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We all are in a very deep economic condition all over the world. The United States, often considered being the wealthiest and prosperous country in this world, is also facing severe economic depression in 2008. The economy in the United States started to become worse slowly for last few years. The economic situation became traumatic during and after the presidential election in the USA. The “economic agenda” was one of the greatest winning factors for Barrack Obama. However, the economic condition in USA does not seems to improve very much even after a month from the election. The three big auto industries in USA – the Ford, the GM and the Chrysler are broke. They are asking the government to help. This is called “bailing out”. There is a big controversy about the “auto bail out” in USA as it will be peoples’ tax money that will be used to buy those auto companies.

Economy

The 401K plan savings has dropped more than 44% for many people over last one year period. So, if you had 100 dollars in your account in January, you have 66 dollars in December, 2008. Now think about the millionaires and billionaires. If they had 100,000 dollars in their 401K plan just 12 months back, they now have 66000 dollars today (possible). Many would say that with improvement of economic condition, most of the people would get back their money. Well, that may be true for young folks who have time to wait for a better economic time. But what about older people who are about to retire? The unemployment rate was highest in November in USA and there is no sign for a quick improvement.

The economy of one country is now well connected to the economy of other countries. If a small bank in a very small country may fail, it could potentially impact some other banks in far distant countries. So we talk about “global economy” all the time. The inflation is also alarmingly high for many countries, for example England – 4%, India – 11% and so on. Chances of no job creation are minimal. The credit market is frozen!

In September, the USA company Lehman Brothers went bankrupt which shattered the Wall Street. With wrinkle effect, the share market for many other countries like Japan, India, England has dropped alarmingly. Various countries are trying to solve the economic depression in various ways. “Short sale” of shares is now banned in England.

Lehman Brothers Holdings Inc. was a global financial-services firm active prior to its bankruptcy and sale in 2008. The firm did business in investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking. On September 15, 2008, the firm filed for Chapter 11 bankruptcy protection; the filing marked the largest bankruptcy in U.S. history. Immediately following the bankruptcy filing, an already unstable market began an uncontrollable tailspin. What was resulted was what many have called the “Perfect Storm” of economic distress factors, from Wall Street layoffs to a spike in durvexity, and eventually led a $700B bailout package (Troubled Asset Relief Program) prepared by Henry Paulson, Secretary of the Treasury, and approved by Congress. (Reference)

“Short Sale” is a known culptrit for such ecomonic diasester which can potentially decides the value of a share and change it overnight! A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property. In a short sale, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor. This negotiation is all done through communication with a bank’s Loss mitigation department. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. Most Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain while the mortgage broker, real estate agent / broker, loan officers, title and closing agents retain their profit. No regulatory agency governs this hybrid transaction. (Reference).

Lehman Bros. bankrupt, B of A buys Merrill Lynch watch the exclusive video


So, what is the answer to out economic trouble? When will the economy be back to normal?
We don’t know the answer yer. Many thinks it will be better soon but no sign of quick recovery can be seen at present. We all think that the economic situation will get better but sure it will take some time.