I have been keeping tabs on the mortgage market in the US for some time now and to my eyes it is not getting any better. In 2006 there were 160 billion CDO’s sold of which 74% have defaulted. In 2007 there were 186 billion CDO’s sold of which 86% have defaulted. Most of these had AAA ratings where the expected default rate is 4%. A lot of money is down the drain, but the banks passed most of their toxic assets to the FED, and I have not read that they have taken any back with their big profits this year.  Part of the bail out for mortgage holders has been an opportunity to “adjust” the interest rate or even the capital owed. But now I read that 47% of those fortunate people that have had their mortgages adjusted are behind on their payments after just six months.

Freddy Mac and Fanny Mae have been the ones caught holding the bag though.  Last week Freddy Mac asked for another 10 billion to cover their losses and Fanny Mae wants 8.4 billion.  The total of taxpayers money these two companies have swallowed up is now 145 billion. Estimates reckon that the total will be 380 billion before it is all over.

Then there is Greece et al. The billion dollar fund (borrowed) to prop up the euro is bound to fail. As I have said before, you can’t borrow your way out of debt.  If the same criteria is used to measure the US problem that is used for Greece, then the US is already bankrupt.  The advantage the US has is that is still the worlds reserve currency and it can print, (create) as many dollars as it wants.

The other problem facing Europe is the Iclandic volcano which continues to throw ash into the atmosphere disrupting air travel.  Today both Heathrow and Gatwick are closed. There is no telling how long it will continue to erupt.  Unlike the oil spill in the US there is nothing you can do to plug a volcano. If this eruption does continue over a year or more it will affect the economy of Europe and even global warming.