Economic Reality...Part 2

Discussion in 'Economy' started by Bullypulpit, Aug 16, 2007.

  1. Bullypulpit
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    Bullypulpit Senior Member

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    For the Bush administration apologists who continue to blandly assert that "The economy is just great..." let me offer this.

    <blockquote>The nation's foreclosure crisis is being driven by home buyers with shaky credit who took out subprime loans. Many of these borrowers are now unable to make the higher mortgage payments required after the rates on their adjustable-rate loans reset. The ripple effect has caused several mortgage companies to fail, others to stop providing subprime loans and many more to tighten lending standards on all loans.

    The percentage of subprime, adjustable-rate mortgages in foreclosure jumped to 3.23 percent in the first quarter of 2007. Compounding the foreclosure problems are predatory loans, mortgage fraud and speculative homebuyers with properties whose values have fallen below their purchase prices, leaving owners unable to sell them for a quick profit. - <a href=http://www.mcclatchydc.com/homepage/story/18926.html>McClatchy</a></blockquote>

    Now, those of you who passed ECON 101 will immediately grasp that as people are harder pressed to maintain their monthly mortgage payments, they are going to stop spending on other items. You know...Cars, big ticket appliances, travel, clothing, food, etc. As the pool of disposable income shrinks, so to does the economy. And with credit markets, the mortgage markets in particular, drying up there will be less and less credit available, thus driving interest rates up. For those poor sots with adjustable rate mortgages coming due, the increase in their monthly payments due to the increase in their monthly mortgage can push them over the edge and into foreclosure, some even abandoning the property.

    The grim reality is that as the housing markets go, so goes the rest of the economy. And unless something drastic happens, and soon, the collapsing housing market could drag the rest of the economy down with it.

    The article I linked to has a chart listing the top 100 US cities with for foreclosures. What's truly staggering is the level by which most of them are out-pacing the same period last year. Do yourselves a favor...Pay down as much debt as you can, as quickly as you can and buy gold.
     
  2. dilloduck
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    dilloduck Diamond Member

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    How much time do I have to convert all-my-soon-to-be-worthless greenbacks into gold?
     
  3. Bern80
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    Bern80 Gold Member

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    You're trying to make a link where there really isn't one. The paragraphs you include don't blame houseing foreclosures on the economy. They blame it on people's poor credit and an inability to adjust to higher rates because of it.

    The houseing market, just like the economy, works in cycles with good times and bad times. Yes, the houseing market is an indicator of the ecoomy overall. But, it's just one indicator. Plus, the above is a prediction of what might happen. Not what is happening.

    The Bush administration also has nothing to do with this, much as you would like the excuse to rip on them. If anything the Bush administration has given people more disposable income than they normally would have.
     
  4. Toro
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    Toro Diamond Member

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    It isn't credible to blame this all on the Bush administration, but it isn't credible to absolve them of all blame either.

    The Bush tax cuts not only increased the fiscal deficit during a time of recession - that's a good thing - it also created structural deficits which increases the supply of money flying around the economy - that's a bad things.

    The excess creation of money found its way into asset prices around the world, from stocks to bonds to real estate to gold to commodities to art to wine, etc. During economic booms and bubbles, as any economic historian understands, standards for checks and balances in the economy decline. In the case of housing, this manifested into very lax lending standards, which increased the marginal demand for credit, and thus increased the marginal price of housing.

    The Bush administration is culpable only in a small way. The problems are much deeper structurally. On the other hand, the economic prosperity during the Bush years is at least partially an illusion because by some estimates, 40% of economic growth since 2000 has been tied to real estate, which is now unwinding. That, again, isn't primarily Bush's fault, since the blame lies both at the central banks of the world, but also due to factors beyond the control of government, not to mention the political demands of the American people. However, the Bush administration has done little to solve the problems, and has exacerbated them by their fiscal policies and tax cuts.
     
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  5. Bullypulpit
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    Bullypulpit Senior Member

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    Well gosh guys...I only mentioned Bush obliquely as the apologists for the Administration keep insisting that the economy is just peachy, thank you very much. Perhaps you were so blinded by your slavish adoration for the administration that you automatically assume that anytime his name in mentioned in relation to an economy on the skids you assume he is being blamed.

    History has show us, repeatedly, that Presidents have little influence over over the economic cycle...but they are inevitably linked to the economy when it tanks. The Bush administration does, however, bear a measure of responsibility as its economic policies have led to a limitation in just what the Fed can do ease the economy into a slower period rather than watching it free-fall into a full blown crash.

    <blockquote>Over the last several years, America’s imbalances in trade and other global transactions have worsened dramatically, requiring the United States to borrow billions of dollars a day from abroad just to balance its books.

    The only lasting way to fix the imbalances — and reduce that borrowing — is to increase America’s savings. But the administration has steadfastly rejected that responsible approach since it would require rolling back excessive tax cuts and engaging in government-led health care reform to rein in looming crushing costs — both, anathema to President Bush. It would also require revamping the nation’s tax incentives so that they create new savings by typical families, instead of new shelters for the existing wealth of affluent families — another nonstarter for this White House.

    Stymied by what it won’t do, the administration has gone for a quicker fix — letting the dollar slide. A weaker dollar helps to ease the nation’s imbalances by making American exports more affordable, thus narrowing the trade deficit. - <a href=http://www.nytimes.com/2007/08/08/opinion/08wed1.html?ei=5088&en=1044bec877b0e02b&ex=1344225600&partner=rssnyt&emc=rss&pagewanted=print>NYT</a></blockquote>
     
  6. trobinett
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    trobinett Senior Member

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    There was a "part one" to this dribble?:lol:
     

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