sub-prime” crisis.

By the way, the media would have you believe that most people took out “sub-prime” mortgages to buy houses. Not true. Most “sub-prime” mortgages were refinances of existing mortgages. People refinanced to get cash. They knew the housing bubble could not continue forever, but they decided to "cross that bridge when we come to it." They took mortgages at a 50% debt-to-income ratio, meaning 50% of ALL their income goes to pay their mortgage. (Before the Fed launched the housing bubble, the maximum allowable debt-to-income ratio was 25%.) These loans put borrowers in their graves the day they signed their loan docs. Borrowers used their houses like ATM machines.

So– yes – borrowers are partly to blame, because they took the bait.

Unfortunately borrowers will take the bait again when banksters put ALL the blame on borrowers. Defaulters will live on the street, while greedy banksters will get bailed out.

Borrowers may have used their houses as ATM machines, but banksters used the ENTIRE NATION as an ATM machine.

Put another way, drug addicts may be responsible for their predicament, but drug pushers are more responsible.

WHO CAUSED THIS?

The blame falls TOTALLY on the Fed, which dangled the bait after the dot-com meltdown in order to keep Wall Street happy. The Fed was the drug pusher on the playground.

This is exactly what the Fed did when it caused the Great Depression. Credit was made easy. Development took off, causing a housing bubble, a stock market bubble, and an industrial bubble. Then – BANG – the Fed tightened interest rates and reduced the money supply. Banks failed. Famine set in. A nation of credit addicts went through the agony of withdrawal.

We should have killed the pusher back then. We should have killed the Fed. But we didn’t. And we won't do it now. The Fed will continue until the debt-addict (the USA) is dead.

There are zillions of “prime” first mortgages that are part of the crisis. “Pay-Option ARMs,” for example, allowed borrowers to buy million-dollar houses with payments of a few thousand dollars per month. This was necessary in high-price districts like the Bay Area of California. Wamu, Countrywide, Wachovia, IndyMac, Downey and Bear Stearns were among the largest Option ARM lenders. These option ARMs are now truly worthless. No investor has bid on them for months. 75% of Option ARM borrowers make the minimum monthly payment, and many borrowers have second mortgages on top of their option-ARMS. They are doomed.

On top of this is the fact that banks will find it increasingly difficult to foreclose, since no one knows were the mortgage notes are. Again, this will make investors stay away from the mortgage market completely. Game over.

CAN THE GOVERNMENT DO ANYTHING?

No. The government can only slow the meltdown slightly. If the U.S. government tries to intervene, investors all over the world will sue the U.S. government. The government can only resort to bailouts and emergency stop-gap measures, but the dam is crumbling all over.

The only investors who will not be hurt are those like Goldman Sachs that are tied directly into the Fed, and knew the meltdown was coming. Perhaps they even engineered it so they could buy the nation for pennies, as insiders did during the Great Depression. You see, the meltdown will also affect commercial industries, which Goldman Sachs will snap up for pennies on the dollar. Your masters will continue to be the Fed and Goldman Sachs, which are essentially the same thing.

Congress people get a whopping pension for life. They’re comfortable. All they care about is protecting Israel. The Bush regime is taking about freezing interest rates on some loans, but this won’t affect the meltdown, since people will still owe more than their houses are worth. Even if their payments are temporarily "frozen," they will walk.

There is no way to revive the housing bubble, since doing so would require massive infusions of capital from the Fed, which means more debt and an even bigger meltdown. Whatever the Fed does from now on will make matters worse.

Today the Fed lowered its interest rate a quarter point. This will let the USA survive until the end of the Christmas season, but after that, the USA will be in critical condition. Each lowering of interest rates is another shot of adrenalin. Eventually the body can take no more. The body dies. Flatline.

The only thing that would work is to dump the Fed, and take back control of our money. Since this will not happen, the government will stage another 9-11 and take us to war, with martial law, rationing, and so forth.

It does not matter if the U.S. military opposes another 9-11. Israel will happily provide the nuke. A false flag will be effortless.

Unlike World War II, however, the USA will not win WW III.

The only consolation is that when the USA is gone, Israel will be gone too.