Originally published June 19, 2001, updated in November 2014
Just as the convictions of the Enron executives were being handed down, the next accounting scandal may be looming. The exact same macroeconomic dynamics that are being repeated today. Oil has shot to over $70 per barrel with no end in sight, and America has been gripped by real estate hysteria the past few years. Americas financial institutions have been inventing the high-risk loans that have fueled the latest real estate craze, particularly in California. No down payment, no principal payments for several years, variable interest rates, forty-year and even fifty-year mortgage terms and other innovations have put many millions of American homeowners in vulnerable situations. Once again, the prudent principles of the real estate/banking business are being abandoned. As energy prices skyrocket, inflation and interest rates will not be far behind. It is already beginning to turn around in the spring of 2006, with housing inventories growing rapidly.
Sales proceeds from foreclosed property
Gain on phony sale to second developer
My day job has given me a front-row seat to the unfolding collapse. I was given the task of accounting for tens of millions of dollars of good as cash investments we were sold by our now defunct investment manager, which we cant sell and are worth a small fraction of what we paid for them. The is turning into a crash, with several large projects delayed/canceled, and skyscraper projects heading for foreclosure before they are finished. If Microsoft and Boeing have layoffs in 2009, the Seattle economy will take a steep dive that will further impact the real estate crisis.
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I believe that we are in the early innings of the turmoil that will likely see the American Empire go the way of other empires. Of course, it , but unless there is a mass awakening in the USA, this nightmare will only get worse.