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United States Heading towards a Depression?

Discussion in 'Politics & Religion' started by decoyjames, Dec 27, 2007.

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  1. earlpearl

    earlpearl Well-Known Member

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    #3081
    domainer: not so sure about that. For instance this article (from our friend, guerilla) referenced a hedge fund operator who is buying mortgage backed securities

    Assuming he is buying them at something like $0.20-0.30 on the dollar it forces institutions to write down the losses. Wouldn't that have the effect you are claiming.

    Maybe treasury Paulson didn't have the assets to buy up everything, maybe he thought he needed to put the money elsewhere. Not sure myself.
    SEMrush
    Meanwhile bailout money isn't going into lending, that is for sure.
     
    earlpearl, Dec 6, 2008 IP
    SEMrush
  2. domainer_10

    domainer_10 Peon

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    #3082
    The point is if many banks today had to declare their losses they would be insolvent. Heck if you wanted to get technical, the entire U.S is insolvent. If all of our debtors asked for our money back tommorow the dollar would crash. But that is another topic.


    Its funny because citigroup was saying they had plenty of money the day before they received a high interest loan from fed plus debt guarantees. If they weren't insolvent they wouldn't have borrowed the money at high interest. Bank of america and probably chase are insolvent too because they hold a large number of toxic assets. I'm not sure, but maybe if they had to declare them insolvent the FDIC would have to take them over. And there aint enough money to cover them.

    We are teetering right now on a total collapse of the banking system because there is other things that haven't hit full fledged like the credit card and COMMERCIAL mortages and the PRIME mortgages. Right now we are in phase one the Subprime triggering it. Next the banks will be scrambling to cover all the credit card defaults and PRIME mortgages as people get layed off and/or can't use their house as a ATM anymore and use their credit cards instead. The commercial mortgages are supposed to get really bad as more and more businesses close. I assume that will get bad after christmas once there is no holiday shopping to keep some stores open on life support. I've heard from a few economist predicting that credit cards will trigger the next phase of the financial crisis.

    BTW another bank just failed yesterday, it was a small bank though in georgia.
     
    domainer_10, Dec 6, 2008 IP
  3. PioneerGold

    PioneerGold Well-Known Member

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    #3083
    This is what some are unwilling to accept. They think this is just a hiccup and things will return to what they were.

    During the 90s and this decade, the US had an opportunity to invest in factories, infrastructure, agriculture, energy, and science/technical training.

    Instead, they produced mini-malls, mini-mansions, condos, stadiums, MBAs, lawyers, multi-millionaire athletes, overpaid CEOs, gas guzzlers, and luxury goods.

    The so-called assets this country produced are neither productive, nor efficient assets.

    The whole country acted like the typical super-consumer who...

    • goes to the mall,
    • buys with credit,
    • takes out a home equity loan,
    • expects home values to increase forever,
    • while piling money into the magic 401k/IRA (which is supposed to increase in value),
    • while driving alone in their 15 MPG SUV,
    • which they financed,
    • to a far flung suburb,
    • in a cul-de-sac.

    You can't have a whole country of people living like this and expect it to last.

    Really, I believe the economy has been stagnant this entire decade. It has been masked by massive borrowing by the consumer and the national corporation (federal government).

    Now, the bill is due and the country can't pay it.

    Going forward, unless people wake up to what's really happening, the country will continue its collapse.

    Welcome to the third world.

    And that massive military, the USA won't have the money to keep it.
     
    PioneerGold, Dec 8, 2008 IP
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  4. Firegirl

    Firegirl Peon

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    #3084

    LOL, that list is sooo true! I see/work with people that make $10/hr and driver better cars than I do, own bigger houses (out in the middle of nowhere 30 minutes away from ANYTHING), and have 10 credit cards. Of course they won't tell you though that they are $10k + in debt though. My boyfriend's best friend buys new, super gas guzzling cars for him and his wife every 2 years (no, not leasing, BUYING) and can't figure out why they are $80k in debt!

    And I thought this whole crisis would be a wake up call for people to stop using credit for everything, only buy when you have CASH. But after shopping a little this weekend, I see that people are still ringing up their credit card bills, just less than they were in the past.

    How many times will it take for us to learn?
     
    Firegirl, Dec 8, 2008 IP
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  5. domainer_10

    domainer_10 Peon

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    #3085
    Im convinced that by the time people and the media realize we are in a depression that it will already be full fledged.


    Interesting facts from last depression: It took 4 years for unemployment to go from single digits to 25% in the great depression. So a depression doesn't mean we have double digit unemployment within a few months like some may think. I believe it also took a couple years before the banks started to fail at rapid succession. I think it took a couple years for the stock market to bottom after 1929 "crash", it didn't bottom in 1929 like many would think.
     
    domainer_10, Dec 8, 2008 IP
  6. smatts9

    smatts9 Active Member

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    #3086
    smatts9, Dec 12, 2008 IP
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  7. bogart

    bogart Notable Member

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    #3087
    Ecuadorean President Rafael Correa holds a doctorate in economics from the University of Illinois :D

    Ecuador had $5.65 billion in cash reserves as of Dec. 5, according to the central bank of Ecuador.
     
    bogart, Dec 13, 2008 IP
  8. wisdomtool

    wisdomtool Moderator Staff

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    #3088
    I guess that exactly the reason why they defaulted. They actually paid interest that far exceed the principals. Not much difference from lending from loan sharks. At least he is making use of what he had learnt :)


     
    wisdomtool, Dec 13, 2008 IP
  9. bogart

    bogart Notable Member

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    #3089
    The housing bailouts are not working. It's going to get worse before it gets better.

    53% of borrowers with loans modified in the first three months of 2008 and 51% of those with loans modified in the second quarter could not keep up with payments within six months, according to U.S. Comptroller John Dugan

    A record 1.35 million homes are in foreclosure, while the number of borrowers who have fallen behind on their payments soared to a record 6.99%, the Mortgage Bankers Association said last week.


    http://money.cnn.com/2008/12/08/news/economy/mortgage_summit/index.htm
     
    bogart, Dec 15, 2008 IP
  10. Mia

    Mia R.I.P. STEVE JOBS

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    #3090
    There's a very small minority of bad loans out there. Solution. Let them fail. If you keep putting gas on a fire, its gonna probably continue to burn.
     
    Mia, Dec 15, 2008 IP
  11. earlpearl

    earlpearl Well-Known Member

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    #3091
    I wish this were so, but its simply not the case. There were in excess of $1 trillion in sub prime loans. Additionally there appears to be possibly $1.5 trillion in varieties of variable rate loans with rising interest rates, many which have yet to adjust. Finally, there was way in excess of $1 trillion in home equity or 2nd mortgages.

    The US home mortgage industry was hog wild with over lending and lending at very high mortgage to value ratios.

    It is a horrible and serious issue of over lending in total, with a huge number of high risk loans that either see big increases in payments with changing/increasing rates or loans made to folks who couldn't handle them.

    I'm going to repeat myself. I firsthand, on a microcosm basis saw a variation of this in the 1980's, in some cases acting as the trusted outside commercial real estate broker for some local Savings and Loans. The S&L's were generating development loans for commercial real estate. The money was flush and available and the fees were excellent.

    Every single loan I saw didn't make pro forma financial sense on its own. Costs of construction and existing or forecasted rents weren't going to cover the loans. The only way the loans would work long term is if the buildings were sold to "the next sucker" in a couple of years after construction for more than construction costs. That actually worked for a few years in the 1980's.

    Overall construction was way out of line with demand. Ultimately the loans went bad and the commercial real estate markets collapsed.

    Currently we had had too much home mortgage lending in the aggregate. On top of that many of the loans made in an environment of over lending turned out to be way high risk.

    Now we are paying.

    Meanwhile its uber ugly.

    I wish it were "a few bad loans". Its dramatically different than that.

    You could guesstimate we are over mortgaged to the tune of several trillion dollars.

    In a home mortgage environment of something like $10 trillion in total....several trillion dollars of over lending is a huge ugly percentage.
     
    earlpearl, Dec 15, 2008 IP
  12. Lexiseek

    Lexiseek Banned

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    #3092
    The de-leveraging of the world is underway in earnest.
     
    Lexiseek, Dec 15, 2008 IP
  13. smatts9

    smatts9 Active Member

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    #3093
    smatts9, Dec 18, 2008 IP
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  14. korr

    korr Peon

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    #3094
    Change we can believe in - that is, no change at all!

    This is worse than an economic collapse, this is becoming downright theft.

    An American born today shall inherit so much debt that they can be assured that they will never own real wealth unless they inherit it as well.
     
    korr, Dec 18, 2008 IP
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  15. debunked

    debunked Prominent Member

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    #3095
    I don't understand what you guys are saying. The media has been praising his work since the election. They say how he has the highest approval ratings since Reagan as well.
     
    debunked, Jan 2, 2009 IP
  16. domainer_10

    domainer_10 Peon

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    #3096

    The media and America are idiots. BTW he hasnt "done anything". Well, except show that his "change" mantra was a fraud, he will continue to be a warmonger (Billary and Gates), he'll continue to be on his path for a NWO (he loves the world more than our sovereignty), and that he is in bed with the banks and not for the common man (getting a NY fed reserve guy as his treasury secretary LMAO).
     
    domainer_10, Jan 2, 2009 IP
  17. bogart

    bogart Notable Member

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    #3097
    The next 6 months are going to be worse than what we've had so far.

    U.S. facing debt 'time bomb' this year that could result in a dollar crash.

    Bailouts plus a $850 billion Obama stimulus package combined with slowing tax revenues will require the US to increase the national debt by $2 trillion.

    40 percent of the debt is held by private investors and will mature in a year or less.

    http://www.msnbc.msn.com/id/28476798

    President-elect Barack Obama has named NYC's Housing Preservation and Development Commissioner Shaun Donovan to lead the cabinet position of Secretary of Housing and Urban Development.

    Mayor Bloomberg housing program has been a great success and the default rate is very low.

    Whatever happened with the CRA, a new crisis is about to happen. The FHA is the new subprime. As I understand it they are making loans with 3% down. Along with a slump in commerical real estate, the crisis is going to get worse.

    This building that I had looked at has had the asking price reduced to $369k from $384k. Prices are still way to high and out of alignment with historical correlation to rent and salaries.

    [​IMG]

    The Housing Predictor is estimation a 10% decline for the New York metro and California/Florida approx 25% further declines.
     
    bogart, Jan 3, 2009 IP
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  18. Mia

    Mia R.I.P. STEVE JOBS

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    #3098
    And had not started the job yet.

    Go figure.

    Anyway, thus far. If he had just said "Jer, I'm gonna cut taxes, Jer I'm gonna let Israel kill terrorists, Jer I'm gonna appoint more Republicans than dumbacrats and leave a lot of the Bush staff in place, something tells me he might have been more appealing.

    So far this guy is doing the complete opposite of what his holiest of holy supporters elected him to do.

    Go figure. Now if we can just get him to effect the increase of interest rates.
     
    Mia, Jan 5, 2009 IP
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  19. earlpearl

    earlpearl Well-Known Member

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    #3099
    Bogart: In terms of buying I stand by my suggestions in terms of finding or creating a "steal buy". Also that ratio of 1% rent/month against the investment sounds like a sound strategy. I always looked at it slightly differently--but I suppose the net effect of an investment decision is about the same. Good luck in the effort. (even though I think most of your political perspectives stink ;);))

    IMHO there is no doubt current and planned rescue efforts will add govt debt at unprecedented levels. On the other hand it appears the financial and business crisis is more the result of both personal and financial institution debt. Over a long period of time personal and financial debt increased at unprecedented levels, and at rates far far higher than did government debt and corporate financial debt. One commentator suggested that planned bailout efforts are intended to replace personal and financial institution debt with government debt.

    Of course those actions will have long term serious and difficult consequences including enormous govt debt going forward, and additionally who will buy this govt debt in the future? Very serious stuff. Any host of problems could arise out of the bailout efforts and at different time frames. International politics can impact issues. The day China, Japan, or who knows who decides not to buy US debt is the day interest rates go skyrocketing upwards. It all has consequences.

    Working out of the problem requires a focus on real productivity rather than debt ridden decisions focused on consumption. Though far easier said than done.

    btw, one of the businesses in which I'm invested had its 2nd best revenue year ever. How about that? (None of these businesses are connected to my sigs).

    How did it happen? The business is somewhat countercyclical. That means it can do better in bad times. That doesn't hold true all of the time, though. Two marketing efforts bore excellent results. The main reason, though, in our humble opinions.....we staffed real well and had good results. Best staffing in years from the revenue side. Our costs were up though. Now we have to keep up the revenue side and do a better job of controlling costs. "shrugs".
     
    earlpearl, Jan 6, 2009 IP
  20. Lexiseek

    Lexiseek Banned

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    #3100
    Consumers are strapped. So unless debt relief is included for taxpayers, it's the taxpayers getting screwed by bailing out companies and not getting anything to show for it.

    Even worse is this ridiculous Obama stimulus package.
     
    Lexiseek, Jan 6, 2009 IP
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