United States Heading towards a Depression?

The housing market is still in a bubble. The FHA has beome the new subprime and is offering effective zero down loans. The $8000 housing credit is also helping to keep the bubble going.

In the New York metro the rent roll won't cover the cost of repairs, taxes and mortgage.

However, at some point people are going to start buying properties as a hedge against inflation. Further, inflation will insure that prices at some point stop falling. The downside is that he will be difficult to sell when interest rates are double digits.

I don't believe that we have deflation. Prices on some items like cars and lobster have collapsed making the statistics go negative. Interesting how the wholesale price of lobster has dropped to $2.25 a pound and is cheaper than hotdogs (http://finance.yahoo.com/family-hom...dinner-try-lobster.html?mod=family-love_money)

However, the average is seeing inflation. The corner liquor store has raised Henikein to $8.50 a six pack, a loaf of wonder bread is $3.29 and property taxes are increasing pushing rents higher.

US wage increases have averaged 1.8% over the last 12 months. But the bigger story is wholesale prices. The Producer Price Index for Finished Goods rose 1.8 percent in June, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported. This advance followed increases of 0.2 percent in May and 0.3 percent in April.

The way that the Government is spending money inflation is sure to run out of control. The U.S. budget deficit that is projected to hit $1.85 trillion this year, four-times the previous record
http://finance.yahoo.com/news/Top-US-officials-seek-to-apf-700676749.html?x=0

 

You are right that the FHA and the 8000 dollar credit is creating a new bubble. Someone bought a house next door to us using the FHA loan. They can't even speak decent english they might even be illegal mexicans. They would have never gotten that house if it wasn't for governments interference.






And for you obama fans out there read this


Geithner Won’t Rule Out New Taxes for Middle Class


http://blogs.abcnews.com/george/2009/08/geithner-wont-rule-out-new-taxes-for-middle-class.html

 

It worked for George W Bush!

 

And that's why this is going to be a depression, not a recession.

Very interesting -- thanks for the link!

15% shrinkage in the economy seems just about right, but it looks like it's going to get worse. Transportation, a leading indicator, is down almost twice that.

I concur. I still am not "in" real estate, because I believe it has a long way left to fall.

It will be difficult for "ordinary" people to buy when interest rates are double digits. But it will be easy for two groups:

• People living on the public dole who will benefit from government-backed loans
• Rich people, like the limousine liberals who got Obama elected

Who will be screwed? The American middle class -- as per usual. Anyone with a job is going to be screwed, paying to the rich and paying for the poor.

We've had four straight months of deflation -- the first deflation since 1955.

• Mar -0.38%
• Apr -0.74%
• May -1.28%
• June -1.43

I don't think this will continue. Falling demand for real goods and services will be far outpaced by the Obama administrations voluminous printing of dollar bills.

That, more than anything else, is going to completely screw the United States.

Obama is going to destroy the U.S. more effectively than Osama ever could.

The Democratic politicians have to tax the middle class.

They can't tax the rich, because the rich are funding their political careers.

They can't tax the poor, because the poor are providing the votes to keep them in office.

The middle class are the working people who support the economy -- the Republicans. This is a win-win for the Democrats. They not only get to reward their own supporters, they also get to punish the people who didn't vote for them.


In other news, the Associated Press has published a pretty map of the U.S. which shows which regions are being hit hardest by the depression: http://hosted.ap.org/specials/interactives/_national/stress_index_premium/

 

No, that worked for a democratic congress. Yes, GWB did spend quite a bit too... He also cut spending at the executive branch every year he was in office. Meanwhile congress increased their spending and gave themselves nice fat raises. Bush cut wages in the executive branch.

Remember Bush fell into a poorly managed underfunded military and had 9/11 and an expensive war to deal with to keep us safe. Yeah, he did spend some money. You have me there. He just spent less and in the right places.

He did not spend trillions on useless government waste. He instead spent billions on keeping us safe so that democrats could do that for him later.

 

The overall market is in a bubble. But prices only will decline so much considering the amount of inflation that we have had over the last 10 years.

Prices were still going up during the '80s even though interest rates were sky high. They were a lot more owner financed deals. I think the key for real estate is whether you can use the space or make some rental income. Capital gains taxes and interest rates are going up which will make it hard for real esatate investors. For someone that plans to hold for 10+ years they will make a profit. But the investor needs to do their homework.

Perhaps at the retail level. But wholesale prices are inflating. The price of gold is almost 1k per ounce. In a deflationary environment the price should drop.

 

I am thinking that perhaps there are real estate markets outside of the U.S. that are better investments at this point in time.

Very true. I saw some very nice newly built apartment condos at quite reasonable prices (compared to rental rates) in Panama City, Panama.

There is still a serious shortage of modern properties in Panama.

And not just real estate investors.

When capital gains taxes rise, investors are motivated to hold onto their assets and not risk them for minimal reward.

It seems to me that the price of gold is being held "artificially" high by people who are seeking an investment that is safe from government mismanagement. They must not remember back to when Roosevelt made it illegal for Americans to own gold.

 

Panama is booming.

We have record deficits and tax revenue is falling 18 percent , the biggest annual decline since the the Great Depression.

http://www.examiner.com/x-6478-NY-Page-One-Examiner~y2009m8d4-US-Tax-revenue-down-since-1932

 

To a democrat, they would see that as, "we need to raise taxes, we obviously are not charging rich people(middle class) enough."

To a Republican it more like, consumers are not making or spending enough, therefore tax revenues are going to be less. "Lets cut taxes and let Americans begin producing and spending again"

Every single year under the Bush Tax Cuts, revenue to the federal Government increased. That there is a fact. SOURCE? US DEPT OF THE TREASURY.

Same source --- the Surplus Deficit was also reduced over that same period. Those savings? Upwards of -35%. Those savings? The result in a reduction of the President's Expenses.

Over that same period Congress increased their spending. Social Spending went up 11%.

Clearly voting for a democrat is just stupid.

 

Thats why we should be cutting the federal government instead of what the republocrats and demopublicans do, so we don't have to raise taxes or increase our deficit.

 

During the Bush admin, the Federal Government at the Executive Branch was cut.

You are correct though. Both side, especially Dumbocraps need to recognize that you cannot spend yourself into prosperity. I think more of them would realize that if they were required to spend their own money on their travel, lodging, postage, clothing, food, and of course HEALTH CARE!!!

 

And to an Austrian Economist follower and Libertarian this says (for both sides) "You're all retarded, we need to bring back manufacturing by lowering penalties and making ourselves more marketable than other countries."

Spending is not our problem. Manufacturing is. We need to have real goods being manufactured, assembled, and made. We can make plastics from grass, we can build better machines, and we could make a better car if only our companies were allowed to fail when they are failures.

Peter Schiff knows what he is talking about. Go look up his August 3rd youtube broadcast.

 

Their presidential election went the opposite way ours did. They voted in the pro-prosperity candidate.

And that's only 2009. 2010 is going to be much worse.

Why? Because those corporations that can still earn a profit are going to take as much profit as possible this year, preparing for the tax increase that will be pushed onto their backs next year.

If you can slide profits from next year to this year, it makes sense to do it. This usually involves delaying expenses and investment.

Also, if you plan to sell an asset, sell it this year. Next year you will pay much higher capital gains taxes.

It is so easy to spend other people's money.

Manufacturing is just one way to make money. It may or may not be the best way to utilize America's true resources.

 

I think that the economy "fueled on inflation" is going to improve over the next couple of years. The US was picking up 1977-1979 until inflation started roaring into double digits.

I'm wondering what will happen to the Banks should interest rates soar and they have trillions outstanding in 5% fixed mortgages.

White House plans to shut down Fannie, Freddie and create new federal agency.

http://news.yahoo.com/s/nm/20090806/bs_nm/us_obama_fannie_freddie

 

I agree - manufacturing is the heart of a modern economy. The notion that somehow we can lose manufacturing and move to some kind of post-industrial paradigm is quixotic, to say the least. (Though I'm quixotic in the other direction - screw modernity).

Name dropping, admittedly. Zysman, my old prof. He's preached this for decades. Dated, but only in the details, in my opinion. The central thesis was apt.

The blurb:

 

Barry's been doing that all his life. He does not know any better. You are right though, its real easy to spend someone else's money.

 

Taylor Bean shut down (5000 jobs lost) 12th largest Mortgage lender and Largest FHA (Hud) Lender overall.

Just as I suspected massive fraud in FHA loans.


http://online.wsj.com/article/SB124940991556305327.html







Major Jewelery retailer files bankruptcy.

http://www.reuters.com/article/smallBusinessNews/idUSTRE5751LU20090806

 

No... Really? I don't believe it.

 

LOL

In a year all these FHA loans are going to blow up. So now we got massive Option Arms to reset over the next 2 years and now on top of that we got phony FHA loans to default around the same time. We are in trouble.....

 

Can anyone say CRA and CARTER??? That's where most of this crap started folks.