United States Heading towards a Depression?

Consolidation in an industry with a high barrier to entry is not in the best interest of a free market.

It's interesting to see you break rank with this evaluation. Houses are not ATMs, they are not liquid assets, they are capital assets with a maintenance cost (property taxes).

If it is ever appreciating, how does it suffer losses? That would imply that it also depreciates.

The rolling inflationary bubble that started to really ramp up around the time of Gulf War I, which includes the ongoing Gulf War II, Serbian intervention etc. The tech bubble. The 9/11 panic.

Sure, I'm all for purging the market of bad credit, that's the only way to truly get healthy again. But you can't purge bad credit if the FED continues to pump more liquidity into the system.

And you're not going to hurt the people who took on bad mortgages exclusively. It's going to affect all of the pension and mutual funds that hold these securities as investments.

I agree, but the lender is not going to feel the heat. The mortgages were bundled and securitized, then sold off. The initial lender took cash on the barrel head, in return for a smaller return on the investment. The people holding the bad paper are the ones in pension funds.

I've addressed this several times already. Inflation is here. We're already feeling it in the cost of our imports, with a weaker dollar. That's where the monetary inflation, as our foreign creditors no longer desire our paper so passionately, start to cash in to the domestic economy, increases the supply in circulation, and driving prices up. The last place you are going to feel it is domestically, but importers have been feeling it coming on for several years.

The only reason it has not become a full blown crisis already, is that we're been able to continue to purchase cheap goods from Asia, particularly China, because they do not freely float their currency, and everyone agrees that the Yuan is drastically undervalued.

I absolutely disagree with this. The dollar is the absolute indicator. When you run a negative balance of trade, and transform from the world's greatest creditor to the world's greatest debtor in 25 years, the dollar is a clarion call, that we're approaching the final stages of a significant event.

Remember, our money is fiat. It has no value except what it will purchase. The "confidence" factor, as it is known. As these foreign held securities become undesirable, they will be sold back into the market, which will flood us with the currency we have counted on foreigners to hold, since the post WWII era, with Bretton Woods. We held the gold, they held our dollars. Today, we don't hold the gold, and they no longer have a reason to hold our dollars if they are backed by bad investments.

Take a look at Gresham's Law. It holds true in every circumstance I am aware of.

What do you think these "sovereign wealth funds" are made up of? Exported inflationary dollars. And now they are coming home to buy up our businesses, and re-enter the economy in a game of paper hot potato.

 

Hey less of the consolidation in banking!

 

No doubt. That's like throwing the baby out with the bathwater.

 

Good post G.
Made me think. In honesty a lot of things there which almost make me feel out of my depth. Maybe I should read more of the newspapers with the pink pages rather than the pink nips?
Or perphaps like everyone else I am burying my head in the sand.

 

Between 1890 and 2004, Shiller's book, "Irrational Exuberance" explains, U.S. residential real estate increased by only 66%, in real terms - that's only 0.4% per year. By comparison, U.S. home prices soared by 52% between 1997 and 2005 - or by 6.2% a year. Since home prices have soared so far above their long-term trendline, a reversion toward the mean would not be surprising.

That could potentially mean a drop in prices of over 40% across the board.

Borrowers, lenders, and brokers never would have been able to play this game with out the FED pumping money and easy credit into the market.

 

I believe as an individual, you gotta keep it real. Too many dumb people in this world with an "it's all good" attitude, that don't have a clue why bad things happen around them, but cry and scream bloody murder for someone to bail them out.

 

From Labour Secretary Robert Reich:

 

I think what we are gonna find is that Greenspan suffered from multiple personality disorder and alzheimer's.

When you have your own hand in the pot.. Come on, an old goofy looking ugly guy like that does not get quality tail without a lot of dough.

 

guerilla knows what's up, it's all about keepin' it real. and i'm taking notes while reading this thread

 

Not at all. Greenspan was serving larger masters than the President, Congress or the financial community. Greenspan was, and is too smart, to have done this without knowing the long term consequences.

He's been married to Andrea Mitchell since 1997.

 

well, it sure is...!!

 

http://finance.yahoo.com/real-estat...ng-Meltdown;_ylt=AkswlpQUlv9OVnR_86aCEgVO7sMF

 

People should seriously look into Peter Schiff if they want to better understand what is happening, and what will happen next. He predicted the housing crash, in almost perfect detail in 2005, and it's in his 2006 book, "Crash Proof".

I really don't care how many people think "it's all good", or "the global economy" is too big for anything bad to happen. That's just being ignorant and closing your eyes to reality, cold hard facts, and the truth about managed, and artificial marketplaces.

 

The housing correction in the bubble markets has a downside of 30% - 40%

Fortune shows how much the price/rent ratios must fall to return to normal levels

Metro area ---- June 2007 ---- 15-year avg. ---- % Correction
Miami ---- 27.2 ---- 16.0 ---- -41.1
Los Angeles ---- 26.7 ---- 16.0 ---- -40.3
Baltimore ---- 20.7 ---- 12.6 ---- -39.1
Greater Washington, D.C. ---- 26.0 ---- 15.9 ---- -38.9
Seattle ---- 38.0 ---- 23.3 ---- -38.7
East Bay, Calif. ---- 50.9 ---- 31.6---- -38.1
Orlando ---- 23.8 ---- 14.9 ---- -37.2
Long Island, N.Y. ---- 24.5 ---- 15.7 ---- -36.1
San Jose 42.5 27.2 -35.9
Fort Lauderdale ---- 24.5 ---- 15.7 ---- -35.9
Palm Beach County, Fla. 27.1 17.6 -35.1
New York 17.8 11.7 -34.6

http://money.cnn.com/magazines/fortune/price_rent_ratios/

 

See also John Talbott's "Sell Now: The End of the Housing Bubble" - 2006.

I think had one before that one in 2005 also...

 

Think the monoline insurers (AMBAC, MBIA) will get downgraded?

 

When they start telling the truth about the housing bubble. The borrowing binge inflated home prices and a lot of home equity credit was used for consumer items and luxury cars.

 

IMO, those are actually responsible purchases. You can't deduct the interest paid on a car, or credit card and often times both have higher interest rates.

Moving high interest non-deductible debt to a low interest deductible equity line is actually a rather intelligent thing to do.

Myself, I got my original line 4 years ago and used it for home improvement. New driveway, new kitchen, etc... Instead of spending cash in the bank, you use your homes own equity to make more improvements to it, that raise the equity even more. All the while, the interest is deductible, and the value is going right back into the place it was taken out of.

Using an equity line for a vacation, yeah, I can see that being irresponsible. But for those wanting to consolidate debt, mitigate tax liabilities, or improve their home, they make perfect sense.

Just a word to the wise for those making even larger improvements on a home, consider leasing items... Leasing an air-conditioner for instance. Big ticket items like this end up being assessed into your property taxes as an improvement and in many cases can actually raise them significantly. If they are leased, they cannot be included in that assessment.

Oh, and you can take a deduction on the lease payments btw... Can't do that if you buy the thing on credit.

 

Home improvement often is a bad investment, you are unlikely to realize more than 80% and closer to 50% of the value of the upgrades you make to your home at the time of resale.

I hope it works out better for you.

 

why not just pay cash and pay no interest?

I have never understood the whole fascination with deducting interest, if you are taxed at 20%, it means for every $1000 of interest you pay , you get back $200, why is that considered smart?

am I missing something?