The Coming Great Recession of 2011 – 2012

The American Spectator published an article written by James Srodes titled, “The Great Recession of 2011-2012”

Mr. Srodes hits the nail on the head.  He explains why, despite the rosy projections you read in the morning newspaper, we are headed for worse times in the next couple of years.  I don’t want to be a doomsayer, or create a sense of pessimism.  I just think the old adage that to be forewarned is to be forearmed is a good one.

I am not going to summarize the article here.  It is a very well-written and logically presented.  It is important to read it in its entirety.  I suggest you go here and do just that.  And then arrange your finances so that you will still be standing when we hit 2013.

While he writes about all the reasons 2011 and 2012 will be very difficult years financially for most Americans, he doesn’t mention one other factor that will contribute to the downturn.  There are billions of dollars of commercial mortgages that will mature in the next 18 months.  The borrowers will not be able to refinance those loans without contributing substantial cash equity.  As a hypothetical example, a borrower who borrowed $21 Million (70%) on a shopping center that was valued at $30 Million in 2006, will likely now find that he can only refinance 60% of a revalued asset now worth $25 Million.  That means he will only be able to get a new loan of $15 million to pay off a $21 Million loan.  He will either have to come up with $6 Million in additional equity, or run the risk of losing his property.  That bubble is still ahead of us and will make the bursting of the home mortgage bubble seem like a minor glitch.

All the signs are there.  You just have to read them.

Go to the American Spectator and read the whole article.

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