Many people knew the real estate boom of 2000-2005 was creating a house of cards. The figures above come from RealtyTrac, an online foreclosure listing service based in Irvine, Calif.
Former Nixon political strategist, Kevin Phillips, suggests we might want to be wary of the economic numbers these days. His warning applies not only to government statistics but to private sector rating companies and even RealtyTrac's statistics.
The Atlanta Journal-Constitution took a close look at the company's data after it said that Atlanta's foreclosure rate had jumped an alarming 75% from June to July. RealtyTrac admitted to the newspaper that it made mistakes in its calculations, and that the month-to-month increase was really 14%.
But don't jump to the conclusion that "Oh, so things aren't as bad as we're being told." Kevin Phillips, and others, question the rosy government statistics:
I think the government has cooked the books, and as a result, we get this unrealistic view of where the economy is.
Real economic growth can be expressed as the rate of Gross Domestic Product (GDP) minus the inflation rate. If the outcome is negative, then we're in recession. Phillps continues:
For example, they pretend that inflation is in the two- to three-percent range. So, if you’ve got nominal [GDP] growth of four percent and you subtract for inflation, you still would get a positive number if you use the number of, you know, 2.6 or three percent inflation. But if you’ve got nominal growth at four percent and inflation is really six to nine percent, then you’ve got big-time negative growth, and the economy is contracting.
The very fact that our society is cooking its statistical measures is symptomatic of a deeper structural failure of the Nation. Phillips argues joins a chorus of thinkers who are explaining that the US isn't merely entering an economic downturn. Rather, the US has been in a downturn for decades (See Lester Thurow's The Future of Capitalism). We might now be watching a final, more obvious, descent. As we watch, we should demand honest numbers.
Update: Second Quarter Headline, "Foreclosure Activity up 14% in Second Quarter, 2008."
This was a 14% increase from the previous quarter, and a 121% increase from the same quarter in 2007. Ouch!
This is where the action is:
Update: Third Quarter Headline, "Foreclosures soar 76% to record 1.35 million." That's in terms of 76% from a year ago.
Sources:
Graphic Credit: Associate Press.
Reality check for RealtyTrac, Peter Viles, Los Angeles Times Blog, posted by Annette Haddad on November 14, 2007.
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