The Assumption That Leads To Regrettable Decisions
I suggest a topic on what the collapse of the housing bubble means for the future global financial order. The US mortgage securitization model has failed, and faith in the titans of Wall Street and government has been shaken. What does this mean for macro trends like globalism? What can we learn from past real estate busts, and will the price decline continue to steamroll everything in its path?
From The Star. “The world economy has seen globalization collapse once already. The gold standard era - with its free capital mobility and open trade - came to an abrupt end in 1914 and could not be resuscitated after World War I. Are we about to witness a similar global economic breakdown?”
“There was a time when global elites could comfort themselves with the thought that opposition to the world trading regime consisted of violent anarchists, self-serving protectionists, trade unionists and ignorant, if idealistic youth. Meanwhile, they regarded themselves as the true progressives.”
“But that self-assured attitude has all but disappeared, replaced by doubts, questions and skepticism.”
“The subprime mortgage crisis has shown how lack of international co-ordination and regulation can exacerbate the inherent fragility of financial markets. Even those who have not lost heart often disagree vehemently about the direction in which they would like to see globalization go.”
“The first three decades after 1945 were governed by the Bretton Woods consensus - a shallow multilateralism that permitted policy-makers to focus on domestic social and employment needs while enabling global trade to recover and flourish.”
“This regime was superseded in the 1980s and 1990s by an agenda of deeper liberalization and economic integration. That model, we have learned, is unsustainable.”
The Nation. “The US Congress on Wednesday passed a wide-ranging housing rescue plan to help ease the downward spiral in the property market that is weighing heavily on the US economy. Mortgage finance giants Fannie Mae and Freddie Mac account for about half of the $12 trillion US housing market. They have issued some $5 trillion in mortgage-backed securities. Of this, $1.5 trillion is subscribed by foreign institutions such as the central banks of China and Japan.”
“Loan defaults are now becoming common among those with good credit records. Bank and financial stocks have fallen by almost 70 per cent since last year.”
“It is a bit odd that the bill aims to help homeowners keep their homes. The question is if people can’t afford to pay for their homes, why bother? US mortgage lenders have been committing a grave financial sin by offering loans to Americans, who have poor credit and couldn’t afford to pay for their homes in the first place.”
“This reckless lending spree went on with the illusion that the prices of the US housing market would climb forever. It is an American dream to own a home. But the American dream can’t be realised by irregular wage or salary earners with poor credit records.”
The Dallas Morning News. “The economy collapsed after years of growth. Can’t-miss investments turned to dust. And banks, gorged on years of aggressive lending, careened toward the breach. A portrait of today’s U.S. economy? Time will tell.”
“But with analysts predicting as many as 300 U.S. bank failures in the next few years, many Texans will recall another banking crash. In the state’s 1980s collapse, an energy bust and a subsequent real-estate wreck leveled hundreds of Texas banks, including longtime pillars of the economy.”
“More than 1,600 U.S. banks - 9 percent - failed between 1980 and 1994, involving assets worth $200 billion, according to the Federal Deposit Insurance Corp. The even larger savings and loan debacle from the same period claimed more than 1,000 institutions with assets of more than $500 billion.”
“‘The good news is that I can talk to you about the ’80s without my shrink next to me,’ jokes Dick Evans, CEO of San Antonio-based Cullen/Frost Bankers Inc., the only one of the era’s top 10 Texas banks to survive the crisis. ‘It was tough getting over it.’”
“Gerard Cassidy recalls living through the 1980s Texas bust as a ‘young and naïve’ bank analyst with an insurance company that had a large exposure to Texas banks. ‘I believed them hook, line and sinker, everything the banks told me,’ says Mr. Cassidy. ‘And we went down with the ship.’”
“Out of the ruins, Mr. Cassidy developed his own way of gauging how likely a bank was to fail, dubbing it the ‘Texas Ratio.’ Two months ago, Mr. Cassidy told MarketWatch that IndyMac Bancorp Inc. had a worrisomely high Texas Ratio.”
“IndyMac went bust this month in one of the largest bank failures in U.S. history. Mr. Cassidy believes the situation is less dire than in the early ’90s. But a string of banking failures - even elsewhere - is sure to revive memories of the 1980s, when the state was today’s housing bust, subprime mortgage mess and economic downturn rolled into one.”
“Throughout much of the 1970s and early ’80s, the state thrived on rising energy prices and served as a beacon to opportunity-seekers nationwide.”
“‘The entire country was looking at Dallas in awe,’ recalls Jeff Chapman, a lawyer in Dallas with Vinson & Elkins LLP who started his career here in 1983. ‘There was no city like it.’”
“The state’s banks competed to finance energy and real-estate projects. Hundreds of new banks were chartered in Texas in the first half of the ’80s. It all came crashing down amid a sustained decline in oil prices, a real-estate glut, and changes to U.S. tax law that made investing in real estate less attractive.”
“‘The state lost its swagger,’ Mr. Chapman says. ‘You didn’t see many mansions being put up. The few-hundred-dollar bottles of wine remained in the restaurant inventories. I saw fewer brand new Porsches on the streets. And that’s just at the wealth level.’”
“Things were even worse for everyone else, with widespread foreclosures and job loss, note Mr. Chapman and others who lived through it. ‘Individuals’ spirits were broken, their confidence was shattered, and they sank into despair and depression,’ wrote Texas banker Joseph Grant, in his book The Great Texas Banking Crash: An Insider’s Account.”
“‘It was not uncommon for the borrower, facing financial ruin, to break down in tears in the lender’s office,’ wrote Mr. Grant, who headed Fort Worth-based Texas American Bancshares Inc. when it failed in 1989.”
“Texas banks recorded losses each year from 1986 to 1989, according to Bob Hankins, who oversees bank regulation at the Federal Reserve Bank of Dallas. The state accounted for two-thirds of bank failures in the U.S. in 1988 and ‘89. Nine of the 10 largest Texas banks failed.”
“‘It was as close to a depression as anyone has seen in this country since the 1930s,’ says Frank Anderson, a finance professor at the University of Texas at Dallas.”
“Last year, Richard W. Fisher, president of the Dallas Fed, reflected on some of the lessons from 1980s Texas in a speech to mortgage bankers in Austin. ‘The assumption of permanently high - or permanently rising - prices in an asset class, in this case oil, invariably leads to regrettable decisions,’ he said.”
“Today, the asset class that people once assumed to be ‘permanently rising’ is residential real estate.”
‘The entire country was looking at Dallas in awe,’ recalls Jeff Chapman, a lawyer in Dallas with Vinson & Elkins LLP who started his career here in 1983. ‘There was no city like it.’
It wasn’t just the nation. Dallas had been the top real estate market in the world for 5 straight years when I went to major in RE in Arlington in 1984. It is hard to describe the unbridled optimism. And these descriptions of the mental toll are very accurate. One of my best friends was a bank employee in Dallas at the time. They fired almost everyone but him in his division. And he sat in his office and foreclosed on one person after another, day after day.
I asked him one day, as he told me tale after tale, what got these people into such a mess. He only had one word as an answer. “Leverage.”
He got an ulcer and quit. He was 25 years old.
one word as an answer. “Leverage” ??
And it was repeated again with the S & L debacle in the late 80’s and then again in 2003-06 with a 1.5% fed funds rate and zero underwriting standards…Go figure..
Those who forget history are doomed to repeat it.
But forget “history” when it means money, fees etc for bankers, mortgage agents, real estate agents.Money greed is always first, everyone knows this! The very few who understood “history” are by far better off today. So much for our education system and the government spend today, don’t save policys. The depression will force reality to those who didn’t know or care to know history lessons of the past.
“The only thing we learn from history is that we learn nothing from history.”
The vocal minority who is against global world trade may be a minority, but they scare me. Last time the nations of the world turned inward, Hitler and Stalin came to power. No coincidence. Free trade prevents totalitarian regimes.
I’m just an engineer but I am a globalist. You don’t have to be a Donald Trump to be a globalist. Just like those libs who harp against oil companies for making big profits. WHY DON’T THEY INVEST IN THOSE AREAS AND PROFIT AS WELL? It never ceases to amaze me when people whine instead of profit. Easy to do so. It’s called investing in oil related stocks and in international stocks.
“Windfall” profits taxes on publically traded stocks is even more idiotic when you consider how many pension and retirement funds have Exxon, Cheveron, etc, either directly or through mutual funds. A windfall profits tax on oil companies is just another tax on the people of the United States.
‘The vocal minority who is against global world trade may be a minority, but they scare me.’
The most popular book in China has been a black market anti-state piece that attacks the status quo and is largely circulated among peasants. Engineers often don’t have a problem with globalism because their skills can take advantage of it. But most of the population can’t.
Here in Flagstaff, the average wage is $14/hour. I can’t see how these people can invest in stocks of any kind. And recalling WWII (ancient economic history) doesn’t get us out of this current situation. How do we make a living? Is the so called “free trade” model serving us well? Is it even serving China, Mexico and India well?
As the twin bubbles in stocks and RE fade, and with it the worlds economic engine, the US consumer; we’ll see who the minority is.
Amen, Ben
IAT
Proponents of global trade don’t study the peasants. They target the rising global middle class. Globalization is a very complex issue. It would take months for us to fully explore it. If we are going to compete successfully, we probably need to do unpopular things like partially nationalize the healthcare system.
‘It would take months for us to fully explore it.’
So it is best left to these ‘elites’ as they call themselves? IMO, there is a bigger connection between these bubbles and global trade than is generally acknowledged. When I started this blog, there was much media discussion of how the US buys stuff, and exports mortgage backed securities. That turned out to be less true than thought, but the implications of changing this flow of money would seem to have implications that involve all of us.
“So it is best left to these ‘elites’ as they call themselves? IMO, there is a bigger connection between these bubbles and global trade than is generally acknowledged.”
Absolutely! There is agenda here that has little to do with “our” benefit.
I think much of the discussion about “globalization” and it’s benefits and pitfalls would be better served if we disaggregated global trade in goods from global financial integration.
It is hard to find any economist who does not believe that the free movement of goods based on comparative advantage inceases global and national wealth creation, benefits consumers and the working class, and even leads (in the long run) to income equality and more opportunity for all. We complained about trade in the 1980s, as Detroit got creamed by Japanese autos. Yet from my perspective, those cars were smaller, cheaper, better made, more fuel efficient, and the American working class benefited enormously from more competition in the market place. I drive a small Corrolla, gets 40 mpg, and has yet to cost me a cent in mainenance over five years of ownership.
Of course, there are winners and losers from trade lberalization, and those displaced by new competition are understandably upset. In theory, most economists argue that some of the net gains from trade should be directed to retraining and other programs to equip those who lose out, although this seems to rarely happen in practice. I also think serious discussion is needed on the implications of free trade among states with vastly different levels of worker rights and environmental and safey regulations. But trade negotiations are a reciprocal game, and politics in the WTO are very complex.
But on the balance sheet, trade is a major engine of global economic growth, and the anti-free traders risk doing serious (if unintended damage) to global welfare by making blanket condemnations of trade liberalization.
The financial liberalization since the 1980s I believe is a much more severe threat to global economic stability. Financial crisis have increased in speed and velocity since the debt crisis of the early 1980s, and we never seem to learn the lessons. … Mexico, Brazil, South Korea, Malaysia, Indonesia, Russia, Argentina, Turkey. One after the other the same fundamental patterns play out time after time: 1) Global capital chasing higher returns, 2) exitement and euphoria over the next “big thing”; 3) mass financial flows into economies with weak fundamentals; 4) the leveraged money gets in the game; 5) a few wise heads realize the house of cards is on shakey legs and begin to get out 6) the masses get a whif of trouble and run for the exits; 7) collapse, the destruction of currency values and economic recession,
taxpayers left holding the bag; 9) a long, slow, painful recovery and adjustment.
Never in my lifetime did I expect it to happen in the U.S. But here we are at the beginning of stage 7.
The nature of global finance is inherently speculative and prone to bubbles. Prudent regulatory controls are needed, as is a fundamental re-thinking of the Bretton Woods system.
Globalization is a complex phenomena, and from my perspective (in academia) I see way too much hot-headed analysis (from the left and the right) that does not seem to reflect an underlying understanding of the complexity nor technical dimension of the issues. In the mainstream debates, people like Lou Dobbs (left - I guess) and Pat Buchannon (right - I guess) scare the hell out of me.
Oooops, I did not intend the smilie face after the word recession, which is nothing to smile about.
S’OK - just remember to put an extra space between the ‘8′ and the ‘)’ - otherwise it thinks its an emoticon.
“So it is best left to these ‘elites’ as they call themselves [to discuss globalization]?”
Absolutely not. I have been preparing for current events (see # 7 above) since 2000. After PNTR passed, everyone should have seen the writing on the Great Wall.
What’s more, I was appalled when the Maestro suggested Americans use ARMs to save money. It will be documented as one of the greatest economic blunders in history.
At a time when our economic way of life was being challenged like never before, this tool was hawking suicide loans. We’ve been on borrowed time since. What’s worst, we used that time and capital to build none productive McMansions.
IMO- Lou Dobbs should not scare you, as he is one of the few in the media that calls it as he sees it.
I for one, am against “free trade”. I am though, all for “fair trade”.
What isn’t fair, is having 2 sets of rules to the same game. IE- An American manufacturer needs to (by law) install a million dollar air filtration system in their factory because the government demands it… thus losing their edge against their smoke spewing competition in China.
How can we trade with countries evenly if they don’t abide by the same (or even close) rules regarding clean, safe manufacturing?
This isn’t even mentioning the wages and rights we give our workforce. Other countries use their people as machines, driving the global economy with a “use and discard” mentality.
If a worker loses an arm in China, do you think they are covered by insurance, and/or their government like we are?
Global companies have no conscience, they exist and expand by buying (manufacturing) cheap and selling high. Tariffs are hurdles to them, and hurdles slows them down in their race to high profits.
America has unfortunately, become the stupid “rich” kid. The kid that lived around the corner from all of us growing up.
These are the kids that got all they wanted and never had to pay for it.
While most kids “earned” rewards through good behavior, the spoiled kids were rewarded regardless of their acts… they never had to “earn” anything they received. (Hello 0 down 110% financing)
Note: These were also the kids that traded a handful of #1 Rookie Cards and 6 matchbox racers for a broken 2×4 you called a “sniper rifle”.
We are trading away our ability to be self sufficient and we don’t even see it. We are letting our middle class jobs go “offshore”… and as they do, these earnings are diluted and redistributed until finally getting to the $3,000 per year “middle class” Chinese worker.
I cant stand the argument that we can “re-train” our workforce to be “technical”.
The fact is, some people aren’t built to work on computers, or deal with customers. In fact, they may not be very good at math, or science either.
But you know what?
They are good at punching in on factory floor at 6:58AM.
They are also good at putting in a hard days work.. and going home to coach their kids football team.
They may not bring a new discovery to this world, but they do bring stability to our country. THIS is what we are losing, day in and day out to the “other” industrialized countries.
Hopefully, this “correction” will wake us all up. Hopefully.
“The nature of global finance is inherently speculative and prone to bubbles. *Prudent regulatory controls are needed*, as is a fundamental re-thinking of the Bretton Woods system.”
GASP!!! You communist you!!! How dare you suggest common sense regulations that might impinge on our fascist system!!!!!!
The people who complain about free trade in this situation grossly misunderstand the reasons behind the current American/global economic shitshow, IMHO.
If capitalism fails as an economic system in this country, it won’t be because it failed us. It will be because we failed it.
We failed it because, by any standard, we have allowed our ethics to disintegrate almost completely in this country. We became lazy, dishonest, greedy, and complacent. The American values that once drove us to such great heights have essentially evaporated, having largely been replaced by a sense of entitlement.
That’s why it bugs me so much to hear about how the middle class is going to “disappear” as a result of this economic crisis in this country. This nonsense all started because the American middle class (largely consisting of baby boomers at this point) suddenly decided in the mid-to-late 90s that it didn’t want to be the “middle class” anymore - it instead wanted (and deserved!) to be something “bigger and better”. Suddenly, every family apparently deserved 4 cell phones, a BMW and a Mercedes, a house of at least 3000 sq ft., several big-screen plasma TVs, a half-dozen trips overseas per year, etc. Moreso than even the 1970s, the nineties/noughties were the “Me Decade” - we reached heights of decadence not even seen during the Roman Empire. During this time, our American middle class vigorously and eagerly took the term “conspicuous consumption” to a whole new disturbing level. This fact is what we need to get a grip on - we wanted the stuff, we pushed so hard to get the “goods”, we blared the rap music and thought that life was all about “the benjamins”, “cash money” and “bling-bling”, we have seen the enemy and he is us. The runup wasn’t driven by some far-away honchos at Countrywide and WaMu and by Greenspan and Bernanke and Reagan and other members of the distant ivory tower, yacht club and golden-parachute brigade (although they helped facilitate it) - it was driven by us, you and me and Mr. and Mrs. Greedy Jones down the street.
And in response to this, we whine at the government?
If we’re going to be so piggishly greedy, then all the additional government in the world isn’t going to save us. Likewise, if we decide not to be so inefficient and greedy, we don’t need the government to tell us how not to be.
“we’ll see who the minority is.”
BULLSEYE…. and I’ll wager we’re gonna find out much sooner than anyone will believe and it can’t happen soon enough.
Ben, this is the information age. Before 1975 it was still the industrial - factory age. My livlihood is computer software and I’m very well aware of the new industry.
Also, Americentric attitudes (or Eurocentric, Sinocentric, Afrocentric attitudes) are not characteristics of true individualists. I consider myself a world resident first. If we all based our attitudes on that, we would not get into wars.
Come to Northern Ohio and see what you globalists have wrought. Vast vistas of industries turned to warehouses for the offshore products to be stored for the Wallmarts that replaced them; promises of high tech jobs to supply services to the vast middle classes of Mexico, Brazil and a dozen other 3rd world countries . While your at it, you might pick up a few dozen of those bargain houses going for 3 or 4 k apiece to fix up and rent to those retrained workers who vote for the globalists from Washington every four years, who, like yourself, touted free trade as our salvation. Brother, come and see your future.
Amen, and when you’r finished in Ohio head north to Detroit and witness first hand the future of the US.
All hail the best and brightest financial minds the great USA has to offer.
Detroit was destroyed from the inside. Crime, corruption and bad management at the auto companies ruined it.
Get out of Ohio and go to Silicon Valley and you will get into the information age.
Americans are hypocritical. Anti-capitalists whine about conservatism, yet they cannot stand change. Guess what? Conservatives hate change. They want the status quo.
The whiners want their same factory jobs from age 18 to 67. But markets are changing much faster because informtion is changing faster. So you have to consider 3 or more careers in your lifetime. Those who expect the world to revolve around them are the ones who are complaining. Those who adapt are the ones who profit.
Not my problem if you want to settle down, marry, raise children, and keep your house and the social makeup of your neighborhood for the next 30 years, but social dynamics change too fast. Mariachi music into 2am with budweiser drinking next door and guns shooting in the air - the reality for my former neighborhood in Fresno when it was socially peaceful and one culture back in 1968.
Like Pat Buchanon (anti free trade), you anti-globalists are conservatives but you hate to admit it.
I’m not against free trade. But weren’t we free traders before the WTO and Nafta, etc? It just doesn’t make sense to open up trade deals with countries that practically have slave labor and horrible environmental policies.
Trade means competition.
And how can US firms compete against child labor, no/low minimum wage laws and companies that dump waste where ever, when here the government has everyone jumping through loops?
I once had two discussions when I lived on the US/Mexico border. One was with a Canadian trucker. He had just brought a load of Canadian beef all the way down to be processed in a Mexican Maquilladora. After keeping it refrigerated the entire trip, in Mexico they dumped it on the loading dock in the summer sun, flies and all. He didn’t stick around long enough to know how long it sat that way. Then the beef shows up in US markets vacuum packed. I can only guess what methods the plant used to sterilize it after sitting in the sun.
The other conversation was with a North Carolina man who had closed a textile plant back home and brought it to Matamoros. After setting the new plant up, the locals wouldn’t turn on the electricity unless he paid a bribe. $25,000 or something. And with the ongoing corruption, etc, he told me that he was making about the same as he would have in NC.
And here’s the kicker; he would still do the deal again, as he was able to lease his NC plant to a company working for the Defense Dept. So we get a parasitic government bomb maker or something, Mexico gets the jobs, we further subsidize a corrupt narco-state, and this guy could care less.
I feel the truth is somewhere it between. Sure enough it is hard to compete when the playing field is not level in terms of labor and environmental laws.
But at the same time our educational system, politicians and culture in general continue to pretend that things will be the same as they always were. The world is changing and unless we want to unplug the internet, information will flow. The expectation that a school diploma/college degree is the last educational stop assuring lifetime employment is naive ( and that is true all over the world not just US). What massive investments have the states of michigan and ohio made to create a highly trained workforce for hi tech jobs? Have they improved the quality of math and science in their schools? Have they made infrastructure improvements to attract investment? Over the last 2 decades what strategic decisions did the planners make besides shaking their collective heads?
The entire housing and economic debacle of last few years is a great example of how people who did not keep up with information and take time to educate themselves will pay a heavy price.
Bill, I hope your job gets outsourced “offshore” I will laugh.
Lane
I’ll throw a party.
I know that bastadge Exeter will. I will drink half as much tequila as that bastadge Exeter.
Yes you drooling anti capitalists hope miserable will rain down on capitalists of all incomes.
By the way I hate Exeter back.
And 99% of the blog will attend.
do you work for faux? If not maybe they are looking for more propagandist’s for enquire type stories and untruths??? might be a back up plan for software when it is all made eslewhere and bought only through the Nets
Nope. You don’t understand what a libertarian is, if you think I work for the that network.
This a great example of these types of words. “Globalism”. There is no real clear definition of what it means. Too many times it is fluid and bent to mean diametrically opposite things. International trade is one thing but what is globalism? Are you suggesting a type of “one world government”? Also what exactly is “free trade”? I mean is it really free and unencumbered? “Free trade” was used to promote both NAFTA and CAFTA but what it has helped produce is a continuing gutting of our industry, a lowering stand of living and the invasion across our borders. If that is a benchmark of “free trade” count me out. But again clear definition to what is meant is crucial.
If Globalism means that the labor market is funneled to the “lowest bidder” World wide ,than how can anyone say that this concept wouldn’t have the major seeds of destruction for many countries like the USA’s and it’s job force .
Free Trade is a different concept ,and I think the cheer-leaders that like a slave labor job force to increase profits like to confuse the two
concepts .
Not only do different countries have different rules of the game regarding labor and product protections ,but different countries have different costs of living ,making the concept of a one world labor force going to the lowest bidder a farce ,that pads the pockets of
guess who.
The problem is not globalization, the problem is that modern globalization involves 80% of the trade done with multinational shifting to take advantage of labor discrepancies.
It is not a Wisconsin dairy farmer selling cheese to a citizen in Tokyo and buying a knife from that Japanese citizen.
In terms of food, we export to China and import the packaged food into the US. All sides of the transaction are the same multinational.
We libs don’t like the oil companies and their huge profits because these companies are destroying America, both its economy and the environment. They thwart every attempt to convert to cleaner, renewable engergy. They thwart battery technology. They fight against tax benefits for solar and wind. They make huge profits and use them to hire lobbyists, to lie and to ensure their dominance in the energy business, regardless of what it is doing to our country. Hell, Bush’s last energy policy included TAX BREAKS for oil companies. That’s how absurdly powerful they are! We LIBERALS like to look at the big picture, and the real cost of oil… including environmental damage, politcal instability, the need for huge military expenses, the horrible cost in loss of human lives, and stupid needless foreign wars. We LIBERALS can see beyond the quick buck of peddling high-priced oil. We see that oil companies need to be put out of business. We need to stop using oil, and start using wind, solar, geothermal… HOMEGROWN technologies that do no rely on an unstable, dangerous, polluting, dwindling source. Even T. Boone Pickens, the biggest oil man of them all now sees that Oil is wrecking america.
‘Free trade prevents totalitarian regimes.”
Yeah, that’s what General Pinochet believed. What’s arrived is the novel idea that the people of a nation, rather than foreign corporate interests, have first claim on that nation’s resources. That has nothing to do with Hitler or Stalin, and I don’t give a damn that the University of Chicago might be upset about it because it lacks ideological purity. I actually think it will come into play here, if our creditors ever got serious about our national solvency — which is a complete joke — and began demanding, say, our crops or our water instead of our degraded currency in payment.
The whole ideology that economics trumps reality, dignity, and every other science is beyond over in all countries but this one. It will end here too, whether we like it or not, because the world’s orgy of “free trade” has resulted in the consumption of a huge fraction of the planet’s resources in just thirty years. That’s not going to continue in democracy, dictatorship, or anarchy.
“The whole ideology that economics trumps reality, dignity, and every other science is beyond over in all countries but this one.”
I like your point there and agree…
But I would also observe that trade between countries can run one of two ways:
1) based on market principles; or
2) based on power relations.
Option 2 gave us such just and equitable phenomena as the Greater East Asia Co-Prosperity Sphere, The German/Bulgarian Trade deal whereby Hitler got Bulgarian Oil and the Bulgarians got harmonicas, and the COMECON, dominated out of the Kremlin and certainly stacked against the interests of the Eastern Bloc.
I certainly won’t claim claim that what we have today under the WTO is “free trade.” In fact, power still plays a major role in which sectors get protection and which don’t, implying winners and losers around the globe based on political calculations rather than market forces. While some of our manufacturing sector is getting creamed, let’s look at the role our ag subsidies play in creaming farmners in the developing countries. The WTO is comprised of some 140 countries all with their own interests based on their unique factor advantages and domestic political forces, and what we want from others must be reciprocated if the negotiations are to succeed in preventing a return to regional trading blocs based on raw military might. However imperfect, at least the WTO allows for negotiated trade relations, rather than those forced at the barrel of a gun.
The system is hugely imperfect, but can you devise an alternative?
Bill in Maryland,
1. Revolution in Russia that brought Lenin and later Stalin to power was not the result of world trade.
2. Germany’s loss in WW1 and following depression brought Hitler
to power.
You do tend to misled people.
Bill in Maryland
1.Revolution in Russia brought Lenin and Stalin to power not
the world trade.
2. Defeat in WW1 and following depression brought Hitler to power in Germany.
Bill, you do tend to misled others.
And engineer ( not the loosy one ) always prefer knowledge to
totalitarian style propoganda.
“‘The state lost its swagger,’ Mr. Chapman says. ‘You didn’t see many mansions being put up. The few-hundred-dollar bottles of wine remained in the restaurant inventories. I saw fewer brand new Porsches on the streets. And that’s just at the wealth level.’”
I predict this will happen all over the country. The arrogance bubble, the biggest bubble of them all, will finally pop. Thank God.
The arrogance bubble ??
You mean the “All Hat No Cattle” arrogance ??
“‘The good news is that I can talk to you about the ’80s without my shrink next to me,’ jokes Dick Evans
The bad news is shrinks cost a bunch and pills don’t pay the bills.
If this market could just bottom out, then we can get back to saving for a home instead of bailing out fools who bought multiple properties with nothing down.
I need a financial advisor or a money therapist.
“US mortgage lenders have been committing a grave financial sin by offering loans to Americans, who have poor credit and couldn’t afford to pay for their homes in the first place.”
Poor credit? Where’s that Credit Suisse adjustable mortgage reset chart when you need it? Plenty of people with good credit can’t afford to pay for their homes either.
The price decline will continue to steamroll everything in its path. Not even an act of Congress will stop it. Can an act of Congress stop a recession? Price declines are part and parcel of a normal cycle. This was a super cycle. The growth recession will accelerate the downward rally in home prices.
These people, who are among the most despised in the country, also “voted” to rebuild New Orleans. But they couldn’t even deliver water. They agreed to democratize the middle east. Hows that going?
I’ve grown tired of trying to get people to see that actions have reactions. What will congress do in the face of a dollar problem? Deeper recession? Treasury bond market disruptions? Either something is impossible or it is not. If a person tells me he can leap a tall building, I say go ahead and show me.
a topic on what the collapse of the housing bubble means for the future global financial order.
Well, I don’t think the housing bubble (or its subsequent bursting) will affect the global finacial order as much as the underlying cause of that event, the continued devaluation of the dollar.
One might think that as the U.S. continues with a policy of keeping interest rates low and thereby devaluing the dollar, that foreigners will increasingly get rid of dollar holdings further devaluing the dollar by re-introducing dollars which were previously held out of the market as a reserve. I think we are already seeing that happen and that a large part of the recent inflation has been mostly from foreigners reintroducing dollars to the economy.
If these trends continue (U.S. devalues the dollar and foreigners wisen up to that fact) the effect on the global financial order is that we will no longer be a financial super power, but rather just another debtor nation with very little ability to manufacture and export real products.
On the other hand, there is no doubt that leaders of various countries “talk”. And China isn’t going to just “wisen up” and get rid of all their dollars tomorrow. To what degree are there secret dealings that help prop up the dollar or at least help control it’s decline? Does the U.S. go to China and say “Look, we know you want to sell all your dollars, so if you only sell off dollars at a rate of X per Y, then we will…”?
In the long run, certainly this will be another failed fiat currency. The housing bubble in particular, with the bad paper sold to foreigners all along may be a strong catalyst to pull the rug out from under this house of cards. U.S. foreign policy might also be a strong catalyst but the underlying problem is still the irresponsible monetary policy.
And the final change in the global financial order (I’m expecting this in my lifetime) is that the global dominance by the U.S. will come to an end.
Yeah, the American strengths might come to a end, unless we do something about it NOW. The model I like to look at is when in my life I saw America functioning at it’s best . This was a time in which labor and Corporate America were in balance in terms of wages and cost of living .
This was a time in which there were plenty of jobs and outsourcing jobs would of been considered,..well,…Un-American . America produced many a product ,right here on American soil creating jobs and in turn a whole lot of spending took place . The middle class grew and the economy expanded .I don’t need to get into how that balance I speak of got disrupted ,but suffice to say a world wide labor force came into play and the loss of the American manufacturing base took place ,slow but sure .
So ,if you ask one cheerleader of Globalism , “What are the Americans going to do for jobs ,and what are Americans going to produce “, they will either stutter and change the subject, or they will say ,”Americans need to learn to compete ,”or they will accuse you of just trying to protect America and a expanding world market is good . One has to ask , “Globalism is Good for Who?”
I don’t think the term “globalism” is really a valid one for any particular use. It can mean lots of different things in different circumstances.
I personally see nothing wrong with trading with other countries, in fact for a long time that was one of the strengths of this country. My post wasn’t about some politicized or contrived “globalism”, but rather about cleaning our own house. We need to look in, not out. If America had a strong money it could maintain its position as the worlds reserve currency and as a creditor nation. Without that strong monetary policy we will (and have) become a debtor nation.
‘If these trends continue … we will no longer be a financial super power, but rather just another debtor nation”
Some argue we are already there. It’s not in the future. It’s the present. America is heading to the auction block. All of our treasured brands are on sale.
The whole lib-fascist diatribe being used in any fashion to describe what’s happening is ludicrous. When Alan Greenspan spoke of ” global economic imbalances” about five years ago, I must admit I was a bit perplexed. It’s become quite clear, he was talking about the huge reduction in the US standard of living that is taking place right now. Dubai is this decade’s Dallas. People wanting to borrow money would do well to familiarize themselves with Sharia Law.
Let’s see: The Texans messed up their state’s banking system in the 1980’s, so 20 years later we let them have the White House so that they could mess up the national, perhaps global, financial system…
And yes, the White House had a large role in this. Go back to the first Bush-Greenspan meeting. The deal was made then: lower interest rates and ease off on regulation so that the country is focused on a real estate boom and not the war…
America will recover from this bust, but will it learn?
so that the country is focused on a real estate boom and not the war ??
EXACTLY !!!!!!!!!!
No different than the early settlers giving the native Indians booze…Keep everyone inebriated with easy money and fear then we can do what ever we want…IMO, it was the biggest political scam on the American people that I have seen in my lifetime…
A world money supply creates distortions . Lets say you have foreign investors funneling billions of dollars into American mortgage back
securities . This flow of money creates excess money ,whereby entities like Wall Street brainstorm on how to make money off this supply . You get to much funny money than that has the potential
of flooding the market with easy money ,and in turn the investment of the money ends up being rated AAA ,even when it’s junk.
Where the breakdown occurred is when the money supply ended up going into a inflated mania real estate market riddled with fraud and faulty lending and loans that were mis-priced on risk .
Than ,another drawback of a global money supply ,is it distorts the market it invest in ,especially if it creates a investment bubble .
Regulations and the prevention of fraud and liar loans would of gone a long way toward curbing this misplacement of funds ,but
how can Wall Street /Lenders ,the Corporate ,turn down a opportunity of making money off money .
Now you have the Global money markets screaming ,”I want my money back “,or ,”I ain’t going to invest no more no more, I ain’t going to invest no more .”
So Global money supply , Global labor markets ,Global you name it ,
can distort what should be regulated or be closed financial system .
Some countries are more Protective than others regarding the forces that affect supply and demand .
Yes, it’s all the Texans fault that Clownifornia bankers loaned $800,000 to a strawberry farmer. It’s all the Texans fault that people were paying $600,000 for a flimsy condo in Florida. Try growing a brain cell before your next post
Don’t lose sight of the fact that [b]ALL[/b] of this was [i] pre-planned, engineered and contrived.[/i] We’ve been led here over the past 28 years, irrespective of leadership or geography. If anyone thinks we just “drifted” into this state, they’ve lost their mind.
I don’t think an obese person pre-plans and engineers getting fat. They just keep eating the popular junk-food diet and end up overweight.
I suspect there was no conspiracy, not one that would last 30 years. I think there was SOME gaming of the system combined with the inertia that goes along with avoiding the real hard work of serious change/improvement.
The “Texan” is the CEO my friend…He sets and directs policy and his policy was to let it all happen….
U.S. house prices overvalued by up to 20 percent: IMF paper
Fri Jul 25, 2008 8:06pm EDT
“The report also said that it is likely home prices will swing well below their equilibrium level before they start to recover.”
http://www.reuters.com/article/newsOne/idUSN2542244220080726
“… it is likely home prices will swing well below their equilibrium level… [a pause, for effect] before they start to recover.”
*****
I have to start using that line when I talk with those still sipping Kool-Aid here in the Alt-A Bay.
Alt-A Bay ??
Good one Jack
What can we learn from past real estate busts, and will the price decline continue to steamroll everything in its path?
there are opportunities for learning from every mistake, but with big mistakes like these societies usually learn nothing. Maybe that is because these are often once-a-generation events. Look in Europe, what is happening in the US RE market is totally irrelevant to them (at least, that is what our politicians and bankers pretend).
Countries like Netherlands are continuing their housing bubble pyramid game as if nothing happened, adding as much debt and leverage as they can in every round. In the next few months the ECB will have to show it cards: keep pretending to fight inflation while doing nothing, or really fight inflation, protect purchasing power and prick the EU housing bubble (which is WAY larger than the US bubble).
There will also be a battles between pensioners (who are hurt strongly by inflation) and workers (most of them profit from inflation, thanks to the EU price/wage spiral and a maximum mortgage). I’m pretty sure the ECB will continue on the current path and do nothing, so we are stuck for the next generation or so with this EU bubble and its fallout when it finally collapses under its own weight.
The mistake globalization proponents have made is to completely ignore the basic economic question of who benefits and who pays. They may be right that globalization offers net benefits– both to the US and globally. There are, however, large constituents of ‘losers’ both within the US and in the world at large. Some countries pay a heavy price and see little in benefits. Working class people, and, increasingly, people in service industries in the US also suffer net losses. It’s not irrational for those who bear the costs but see little of the gains to oppose globalization. On the contrary– it was irrational for those who wanted to see globalization succeed to imagine that the ‘winners’ would be allowed indefinitely to hog the benefits to themselves even as the situation of wage-earners and third-world countries became more and more dire.
Problem is we focus a lot on USA problems…BUT is it much better elsewhere? not really…what will happen to the Euro when Germans refuse to work while others spend day watching soccer & sleeping siesta?
Timing the bottom is not that difficult…day when properties are priced at 100 times rental.
agree, most of the eurozone housing markets are more overvalued than the US market ever was, but up to now there are just a few small cracks in the EU bubble. When it collapses the EU will be in very serious trouble, because of the far stronger entitlement mentality compared to the US and the strong anti-market stance of EU politicians (causing a slower adjustment).
A battle between pensioners/renters and workers is about to begin here, and a battle between the northern and southern EU member states. There is no ECB/EU policy that benefits all of them, so painfull choices will have to be made (my prediction: no choices at all, so the mess will get even bigger).
I don’t want to play “the same people who - ” game but it always seemed like it was the far left that complained for decades about the US monopolizing the world’s wealth, yet now they complain about globalization. We sink and other countries rise. Not saying this is good for us, but isn’t this what they wanted? That has always puzzled me but it’s clear the protest comes mostly from ultra-libs.
Maybe more protest should come from the right but then memories of Smoot-Hawley rear their ugly head. What’s different now is businesses themselves relocating, and it’s been clear to me for a long time that big business does not care what country it’s in.
I have no answers, but it’s kinda funny to recall how 100 years ago the plan was open the “door” to China so we could sell them our goods. Yeah how did that turn out. Clearly, corporations may be “persons” in law but not “patriotic” persons.
China will have to deal with world’s recession, not easy to control 1,2B population demanding a higher quality of life.
Yes, well when some idealist screams they want something ,
they usually don’t take into consideration what price will be bore by what they want . Human nature never seems to be taken into consideration in all the hair-brain ideas that people can come up
with to make a better world .
All human beings usually strive to obtain a better life .If that human can game the system to get it ,it will ,if the system allows it . Look at the welfare system, a good concept on it’s face ,but than the abuse that followed . In capitalism you have to have strong rules and regulations or the system gets gamed by the greedy or criminal or power seeking .
To think that people were so idealistic that they thought they could have a global world ,without global rules of the game ,is the part
that befuddles me.
In a totally unpublicized expansion of our new Surveillance Society, that 600 page “Housing Rescue Bill” includes new rules for all our CREDIT CARD BILLS to be sent to the IRS. When will Americans wake up, we are no longer living in a free country, the USSA has morphed into some sort of corporatist pseudo police state. All that’s left is the election of a charismatic Marxist leader. Oh yeah, that’s on its way, too.
…a common side effect of sustained negative interest rates…
Isn’t the distribution of credit card users similar to the mortgage situation? I’ve read that something like 1/3rd of US families don’t use credit cards at all, another 1/3rd use them somewhat but pay whatever their balance is off each month leaving 1/3rd who are in debt up to their eyeballs with them (in addition to their mortgage - assuming that tracks the same way).
Looks like there is an overwhelming need to track this last 1/3rd of Americans for some urgent reason. The same group who don’t have two coins (of any denomination to rub togather) at the end of the month, the ones who it doesn’t matter what the surveillance uncovers they couldn’t pay (if money owed or due IS the object of this interest) anyway.
It is an interesting phenomenon (I guess you’d call it).
It helps the feedback on the effectiveness of stimulous payments if the spenders can be better monitored
It’s Big Brother’s way of saying, “Stop using the credit card, Winston.”
I think those of us who are debt free and frequently pay cash are the objects of suspicion, we have free time to learn the facts, and we’re failing to do our fair share to prop up the credit bubble, don’t you know.
It might be that they are looking for people spending 100,000 dollars a year on c.c. and paying tax on their 28,000 dollar a year income and also getting gubmint handouts. I have no problem with that.
Lane
totally unpublicized? I found it easily enough.. But i don’t recommend anyone else around here actually learn what the provision says.. it’ll spoil all the fun.
Carry on.
“When will Americans wake up, we are no longer living in a free country,”
“How I Found Freedom in an Unfree World,” by Harry Browne, is just as applicable today as it was in 1973 when it was published. There are a lot of ways to exercise your freedom without aggressing against anyone else and without asking permission from government or any other group or individual.
Each of us breaks at least a dozen laws every day. And we don’t get caught. There are tens of thousands of laws on the books, some of them contradict others. If we each had to make sure we would not violate any law, we would not be able to walk out our doors.
Dude, I don`t break laws everyday. If I break any law on a given day its probably going 10 mph over the posted speed limit. If you are breaking 10 laws a day then maybe we do need big brother looking at you a little closer.
Lane
Leaving my house, I need to turn the water off before 10 AM: can’t water the lawn from 10 - 6pm. I need to put my seat belt on before moving the vehicle. I need to stop before backing across the sidewalk, then back up further and stop again before entering the street.
That is 4 laws to follow just before leaving my property in the morning. (Assuming I have my drivers license, proof of insurance, car registration and vehicle inspection stickers up-to-date and in place.)
Laws for the most part are about money….New “Hands Free” cell phone use law in Cali racked up 2700 citations in its first week !! Ins. Co’s get less accident claims and then raise your premiums…
Matt, its not all about you. Maybe you are in drought area. Seat belt law…thats for idiots, you should do that anyway, backing up and looking twice, wow thats terrible. Everybody is not out to get you. What a bunch of babies. I have been to over 25 countries in my 42 years…you have never seen big brother.
Lane
I have been to over 25 countries in my 42 years…you have never seen big brother.
Lane,
So, I guess you’ve never visited any country on planet Earth or are blind then? You seem to be saying that government should turn every petty thing we “should” be doing (in your opinion) into yet more laws –to add to the pile of poorly enforced existing petty laws?
Are you also in favor of creating more laws that are very arbitrarily or capriciously enforced? Oh, and how about laws that impose very high fees for relatively small offenses that result in little-to-no public good. I can name a few of those from personal experience, such as the “no cats outside without a leash, or $100 fine + impound fees” law my city is very fond of. Or how about getting fined for having an “unpermitted” yard sale in front of your own house? Yes, these actually happened to yours truly.
For more examples, check this out:
http://www.dumblaws.com/
I am no pro-globalist big-”L” Libertarian purist living in some Ivory-Tower economist’s fantasy-land. I’m completely in favor of some strong new regulations of the banking and mortgage industries. Or, just enforcing some of the ones that are already on the books (and currently being ignored by our bought-and-paid for COn-gress). However, while the banksters on Wall Street and CEOs of offshored multinationals are getting away with murder (literally in some cases), I’m getting hyper-regulated to death.
Some laws are definitely in the public’s best interest and worth enforcing. Others are idiotic and very nanny-statish. Not all laws are created equal, and not all aspects of our daily lives *need* to be regulated.
Dude, do you use turn signals? Do you drive at or below the speed limit? Do you stop at stop signs or come to a rolling “stop?”
I use signals every turn and every lane change….I am smart and I drive that way. I always stop. Yes I speed some and that was my point. I drive over 30,000 miles a year…with over 700,000 miles no wrecks and one ticket. I have seen alot of deaths!! You should take it very serious. Also 60,000 of motorcycle, 2000 hours of c-130 flight time and a few hours in light planes. Rules are good. Go to a country that does not enforce rules and you will like rules.
Have a good weekend everyone,
Lane
Thank you for underscoring this very important point!!!
“The US mortgage securitization model has failed.”
Please give the basis for this statement. The goals of securitization are taking maximum advantage of changing interest rates by restructuring in the secondary market, risk sharing, and moving assets off balance sheets. Each one of these goal was met. Securitizations are not failing being because these goals were unattainable or the structures were faulty. They are failing because the underlying assets were over-valued. When the underlying value of one’s only asset class is depreciating rapidly the structure pursuant to which such asset is held is not the appropriate scapegoat. Securitizations are not dependent on over-valuation for their success, and in fact they work just as well if not better when the underlying assets are under-valued. As interest rates rise they will be an even more valuable tool, and I am working with ppl to create various new structures to take advantage of the brave new world. Did the rating agencies and buyers get the risk wrong? Sure. Did they get it wrong because of faulty securitization structures? No. They got it wrong because they didnt understand the risk of mortgage defaults and couldnt comprehend that housing was way over-valued although any true economic anaylsis would have revealed the existence of such over-valuation.
I would like to know a single goal of securization structures that was not met that was not directly linked to the simple fact that housing was over-valued and others failed to understand the true risk of default.
“They got it wrong because they didnt understand the risk of mortgage defaults and couldnt comprehend that housing was way over-valued”
they knew money was borrowed to “gamble” in the RE market…
True. The problem was the underlying assets not the structures.
Tim,
Is there a reasonable way to structure these things that takes moral hazard into account?
Assuming you are referring to the issue of banks making questionable loans because they were going to be sold on the backside to a securitization so the entity in original privity with the buyer wouldnt be left holding the bag, I think this is easily solved by establishing clear guidelines for which loans are acceptable into the structures (e.g., maximum LTV, salary/asset/mortgage ratios, etc.) and disclose this to buyers. A related issue is that the majority of the deals I worked on were insured by the monolines (e.g., Ambac, MBIA, etc.). Thus, ppl overlooked the value of the assets sometimes and bought based on the value of the insurer. They have already been burned. This education will make buyers more suspect and get us to more reasonable valuations. The interesting part is that over-valuation of assets on both sides were not necessary for the efficiency of the structures. Even assuming fair and historical valuations on both sides, securitization itself offers efficiencies that would not otherwise exist (e.g., splitting fixed rates mortgages into floating and residual pieces to take maximum advantage of changing rates and market demand).
I think buyer education is possible given appropriate regulation, and I know for a fact that if we assumed perfect information securization is an extremely valuable tool. The problem was that is was unregulated commission based market. Get it regulated, promote perfect information, and the problems will resolve themselves.
Add to that a appraisal system that is accurate and certainly not
putting the appraisers in the position of being corrupted by pressure from the real estate industrial complex , or starve .
I agree Tim…Bundled securitization will come back after the housing market reaches some equilibrium it will just take a couple of years…Yields will be higher and underwriting will be very strict…
Tim,
may I ask a question?
What do you do to make secularization work, if the people designed structured it so that their was no perfect knowledge between the parties of the contract. Do you really believe that one party to a contract (the party who wrote the contract to his liking and holds more knowledge as to the real risks) is willing to willingly give up the true nature of the risk to the other party?
I am truely sorry, but I believe that belief, which causes the who system to collapse, is unrealistic. It may be true that secularization is more efficient, but it is terribly complicated and is prone to abuse. Whats that saying, “Why do banks come up with new ways to lose OPM, when the old ways were just as good in accomplishing the same end result?
Tim, you do need to respond, a rhetorical question.
It seems to me that one of the flaws of secularization is that it takes a money supply and than it looks to create a market with that money supply by finding a asset or investment .A true demand for money would be based on a market needing money because of demand or need for it because people really needed housing and they could qualify for paying for it .
Think about the fact that the market lend out way to much money, billions more than the true demand called for regarding people really needing homes or equity loans .People were talked into using their home to fund their lifestyle ,and the market makers sold the idea of leverage to make your home work for you ….and you deserve it …and so on .
So when I use the term market-makers ,I mean markets are created to funnel money into ,in spite of those markets not
being necessary or really in demand or a dislocation of funds ,or the worst ,in spite of people not really qualifying for the debt payments .
The market makers also attempted to set people up for
needing to refinance repeatedly ,which would be a built in business for repeat business . So “churning “loans became a
new way to keep a market going .
Securitization wasn’t the problem; it was the mismatch between the risk the CDOs were billed as having and the risk they actually had. (Whether it is in fact possible to figure out the risk accurately is a whole separate question.)
The banks had no “skin in the game” if the CDOs were mis-labeled and there was too much incentive to sell them off without checking. Exactly the same mishmosh that doomed the Japanese banks during their real estate bubble–money was invested *everywhere* with total disregard of risk.
Now, of course, all the proverbial fowl are coming home to roost….
OT: Granite countertops radon
From CBS
http://news.aol.com/health/article/are-granite-countertops-a-health-threat/102077
…
Are Granite Countertops a Health Threat?
CBS Newsposted
NEW YORK (July 25) - If you have granite countertops in your home, you might consider testing them for the amounts of radon gas they give off, experts say, due to the potential that those amounts are above levels considered safe.
But marble manufacturers say flat-out that, “Radiation in granite is not dangerous.”
…
What good is the “housing rescue bill” if the FBs start dying off ?
heh heh…Is this a plant by home remodeling industry to trigger the next set of kitchen re-design?
I wonder what happens when one follows the money.
(But that is, not just the money, but the dollar as the world reserve currency. If a substantial portion of the reserve currency has flowed eastward, then they likely want do with that what the Japanese wanted to do with it when it flowed to there in the 1980s. So Prince Alwaleed is in Citibank, Abu Dhabi nows owns a NYC landmark. Still drops in the bucket. )
Here’s the bigger problem: a state that increasingly seems willing to do the bidding of commercial interests, at the same time people are in terrible debt (and the value of their most expensive hard assets, both houses and cars, borrowed or not, are in rapid decline. In fact Chrysler’s financial arm no longer offers leases because their penultimate resale has dropped.
This is going to be not one but a collection of substantial, almost unrelated occurrences that make the population feel as if they’re drowning in added costs.
While they’re increasingly jobless…
— Under a rubric of “healthcare reform” Congress is likely to approve health industry lobbying requests that will require by law that the individual purchase private-label “affordable” health insurance, under penalty of federal tax assessment. On top of added paperwork for the individual, those who aren’t bled dry by the premiums will see the value of the dollar drop further if their tax rates don’t rise. They will be kept in perpetual servitude in the continuing absence—by design—of cost controls.
— Corn is fuel now, a condition unlikely to be reversed in the next decade. Food prices will continue to rise because trillions of cubic lbs. of nat. gas and billions of barrels of oil are going unharvested by choice. Topsoil is burned for energy.
— As the value of the dollar declines further under the weight of an increasing realization of just how deeply the US has indebted its people to the world with entitlements and baubles, the reserve currency will be gradually shifted into a basket of currencies led by the euro and the yuan. (Does this anticipate the introduction of the amero?)
Still no jobs. Declining manufacturing base: tools, electronic components, steel produced increasingly overseas at the expense of the local economy.
It’ll continue on until it doesn’t.
When it doesn’t the laws of the state will be ignored by one and all.
Its that simple.
Is there a method to the madness of closing down banks?
Closing down a nothingburger bank or 2, in widely scattered locales, every week or so?
But national banks are untouchables… (for now)
WaMu will be the biggest bank to fail, probably sometime this August.
If regulators were actually enforcing accounting standards and making banks recognize losses on MBS this weekend, I don’t know if there’d be a single institution still open come Monday morning.
You would think a lot of attempts are being made right now at seeing what banks can be merged together and what banks are hopeless ,whatever .
Maybe some banks can survive if they are given long term loans ,while they absorb their losses more slowly .
With regards to free trade, I’m for and against it and everything in between.
Winston
Winston,
Double-Plus-Good look @ the future 60 years ago, eh?
“The ideal set up by the Party was something huge, terrible, and glittering—a world of steel and concrete, of monstrous machines and terrifying weapons—a nation of warriors and fanatics, marching forward in perfect unity, all thinking the same thoughts and shouting the same slogans, perpetually working, fighting, triumphing, persecuting—three hundred million people all with the same face.”
Cheers,
G.O.
The more I think about it “free trade ” doesn’t work either ,so in some cases taxes have to be added . I remember about 30 years ago everybody around me was getting mad because America would import ‘
a lot of products from other countries ,but the other countries weren’t
importing products from us without adding a major tax to it . Here we were expected to buy buy buy from other countries ,yet they didn’t want to return the favor and buy from us ,unless they stuck a penalty on it so their people wouldn’t want to buy exports from the USA. I have seen a
lot of one-sided trading between Countries where America was a pasty .
Some countries don’t allow foreigners to buy real estate in their country
and some do .My point is that “free trade “never ends up turning out to
be free trade or fair trade .
What happens when Commercial real estate starts to go soon? Bigger than the residential mess by far, so any thoughts?
In Sacramento, we’re already there, IMHO. CRE sales have basically been stagnant since the first credit crisis last August. Vacancies are way up for both retail and office space, and have been vacant for quite some time. For example, down the block from my apartment, a large office suite that used to house a Countrywide branch has been vacant for over a year. “For lease” signs in front of commercial buildings is almost as frequent as “for sale” signs in front of residences.
Sacramento has the great retail space per capita in the country, and has a lot more space opening later this year in the Roseville Galleria expansion plus the new Elk Grove open-air mall. A new mini-mall, the Promenade at Natomas that opened in 2006 has never been more than 50% occupied. It’s insane, but we are absolutely headed for a CRE crash as bad if not worse than residential, if you can believe it.
CRE will also have a deleterious impact on local business expansion prospects. I know of quite a few small business owners who owned their own buildings/land that were able to secure very cheap financing for expansion projects using their CRE as collateral. That avenue to financing has presumably been eliminated for the foreseeable future.
So yeah, CRE is going to crash and it’s going to wipe out quite a few well-established institutions and investors. It’s a ticking time-bomb that will probably not go off until after the election.
Bens question in part was what was going to happen to the world financial markets with the housing meltdown .
(1) Countries that invested in mortgage backed securities in USA are not going to like losses and they will pull back . USA is not creditable anymore
with this funny money lending that created a bubble .
(2) The World will get less dollars from Americans because of their reduction in buying power ,(examples, Americans will travel less ,they will
buy less imported products ,imports will be more expensive to ship ,and on and on .)
(3)Countries that depend on USA spending will sink along with USA unless
they shift gears and produce for demand countries .
(4) USA will get less investment dollars from foreign countries ,which will create a tighter money market .
(5) Countries that had their own real estate bubbles will correct and depending on how faulty their lending was will determine if the population can debt service these loans .
(6) All countries will have increase cost of living and inflation . Some poor countries will even be left without resources like food ,etc.
Oh darn ,I can’t finish this post because I have to leave to go out to dinner with some friends of ours ……….
“Here in Flagstaff, the average wage is $14/hour.”
Er… I’ve driven through Flagstaff. Beautiful area. But like many small towns, why would anyone move there expecting to make even $14.00 per hour? Small town life on the outskirts of wilderness is a luxury I wish I could afford.
I tried living in AZ a few years ago, but at every step, 3rd world illegals and those with the morals of 3rd world illegals offered more attractive solutions to prospective employers than I was able to do.
No matter, we’ll all be 3rd world soon.