Posted 1/30/2006 05:25:00 PM by Douglas

And now for today's dismal economic forecast. We're not only spending more than we make, but more than we have.

The Commerce Department reported Monday that the savings rate fell into negative territory at minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing.

The savings rate has been negative for an entire year only twice before — in 1932 and 1933 — two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs.

With employment growth strong now, analysts said that different factors are at play. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

Wow, this hasn't happened since the Great Depression? And what the hell was so damn great about it? Anyhoo, we still have our homes, right? That 10% increase per year is pretty much guaranteed, right? Oh Shit!

Paradoxically, the sudden halt to sharply rising home prices put a squeeze on many borrowers, analysts said. Homeowners who stretched their finances to the limit to buy a home found it more difficult to make their payments on variable-rate mortgages as interest rates rose, but they were less able to refinance their loans at more attractive rates -- or sell and pay off their debts -- because the value of their homes fell or remained flat.

''When prices are skyrocketing, you have the option" of selling the house for a gain or refinancing, said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University.

''In an economy where price appreciation is more modest or doesn't exist, what option do you have left?" he said. ''Sadly, one of those options is foreclosure."

Well what the hell did you expect? Is it going to go up forever, and if so, then why did that ignorant asshole sell it to you? It could be worse, I suppose. You could have an wosre. You could have an interest-only mortgage. The understatement of the century:

Interest-only payment periods almost never run for the entire term of the loan, even when a fixed-rate mortgage is the underlying instrument.

Sure it does. It's called a banker's wet-dream. What they don't tell you is that the term of the loan is infinity.