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The subprime mortgage/credit debacle is just the tip of the iceberg. I'm giving it 6 months to a year before the shit hits the fan. It will be a good time to pick up distressed property. Beyond that, I think it's finally going to tank (as many have predicted for years) Any optimists? Different timeframe?
Jackie T
P.S. The U.S. Economy is what I'm focused on. It's hard to say what the defaults will affect beyond that.
My bet would be on 2008.
Several things are going to happen then:
1) A lot of ARMs are going to reset. Foreclosures might snowball, especially if a lot of people are hedging their bets/waiting fro property values to fall
2) Baby boomers start retiring en masse, and demanding their Social Security. For the record Social Security is a Ponzi scheme. It will collapse.
3) A democrat takes us out of Iraq, the US abandons all hope of keeping the petrodollar. The US dollar tanks.
Sounds about right. I've heard Social Security was solvent 'til '11, but it won't be based on those other factors. It will be interesting to see how 1 and 2 interact. The USD is already showing some downward movement. My sense is the fed will try a bailout which will backfire sometime next summer. They'll end up cranking up the printing presses.Quote:
Originally Posted by Bikerpunk
Jackie T
Well, Bubbles has put the Fed's nuts in a vice.
The usual wisdom is to lower rates when the economy hits the shitter, and here's why
Back in the old days, people made shit, and people bought the shit that got made. Factories would eventually start making more shit than people were buying said shit, and so inventory would pile up.
"Stop making shit, we're trying to move this shit" basically results in the factory making cutbacks. This means that lo and behold, workers lose jobs, even less gets bought.
So they lower interest rates, so buying stuff on credit becomes more attractive, and therefore excess inventory gets sold, they need to ramp up production again, etc.
Problem is, we don't have overcapacity problems, we simply have the problem that we don't make anything and we spend and consume far more than we make. Making credit easier is digging the hole deeper.
Now, right now the USD is tanking because the petrodollar is no longer holding. The only reason why the USD has ANY value at all is that the US made a Faustian bargain with certain tribes in the Middle East that ALL oil would be bought and sold in the US dollar, making an inbuilt demand no matter how hot they ran the money printing presses. This is changing -- and as more and more countries are accepting the Euro... that means the greenback don't look too good, long term.
The financial district right now is seeing a credit crunch because the banks can't properly assess the risk of holding dodgy paper which was the result of them pooling mortgages and selling said mortgages as securities. As more defaults and forfeitures hit the books, companies are increasingly nervous about the inherent risks of owning this dodgy stuff. Banks lend you money and then sell your loan to investors, who get a percentage of your interest, but the bank gets its money back to lend to someone else. What they want is for the interest rate to go down, meaning refinancings can occur at lower rates so forefeitures go down, but lowering the interest rate will hammer a dollar already in freefall.
So the Fed Chairman is frankly fucked either way - he lowers the rate and people will bitch the dollar is worthless, and if he doesn't the stock market will continue to wibble, but more scarily, liquidity in the credit market will drop to zero, meaning companies won't be able to get the financing they need to expand, and bye bye economy.
Well, Bubbles has put the Fed's nuts in a vice.
The usual wisdom is to lower rates when the economy hits the shitter, and here's why
Back in the old days, people made shit, and people bought the shit that got made. Factories would eventually start making more shit than people were buying said shit, and so inventory would pile up.
"Stop making shit, we're trying to move this shit" basically results in the factory making cutbacks. This means that lo and behold, workers lose jobs, even less gets bought.
So they lower interest rates, so buying stuff on credit becomes more attractive, and therefore excess inventory gets sold, they need to ramp up production again, etc.
Problem is, we don't have overcapacity problems, we simply have the problem that we don't make anything and we spend and consume far more than we make. Making credit easier is digging the hole deeper.
Now, right now the USD is tanking because the petrodollar is no longer holding. The only reason why the USD has ANY value at all is that the US made a Faustian bargain with certain tribes in the Middle East that ALL oil would be bought and sold in the US dollar, making an inbuilt demand no matter how hot they ran the money printing presses. This is changing -- and as more and more countries are accepting the Euro... that means the greenback don't look too good, long term.
The financial district right now is seeing a credit crunch because the banks can't properly assess the risk of holding dodgy paper which was the result of them pooling mortgages and selling said mortgages as securities. As more defaults and forfeitures hit the books, companies are increasingly nervous about the inherent risks of owning this dodgy stuff. Banks lend you money and then sell your loan to investors, who get a percentage of your interest, but the bank gets its money back to lend to someone else. What they want is for the interest rate to go down, meaning refinancings can occur at lower rates so forefeitures go down, but lowering the interest rate will hammer a dollar already in freefall.
So the Fed Chairman is frankly fucked either way - he lowers the rate and people will bitch the dollar is worthless, and if he doesn't the stock market will continue to wibble, but more scarily, liquidity in the credit market will drop to zero, meaning companies won't be able to get the financing they need to expand, and bye bye economy.
Uh, I submitted this once, wtf?
I feel sorry for Bernanke. I can already see politicians pointing the finger at the poor guy either way.Quote:
Originally Posted by Bikerpunk
Jackie T
That will be a smokescreen. There's going to be a metric FUCKLOAD of money being made.
I had the following conversation with a co-worker yesterday
"I'm looking forward to this credit crunch getting worse."
"How so?"
"Well, it means that housing will go down."
"And?"
"And I'll be able to afford a house!"
"Wow, you have that much cash?"
"No..."
"Well, where are you going to get the money FROM?"
"The bank, duh...."
"Uh, the news is telling you the banks DON'T HAVE ANY MONEY TO LEND and are SUSPENDING LENDING."
!!!!
People with fuckloads of cash (Gates, Buffett, Bush, Clinton, Chang, Liang, Leng) will waltz in and buy up property for pennies on the dollar.
THEN watch the price go up. You think it goes up when Joe Blow wants to flip a house, wait til a real fat cat wants to flip half of Pittsburgh.
I'm hoping they default on my grandparents' old house (market valuation only at 100K, first house they bought after immigrating) I have enough cash if I get in in time. I check the tax assessor's site weekly. As it worsens, that'll be daily. Pittsburgh would be hard to flip, although there is enough to be made there that some will.Quote:
Originally Posted by Bikerpunk
Jackie T
Ah, the old tax auction trip? Tons of get rich quick schemes about that one. Many well heeled folks will be auction bidding higher than you for that.
It won't be worth much at that point. Worth a shot. They'd have to be fairly optimistic to go higher than 10-20 if the economy really does tank. I'm definitely not counting on it though. I'm thinking it may go REO back to the lender (who would unload it quickly). It would really depend if anyone seriously thought they could do anything with it. I'd just pick it up to live in.Quote:
Originally Posted by Bikerpunk
Jackie T
Oh, not you. Any potential competitors...
oh I know. If someone saw potential, it'd be gone. It's in a mediocre neighborhood in St. Paul though. Timing would be everything.Quote:
Originally Posted by Bikerpunk
JT
well of course housing was set to tank, because what is housing but a place to sleep, and keep your shit, and play with your shit, it aint worth at all what the prices have been, insurance should go to, hard to say cause it's a real messed up game.
next big economy...security, everybody wants that
I think you're right. I will be operating on that assumption when analyzing policies and trends. I'm hoping that civil and personal freedoms will expand, however.Quote:
Originally Posted by Mr Karl
Jackie T
well civil and personal freedoms will have to expand because that's where the big money will be made providing security
I'm not sure I follow you here. What I see: A desire for economic security. Do you mean physical security? I'm looking more at the likelihood at changes in how the U.S. economy operates. I don't see a "new deal" but something akin to it. It would not be directly related to civil liberties (although an economic libertarian will see some of it as a contraction thereof)Quote:
Originally Posted by Mr Karl
JT
bla blah blah.
I hope the economy collapses tommorrow. the economy is stupid and boring.
we should all build forts out of cardboard like we did when we were kids. a cardboard skyscraper? wouldn't that be something to see! and yeah, we'll probably get some skinned knees and broken hearts, but it's still a lot better than anything else ever.
Im with u, lets build tree houses too!
Theres alot o talk about the american econ at the mo, the british econ is pretty steady at the mo, bin long time comin n new pm was the chancelor so should steer us through fingers x
I'm not sure I quite yet follow me there, have been pondereing that thought the last day and when you think about what security is....well whoever can provide total security is going to be really rich.Quote:
Originally Posted by Jackie T.
on a lighter note, the exchange offered by stores up here for the us dollar is less than a canadian dollar
Sounds fun. Tomorrow? I wake up in the same world.Quote:
Originally Posted by Morning Glory
JT
Total security. I think we're both conceptualizing but can't define it. Has the value of the USD ever been that low up north? I don't pay much attention to that exchange.Quote:
Originally Posted by Mr Karl
JT
been a long time since the USD' been that low, maybe Diefenbaker
i hope the US eventually collapses into autonomous states.
I am trying to buy a house in the next six months - a year. I actually put an offer and escrow check for a place last week that had been foreclosed on by the bank, but was OUTBID. My final offer was only 4k less than what the bank was asking, so some schmuck came along and gave them exactly what they wanted. *sigh*
I'm not sure real estate near DC follows the exact same set of rules as most of the rest of the country....but I only see housing prices going down another 7-10% ,tops, in this area. Damn glad I didn't buy a few years ago....
I'd have to know *who* you were outbid by. Prices will fall off at different rates. In areas where there is a limited housing supply and a lot of people wanting in, they'll fall of less. The economic dynamics in Cali are a lot worse. Prices may not collapse, but places will get bought up just for the real estate they sit on, I see a collapse that goes way beyond property though. It needs to be corrected fast. Like MG and bikerpunk have alluded to, we have the cash now, we won't as we expand the debt and the dollar loses the petro/default currency advantage,Quote:
Originally Posted by kclark
I see some weak currencies gaining on the dollar. Countries that deliberately devalue their currency are struggling not to keep up (they keep the exchange down to dump exports) Economist Magazine rates the actual value of the Ukrainian currency at 2.71 per USD whereas the exchange is 5.05. That is just crazy.They are growing fast but still unstable economically. That means Russia has a lot more actual cash and power than people seem to want to admit to. China owns a shitload of our debt. So: I do hope you get in in DC. You will be fine as long as your job is somewhat recession proof. Overall dynamics of the US economy are really getting bad though.
JT
Were it feasible, I wouldn't mind. The state I'm in (Minnesota) could easily be self-sufficient. There are a lot of co-operative ventures to get local agriculture to market. It would devastate other states though. Regardless, I have every intention of keeping things local here. You lose some corp jobs and people, but you keep the environment clean and need not worry about the feds beyond taxes (and silly shit like phonetaps if u take the man a bit more seriously than I do at this point) I joined the local Green Party for this reason. I even told em I was pro-gun ownership, conservative on some criminal issues, and opposed to any unilateral disarmament. The policy chair was too! We just separate party from personal politics. Main goal is keeping things local.Quote:
Originally Posted by cheshire centauri
JT
yep... I can now afford almost as much czech viagra as you guys... yay!Quote:
Originally Posted by Jackie T.
http://www.boingboing.net/200511211104.jpg
Russia has more oil than god. They have not been our poor economic cousins for some time... the country is absolutely loaded and an economic energy-rich powerhouse (well the very few rich powerful among them are anyway) and throwing their weight around again like the natural gas sniffing cossacks on steroids that the oligarchs are.Quote:
Originally Posted by Jackie T.
i.e. you work in the beer industryQuote:
Originally Posted by Jackie T.
http://i3.photobucket.com/albums/y99...c/debt-big.gif
I've always wondered why people assume fiat money to have any actual value. The USD is backed by petro to some extent. Beyond that, we are mass consumers deeply in debt.Quote:
Originally Posted by helcyon
There are plenty of recession proof jobs: You can even cash in on it. Divest currency and practice bankruptcy law (I'm assuming the current bankruptcy law can be considered dead letter when people start filing unemployed with a 1/2 mil in debt.
JT
i do this crazy thing i have a couple gas cans and i check the price of gas at this one gas station and when i dont fill my gas cans the price of gas seems to rise(and i wish i stocked up) when i fill them up the next couple days the price of gas goes down and i am stuck with more expensive gas that what i could buy fresh
well i filled them up 2 weeks ago and now gas is 17 cents cheaper a gallon
i guess i had to take one for the team
Interesting. The smart money is on the stock market going up like a rocket when the fed massages the rates down to 4%.
The dollar will fucking suck, but hopefully the early entrants into land will clean up.
That's wild. You think Bernanke would go that low?Quote:
Originally Posted by Bikerpunk
JT
Apparently there's a really good, really strong case for it.
Apparently when this whole thing plays out, people will hail the dude as a genius.
I thought it was a fucking retarded notion, but it's on Bloomberg...
Wow. That's all I can say. I'll have to read up on it.Quote:
Originally Posted by Bikerpunk
JT
http://www.bloomberg.com/apps/news?p...d=aYmu27w3_3aM
Fill ya boots, Jack. Avoiding recession, a gentler landing and then a takeoff of the markets.... yup. That's some genius.
I'd like to believe it will turn out that way. Given the Greenspan era, I tend to question it will be that simple.Quote:
Originally Posted by Bikerpunk
JT
How the rich get rich:
get people greedy so they buy and buy and buy and put the prices of stocks up so you can sell high
then
spook the shit out of people so they sell sell sell and race to get rid of stocks and other assets. Then they buy low.
I can see them buying up the defaulted mortgages and renting em back to the same ppl after they get a super low rate loan as well. Fuck'n humans haha. The currency is another matter though. Some of the poor folks are gonna go postal after this.Quote:
Originally Posted by Bikerpunk
JT
Yeah, I can see that, and more's the pity, too.