Remember when policymakers at the Fed told us in 2007 and 2008 that the credit problems were “contained” to the subprime mortgage sector? Or when then-Treasury Secretary Henry Paulson spouted the same line?

Oops.

We’ve already established how those guys were dead wrong about home loans. Indeed, the delinquency rate on U.S. mortgages surged to a record 9.12% in the first quarter of this year. Late payments rose in ALL categories, including prime fixed-rate loans, the absolute “cream of the crop” in the mortgage world.

Now, it’s clear they were dead wrong about the entire credit market! Credit losses and delinquencies are rising anywhere and everywhere.

Get a load of these figures from the American Bankers Association (ABA). In the first quarter of 2009. ALL ARE RECORD HIGHS!:

Home equity loan delinquencies increased from 3.03% in the fourth quarter of 2008 to 3.52%.
Home equity line of credit delinquencies rose from 1.46% to 1.89%.
Credit card delinquencies rose from 5.52% to 6.6% (measured on a “% of dollars outstanding” basis).
Direct auto loan delinquencies increased from 2.03% to 3.01%.
RV loan delinquencies increased from 1.38% to 1.52%.
Mobile home loan delinquencies increased from 2.96% to 3.70%.
Personal loan delinquencies increased from 2.88% to 3.47%.

What about CORPORATE credit quality? Any “green shoots” there?

Nope:

The default rate on junk bonds has almost quadrupled to 9.5% from 2.4% a year earlier, according to Fitch Ratings.

A University of California economist just predicted that a whopping 20% of hotel development loans made in the U.S. may default over the next year and a half.

Standard & Poors just said it’s planning to slash ratings on more than $235 billion worth of commercial mortgage-backed-securities. Loose underwriting, falling asset prices, slumping rents and rising vacancy rates are wreaking havoc on the entire commercial real estate sector.

Source: http://www.marketoracle.co.uk/Article11977.html

http://globaleconomicanalysis.blogspot.com/2009/07/continuing-claims-soar-by-159000-to-new.html

http://globaleconomicanalysis.blogspot.com/2009/07/unemployment-claims-how-bad-are-real.html

And indeed, there is nothing to enjoy : the reality is bad.

http://www.marketoracle.co.uk/Article11825.html
Check the derivatives numbers! Goldman Sachs shall probably announce huge profits today but, in reality they are in the brown and slushy up to their necks.

Also of note:
U.S.UNEMPLOYMENT CLAIMS: HOW BAD ARE THE REAL NUMBERS?”
http://www.marketoracle.co.uk/Article11934.html

The record continuing claims number is dramatically understated. I have read elsewhere that the US unemployment figure is actually around 18.5% if measured against past calculations

http://news.bbc.co.uk/2/hi/business/8000062.stm

But how real are these signs, and how long will the recession last?

BBC News has asked some of the world’s leading economists for their views. The article is a few months old but remains relevant – the green shoots continue to be pissed on.

Capitalism is certainly not dead, it is merely just changing a bit. It has worked great for the past 50 years and will still be the driving force in the future. So a few 401K’s has been reduced to 201’s and unemployment is 10%. Small speed bumps, 90% are still working and the retirees will have to get a tent instead of that mobile camper home. No big deal.
I have some friend who have been the victims of Hugo Chavez dreams. Their companies and life dreams have been confiscated for the greater good of the people. Mind you, this is mom and pop type of companies that has been nationalized, but guess what? Without maintenance the equipment is now failing and the people has gained nothing but chaos.

NB: Yes, I has blog for a long time. I am just more of a reader than a writer.

Yes the central organization and planning has not worked (except in Science where the Soviet Union was always “state of the art”). But this was only a part of the failed russian socialism style. There is no reason why there shouldn’t be a market driven socialism.

The real world socialism in Sweden or Denmark is not going so bad, even if there are lots of possible improvements.

Amen.

In a complex inter-related world, simple solutions, while alluring, don’t work. A rules-based, monopoly-averse system with checks and balances where progress is measured by more than just economic/consumption/production matrices is the system to aim for.

Neither Socialism nor Capitalism are evil. Neither provides all the answers. lasting solutions cannot come from dogma.

Yes i’m an european Red Shirt – with all my heart for more then 25 years.

And at the moment – the horror news for you Socialism is winning on all fronts because it is better for the majority of the people. We see the fall of capitalism right now. Ask people from East Europe they will tell you the current situation looks pretty familiar to them.