A Social Contract to Write Down $163 Trillion?

“Deleveraging” is all the rage in economic cirlces.  It is a mystical process by which you take shares of stock or financial issues invested in and change their value.  What once was worth $200 dollars a share, get written down or written off to $2 bucks….because no one thinks it might be worth more than that.

For those that don’t know re-valuing your investments is only allowed by authorized, incorporated, investment and financial institutions.  “Joe Sixpack” cannot re-value the price of his investments, be they his home, his car or his furniture!  He can have several garage sales and hope someone might want to make an offer.  Usually, after the third NO SALE week-end garage bargain sale….the stuff is either put back in storage or hauled off to the dump.

Right now, the highly leveraged debt that was based on NO DOC loans, Interest Only Purchases and Credit Default Swaps…..are not worth the paper they are written on.  People that cannot afford to pay their artificially inflated monthly mortgage payments are letting foreclosure take its course.  What can these people do?  If they bought a $Million dollar house that is now worth $250,000 dollars and they don’t have the monthly cash to make the monthly payment….what are they to do?  Pour good money after bad?

The conservative estimate is that the necessary world deleveraging required just to get started is close to $163 Trillion dollars in over values!  The problem gets more complex when you realize that Pension Funds, Governments, Retirement Funds, Municipalities and Cities across the world have all invested their members or taxpayers money into these worthless pieces of paper.   The Russians had this happen in the late 80’s and when they joined the World Economy…..they called it: “Economic Shock Therapy”!

The harsh reality is that world property values will not stabilize or find a true value floor until the properties are either re-valued or written off as unsaleable on the world market.  The fun part of this very sad story is that there will be no doubt that something akin to the “Oklahoma Land Rush” will eventually be necessary to correct this problem.  New Sales will set various values for various pinpointed Regional Areas.  In fact, a computer model will be required to target the most susceptible and most popular locations which will be able to sustain their value structure.  Corner lots and beach front property will no doubt create this computer model floor and property value re-sets.

What happens in the meantime?  No much!  Frozen property values at the old levels will be unsustainable…either to make payments or to resell.  There needs to be a “New Sheriff in town!”  In this case Grass Roots Assessors around our country and around our world….in Tourist areas and end destination resort areas should be the start of getting these values assigned.

The “Shock Therapy” that will be required needs to start bottom up and go back Top Down!  This must be an “Across the Globe” effort.  Is this concept even possible?  Of course it is….with “political will and decisive leadership”.

One thing is certain, if we do not get started soon…..the lethargy and stagnation will last years and years and years.  Do we have leadership that make these tough decisions?  We will see!

About Ron & Anna Winship

Independent News Producers/Writers and Directors for Parker-Longbow Productions. Independent Programming which includes a broad variety of Political, Entertainment and Professional Personalities. Cutting Edge - a talk show...is the flagship of over 30 URL websites developed or under development. The Winships have been blogging for the Orange Juice since back when nickels had buffalos on them, and men wore onions attached to their belts, because it was the fashion back then.