Where is the US economy headed?

@Cycloptichorn,

Quote:

Stick to drinking, it seems to be the only thing you know anything about at all; for you could not be more wrong about your predictions or your understanding of the basic facts of the situation.

Oh yeah. I was into property for twenty years. Flats, houses and commercial. My desk was where the buck stopped and it was my money.

I might not know your law but I know human nature. If you want to discuss these matters in terms of Mr Responsible Nice Guy that's your affair.

And your last post is not worth bothering with. Dream on.

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@spendius,

spendi knows human nature. ROFL

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@Lightwizard,

Quote:

A law degree does not indicate that one is a practicing lawyer.

Maybe but it indicates being steeped in the mores of the legal profession. And if you don't know what that means heaven help you.

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@spendius,

spendi, In one post you say you

Quote:

"...understand human nature."

In the next, you say

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"but it indicates being steeped in the mores of the legal profession."

FYI, they are contradictions. Try to determine why that is so. LOL

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@spendius,

spendius wrote:

Quote:
Stick to drinking, it seems to be the only thing you know anything about at all; for you could not be more wrong about your predictions or your understanding of the basic facts of the situation.

Oh yeah. I was into property for twenty years. Flats, houses and commercial. My desk was where the buck stopped and it was my money.

I might not know your law but I know human nature. If you want to discuss these matters in terms of Mr Responsible Nice Guy that's your affair.

And your last post is not worth bothering with. Dream on.

And yet, you did bother with it. I suppose you can pull yourself out of the stupor long enough to pen a rather un-witty response every now and then.

Human nature or not, you are ignorant as to the facts of the situation, and that doesn't bode well for your success in this thread.

Cycloptichorn

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@BigTexN,

Quote:

Hmm, government housing...thats a good reason to uproot your children, abandon your existing home in a quality neighborhood and crush your credit for...

I didn't say that. What's a good reason for people who are desperate. Gone to drugs, marriage breakup, got sick, lost their job, all sorts of stuff? Spent too much.

And there's a lot of that happening. They have no alternative. That's the best reason there is. And it snowballs as we are witnessing. Theoretically there is no bottom to house prices. Houses can even become a liability.

Why do you think governments are in panic mode?

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@spendius,

spendi, Who are you trying to describe? And what point are you trying to make?

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@spendius,

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I didn't say that.

Yes you did, tell me this quote is not government housing:

Quote:

We house people. We don't like the unsightly mess the homeless create. If there are any kids the local authorities are duty bound to house them.

And the problems you mention people having...Gone to drugs, marriage breakup, got sick, lost their job...have been around since time began but people never "walked away" from their homes just to get into government housing.

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@BigTexN,

spendi doesn't only contradict his own statements, but can't remember what he said in the past. His credibility is going down the shite hole quickly...

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Good evening to all. The Dow ended right at 8000 on Friday. The week started with reports of huge job losses on Monday and continuing bad economic news throughout the week. Too withering data for the markets to sustain any rally.

Every Cloud Has a Silver Lining
I found this amusing yesterday from Dow Jones. Some analysts added up the sales of now defunct retailers (Circuit City, Linens N Things), added in estimated sales from shrinking chains (Gap, Office Depot, Starbucks) and sick outfits and came up with cumulative sales for them last year of $20B. That revenue, or much of that, will flow to the "survivors" of this downturn.
So those retailers who can hang on might come out okay.
You have heard me argue before that we have too much retail in the U.S. It sets up an economic model that is prone to collapse in any size of recession and it adds to unhealthy urban sprawl.
On a personal note, when I, the semi-retired Johnboy, went home today, we had had a good half-day. If the rest of the day is good and tomorrow is good, my little chain of stores will equal last January. That would be quite a feat and my employees know it.

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@spendius,

What mores of the legal profession -- those dictated by you? Rolling Eyes

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@realjohnboy,

rjb, We can anticipate further bad news in the coming weeks and months. I'm not too confident about the stimulus package now being processed through congress, because they're adding too much social programs rather than working to create jobs. Their emphasis on social programs is not the best way to help the American people. Job creation will stimulate more jobs; it's a very slow process, but that's the only hope the majority of working Americans have in this economic environment. There's no magic wand when consumers are spent out over their heads, worry about the security of their jobs, and many losing their homes. That's what congress must work on first; everything else can follow as the tax base improves.

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@cicerone imposter,

From the NYT:

Quote:

January 31, 2009
Steep Slide in U.S. Economy as Unsold Goods Pile Up
By JACK HEALY and LOUIS UCHITELLE

The United States economy shrank at its fastest pace in a quarter-century from October through December, the government reported on Friday, as consumer spending and business investment collapsed, signaling more economic contraction in the months ahead.

In the broadest official accounting of the toll of the credit crisis, the government reported that gross domestic product shrank at an annual rate of 3.8 percent in the fourth quarter of 2008. While that was less than economists’ expectations of a 5.5 percent drop, the decline would have been much steeper " more than 5 percent " if shipments of goods had fallen as sharply as orders.

I still think the government stats on the shrinkage of our GDP is understated.

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@cicerone imposter,

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I still think the government stats on the shrinkage of our GDP is understated.

So do I. And how can you possibly agree with me seeing as how I am a permanently pissed up wanker who hasn't the faiuntest idea what I'm talking about?

I tossed a thought into the corner of the pub tonight-- suppose you won the roll-over lottery. £22 million odd. What would you do with it?

They were still arguing about it when I fucked off to get back to you silly sods.

1 Reply

@spendius,

I couldn't win, because I don't gamble. Simple, isn't it.

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@cicerone imposter,

Oh- how twembly-wembly ci. Don't come in my pub for ****'s sake.

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@spendius,

You don't have any fear of that!

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@BigTexN,

BigTexN wrote:

Quote:
Therefore, the propping up of the bank and your loan, and all loans like yours, isn't it the same as paying for the inflated value of your house, and others like it?

The answer to your question is an obvious "No".

The loan value, once the loan is made, is unaffected by the inflated (or deflated) value of the home. The reason is twofold:

1) The amount of the loan is due regardless of the value of your house.
For example: On the downside - If my house is worth half as much, does that mean I owe twice as much as what I applied for? Or on the upside, if my house doubles in value, does that mean I now owe half as much as what I applied for?
2) The vast majority of mortgages are and were made to people who do not intend to sell simply because the market value went down. They bought their home to be a home. So, if I bought my $100,000 home for $200,000 with a mortgage worth $200,000, I will continue to pay my mortgage today just as I have been since the day I took out my mortgage to begin with. A person wouldn't simply 'walk away" because their house is worth less. They bought it to live in for more than a month and a half.

Banks, however, with mark-to-market accounting and regulated reserve requirements face a different scenario.

If they do a mortgage today for $200,000, transparency accounting will force them to list the actual value of that asset as $120,000 on their books. This is because there is no market for mortgages. So, if they tried to sell that mortgage in the open market, it would be worth 40% less than what they wrote it for. Therefore, they must show (mark) the asset on their books at the current market value.

That now becomes a "writedown of assets" and will require a "cash infusion" (government bailout funds) to bring their capital up to meet minimum reserve requirements.

Hence, no bank has any incentive to make any kind of loan....which leads to what the banks are doing now, hoarding the cash they get from Uncle Sam.

The quandry is that, without access to credit, the economy loses liquidity and stalls. But, if the banks make the loans and then they have the market-to-market accounting force them (on paper anyway) into insolvency.

Okay, perhaps for your house, you are paying the loan, but I am talking about the past practices of highly leveraging loans, as your house apparently is an example, if you look at the total pool of loans in this country that were highly leveraged to the hilt due to the practices that your home loan was a part of, we are paying for those faulty loan practices. Although you are paying your loan payments, there are enough other people that are not. Apparently a very high percentage of home owners do not live in those homes, and contrary to your desire to pay for your residence, other owners and especially investors that do not live in them do not care to pay for a house that is worth far less than the loan is worth, so they are walking away. The vicious cycle then comes into play, as more owners walk away, home values fall further, then more owners walk away, and so on, until the process stabilizes again at some point at a much lower home price market.

Again, those of us that did not leverage our house to the hilt are paying taxes to shore up banks and home owners that did. Specifically, we are paying for those people that walked away from loans, but the whole culture of highly leveraging homes and properties is at fault. That includes us, the public, that bought into the wisdom of buying homes in that manner.

Because I have always lived conservatively, I have always bought a home of less value than the real estate salesman told me that I could, and I always had a pretty good down payment to avoid having my home mortgaged for near its market value. My home now is almost paid off, and only due to some improvements and a line of credit, I now owe some, but less than 10% of its probably value. And similar to ci, the line of credit started out at about 4.875, but I am now only paying a little over 3%, so I don't have much incentive to pay more than the minimum each month.

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@okie,

okie, Most home purchased are highly leveraged; from 80 to 90%. Those who purchased homes with no down payment, interest only, variable loans are the ones who are in trouble today. That they didn't have the common sense to know they could not afford to buy a home can be blamed on their own ignorance, and the people who sold them the homes who shouldn't have. All they cared for were the quick commissions they earned by selling to those who really didn't qualify. The banks and finance companies were quick to trade those instruments, because those who rated them always rated them higher than they should have. They're all guilty of wrong-doing.

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@cicerone imposter,

Agree on the stimulus package. Like the last tax rebate stimulus, it is very hard to stimulate an economy with borrowed money. Jobs, and a competitive manufactoring sector are what is needed.

1 Reply

Where is the US economy headed?

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