There are 75 million houses in America; 24 million don’t have mortgages. Of those 51 million homeowners with a mortgage, approximately 15 million are underwater. According to Mr. Shilling, with the further decline in prices a given, 25 million homeowners will be underwater, to the tune of $1 trillion.

Anyone predicting a recovery by the end of 2009 is delusional.



The next bubble just peaked in 2008, so it has a long way to go on the downside. Consumer spending as a percent of GDP peaked at 71% in the second quarter of 2008. Americans allowed their savings rate to drop below 0% and counted on their home appreciation to fund their retirements. They believed the Wall Street hype about 10% long-term stock returns. Getting back to pre-bubble levels of 62% of GDP will take years. With home prices down 25% and retirement funds down 50%, no one will continue to spend at previous levels. Consumer spending will decline by $1.3 trillion annually for years to come.

The last and most dramatic bubble is total US debt. There's no doubt it's unsustainable. It currently amounts to 340% of GDP. It would need to go back to 200% of GDP or below to retrace its path. This would require $20 trillion of debt to be paid or written off. The implications are staggering, and the American standard of living may decline significantly.

The national debt of the United States from the creation of the country in 1783 until 1986 was $2 trillion, and it's increased by $2 trillion in the last 18 months from $9 trillion to $11 trillion. It's increased by $1 trillion in the last 6 months alone. The independent Congressional Budget Office -- which has been overly optimistic over time -- projects that the Obama budget plan will add $9.3 trillion to the national debt by 2019.

This will drive it as a percentage of GDP to levels above the peak years reached during World War II. The difference is that in 2019, the unfunded liabilities totaling $56 trillion for Social Security, Medicare, and Medicaid will sweep over the country like a tsunami.

If our government continues to follow the path it's chosen, our country will be bankrupted.




In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positve change in the lives of children.