United States Heading towards a Depression?

Are you trying to imply that Obama will turn out to be a failure at spending like Bush was by somehow cutting his budget prior to year 4? Wont year one, which is already half behind us, spike the chart 4x no matter what he does the rest of his term in office? Listen, Obama by his own projections puts your numbers out of touch. The CBO puts him even more into the stratosphere. Why are we debating this? Nobody else disputes this.

 

The forclosure crisis started with interest resets and flippers. But now unemployment is the primary factor. The mortgage bailouts aren't going to work when people don't have jobs.

If it's anything like what happened after the 1975 recession we will have a few good years. But, It's almost impossible to know what will happen though. I find it hard to imagine that inflation will not go out of control. China is getting worried and the price of gold is almost $1000.

I'm really wondering what would happen should interest rates go back up and hit even 8%. How are the banks going to make money when they are making thirty year mortgages at 5%?

The S&L crisis back in the early '90s cost something in the area of $500 billion. In this environment who knows what it would cost today.

 

China is in a pickle cause they can't significanlty stop buying bonds right away or else it will cause a panic. They have to slow down the rate of how much they buy instead.

You can't compare the 1975 recession to this one because the 1975 wasn't caused by a crippled banking sector and we weren't doing bailout after bailout. I think the only thing you can say is that when there is runaway inflation that it will FEEL like the 70's all over again. Only this time it is much worse.

 

You sound like you can predict the future. You must be the richest person alive.

Projections, estimates, allocations, legislation, etc. all mean checks aren't being cashed yet, unlike Bush.

So many think they can predict the future when there is a new President. How often are they right?

You seem awfully eager to call Obama a spender. I say that is ridiculously premature. Obama and his best laid plans. I suppose you believe a President will do everything he plans, hopes, dreams, projects to do because they have perfect information and know the future, like you do.

Obama may be an utter failure at spending, unlike the proven success of Bush (don't count your chickens...). My point is, until it happens, we don't know.

Why do you keep posting like you do?

 

Its not about predicting the future. Its just some of us have lived through this before. Its history repeating itself. Its much more about the past than the future.

If what happens, happens you will see double digit interest rates.

 

Lol. Yeh, governments (or any other organization) always spend less than they project they will.... that happens like never. Your quip about the CBO calling for a surplus 5 years out as the presidency got handed from Clinton to Bush was a joke. Go check the records and tell me how many times the CBO has OVER estimated how much will be spent. Here's a hint. Its a number less than one.

Because someone has to defend Obama from these scurrilous accusations that he is just like Bush. They are both humans (if you can call Bush a human), and that is about it.

 

In 1980 the Banks were crippled due to the gap between high interest rates and the low mortgage rates they were receiving for old loans. It seems that ervery ten years or so we are having a S&L crisis.

 

Is that what caused the S & L crisis throughout the 80's or was there more to it?

If you look at history, we have had major financial panics every 10-30 years. Not all financial panics led to a depression. Its funny because I never knew that until recently. I bet most people aren't aware that America has been through a few depressions (1920, 1930's, 1870's, 1890's, etc). Until recently I thought we only had one depression in our history. Just goes to show you that they don't teach you anything in school or college. Some were caused by wars, some were caused by financial panics, some were caused by changes in currency or farming or a combination of all factors together. We have had many financial panics but many didn't lead to a full blown depression. So when the media keeps spouting off about it being the worst recession since the depression most don't realize that the country has been through this many times before.

What we have experienced up to this date is minor by historical standards.

 

That was the start of it.

1980-1982 Statutory and regulatory changes give the S&L industry new powers in the hopes of their entering new areas of business and subsequently returning to profitability. For the first time, the government approves measures intended to increase S&L profits as opposed to promoting housing and homeownership.

March, 1980--Depository Institutions Deregulation and Monetary Control Act (DIDMCA) enacted. The law is a Carter Administration initiative aimed at eliminating many of the distinctions among different types of depository institutions and ultimately removing interest rate ceiling on deposit accounts. Authority for federal S&Ls to make ADC (acquisition, development, construction) loans is expanded. Deposit insurance limit raised to $100,000 from $40,000. This last provision is added without debate.
November, 1980--Federal Home Loan Bank Board reduces net worth requirement for insured S&Ls from 5 to 4 percent of total deposits. Bank Board also removes limits on the amounts of brokered deposits an S&L can hold.

August, 1981--Tax Reform Act of 1981 enacted. Provides powerful tax incentives for real-estate investment by individuals. This legislation helps create a "boom" in real estate and contributes to over-building.

September, 1981--Federal Home Loan Bank Board permits troubled S&Ls to issue "income capital certificates" that are purchased by FSLIC and included as capital. Rather than showing that an institution is insolvent, the certificates make it appear solvent.


http://www.fdic.gov/bank/historical/s&l/

 

So, you're predicting the CBO's predictions will be predictably overestimated.

Looks like a whole lot of assumptions to me.

Who said Obama needs defending? He hasn't done anything yet that needs defending. You keep saying he has done something and I say he hasn't done anything.

My question is why do you keep defending things that haven't happened yet????

Come to my side and defend Bush. He's the one who keeps getting attacked for his 8 years in office (vs. Obama's <5 months).

We shall see.

 

That is a good source of information. Of note, if you go to the link there is a far more in depth description of the entire phenomena.

Additionally, as a commercial real estate agent during that period I worked closely with several S&L's in my market. Very closely. I had the unusual opportunity to view a couple of loan requests that were granted for ultimate suburban office development. I got to "pencil" out the deals. Not one of them made sense in our market. Regardless the loans were made. Ultimately the 2 institutions that "granted me" that opportunity eliminated my participation...because I pointed out that the deals were highly unlikely to make money within a market environment wherein the costs of development were not being paid back by "expected" rental returns.

One thing that the above link from the fdic historical perspective doesn't mention with regard to this aspect of business/economic history:

When the S&L's were granted these additional opportunities they had no staff qualified to do the loan work on commercial real estate. Nobody. They had never done this work before.

They started hiring up like mad. They had no histories for limiting or reviewing the loans they were making. Some of their personnel came from commercial banks with histories...but they had been junior people moving into more senior and more responsible positions.

The S&L's were personnel weak, had no history with regard to reviewing the credit worthiness of a lot of loans.....and in the aggregate contributed to an immense oversupply of office space that created a huge negative financial problem for the nation.

They should have had a significant level of oversight that would have tightened the money supply once the oversupply of office buildings became apparent....and it did become apparent.

Too bad there wasn't a filter at the top to stem the flow of money. Ultimately it created a financial disaster.

Hey markets are great...but man they can f*ck themselves up....and in the process cause consequences that are far more serious than their own little worlds....-> that crisis in the 1980's and 1990's....and on a residential basis -this crisis that is far bigger now.

Ultimately financial markets need oversight and levels of control. Otherwise they f*ck up and everyone pays.

 

I'd rather not.

 

Nice double entendre. Now you are implying he hasn't done anything in 5 months in office, when everyone else on the planet recognizes he has done more than any president since Hoover/FDR.

LEAVE OBAMA ALONE .

 

True, he has. SPENT MORE THAN ANYONE. FUCKED WITH MORE THAN ANYONE. TAKEN OVER AND ASSUMED MORE GOVERNMENT CONTROL THAN ANYONE.

For the history buff, Obama is not too far off from Hitler in terms of the similar rise to power and assumption of state control. Scary shit.

 

You see, that's your opinion and presumption.

You BELIEVE he has done more than Bush. Then, you PRESUME to speak for the planet by saying everyone agrees with you.

That kind of belief and presumption doesn't seem to represent an Obama supporter.

Rather, you are an Obama critic by saying he has done more than Bush in 8 years. You imply 5 months of Obama is as long as 8 years of Bush.

Are you saying you can't tolerate Obama nearly as long as Bush?

 

Saying Obama has done more in 5 months than Bush in 8 years makes me an Obama critic? With reasoning like that, I can see why Bush supporters are considered "loons". The polls agree with me. The CBO agrees with me. The congress agrees with me. The jury has weighed in. Spending is stimulus. Its a good thing, and we will do more. Bush didn't alienate the world because of Iraq. It wasnt because he spent too much. Its because he didnt spend enough by a long shot, and we are here to fix that.

 

You cannot spend what you don't have.
You should not spend what is not yours!

 

That is interesting, pizzaman. Two things about the recession, and real estate that drops in value.

It kills the existing current owner. It is great for existing or future tenants, and it is great for cash rich buyers who can buy low.

As a commercial real estate person I worked through tight markets where rents went up...and soft markets where rents went down. I have some real estate, most of which is retail. I've gotten signals that I'm gonna get hit w/ requests/demands for rent reductions. Commercial doesn't generally move in either direction super fast. Something real unusual has to occur to see enormous changes quickly.

We will see. Right now I'm debt free. If the real estate market tanks I can sustain w/ very aggressive rents.

more power to your boss. He got good deals. As business people we tried to set up a business and take advantage of what shoulda been a much lower rent. The owner's attorney and advisor kept telling us they agreed with us (as a tenant) but the owner didn't go through with it.

Too bad. No deal. No rent. The space is still vacant.

Its a recession. It lasts for a long time. We have no idea if and when recovery will start. The whole thing will be tough for a while.

Meanwhile, more power to your boss. If he was real aggressive he revised leases for a long time and rewrote the deals to sustain lower rents for a lot of years. (and I'm glad I'm not the landlord in any of those cases)

btw...if I were him...I'd look at what nakedpizza in new orleans is doing w/ twitter. Its neat. I think its working.

 

Yes.

Since you can't figure out why, it makes it clear you are very critical of Obama, since he gets less time to prove himself, than Bush.

So, you're the spokesperson for the CBO, the Congress, Obama, and the world?

That sounds like a critic, and a presumptuous one at that.

You keep making these strawmen arguments, which makes it clear you don't like Obama.

You seem to dislike Bush too, but I don't know if you hate him as much as Obama.

 

Your two points:
1) I claim to speak for these other people.
No, I don't. The CBO has their projections, Obama has his. Both put us at the numbers I stated. The only reason we won't be is if some of the pussy conservative symp congressmen get cold feet and fail to continue to authorize, but in either event, Obama will do his best to push for it. Secondly, a good portion of the money has ALREADY been allocated and spent.

2) Bragging about Obama spending after only 5 months makes me a critic, since I'm not giving him 8 years like Bush was given.
That argument falls apart for two reasons.
a) As I have already indicated, Obama has done more in 5 months than Bush in 8 years, so why wait?
b) Your argument only works if I think spending two trillion dollars more per year than we have on liberal (and some not so liberal) programs was a bad thing. Like Obama, I don't. I've stated as much. These social programs have sat on the shelve for decades while the poor and under privileged in our country have languished away. Many claim Clinton wanted to put them in place, but the economy was too hot to do that kind of govt. spending then. Even if you are a conservative, you can use the excuse "Our economy needs spending to save it". Spending is stimulus after all. Either way, this is the rational that holds our president at over 50% approval(by any poll), or are you going to argue with that as well.