Do you think there could be a second Great Depression?

[jamespowers]

The dollar is beyond inflated, and America has outsourced itself to death. If a hiccup in China can cause the DOW to drop 400 points in a matter of hours, economic hard times, (that is, harder than they have been,) are not beyond possibility. Personally, I wouldn't be surprised if jealous foreign countries didn't use the amount of stock they hold as leverage for a war of economies.

That would be far different from a depression. That would be financial terrorism. A little off the deep end of a depression.
However, it is one of the drawbacks of having so much information so readily at hand. They can get the stock sold in an instant.
In the China case, a 400 point drop is a dip of less than 3%. Not exactly a big deal. I expect it to be back up by next week. You are discounting the role the Fed plays in the market though. If something like economic terrorism happened, the Fed would likely step in and level the market. I'll bet they did so today without any of us knowing a thing.

Regards,

J

 

[jamespowers]

"Life is hard, and there are those who cannot adjust themselves to it." So said an observer in the wealthy city of Babylon some 5000 years ago. Hard times can strengthen a person's resolve and can make people get along and work together. (Consider the weeks and months after 9/11.)

Like they say: there is nothing new under the sun.

 

[jamespowers]

There would also be a lot of wrangling, some of it very ugly I'm sure, about what exactly it means to "deal with the situation." If push came to shove, I believe some people would prefer we became a Latin American-style plutocracy rather than return to the social-welfare net of the New Deal.

Is that like the oligarchy we have now?

Regards,

J

 

[Fletch]

Worse yet.

 

[Marc Chevalier]

That would be far different from a depression. That would be financial terrorism.

True ... and what good would it do Saudi Arabia or China to wage such financial terrorism against the U.S.A.? It doesn't help them much if they plunge a knife into their good customer's back. Dead customers don't buy things. And for Saudi Arabia and China, we are a very good customer indeed.


Only a country like Iran, which doesn't have us as a customer, would try to wage such financial terrorism as pressuring OPEC to switch from the dollar to the euro.


.

 

[jamespowers]

Worse yet.

I made a mistake. I meant the kakistocracy that we have now. Sorry.

 

[jamespowers]

True ... and what good would it do Saudi Arabia or China to wage such financial terrorism against the U.S.A.? It doesn't help them much if they plunge a knife into their good customer's back. Dead customers don't buy things. And for Saudi Arabia and China, we are a very good customer indeed.


Only a country like Iran, which doesn't have us as a customer, would try to wage such financial terrorism as pressuring OPEC to switch from the dollar to the euro.


.

Very good point. Sort of related to my point about recessions/depressions in other countries being good for us. More for the money.

 

[Marc Chevalier]

Sort of related to my point about recessions/depressions in other countries being good for us. More for the money.

I remember a wonderful time in history -- about 9 years ago? -- when the euro was much lower than the dollar. What a great trip to Europe that was! Too back my backpack couldn't hold more goodies ... I'd have bought home half the continent.

.

 

[jamespowers]

I remember a wonderful time in history -- about 9 years ago? -- when the euro was much lower than the dollar. What a great trip to Europe that was! Too back my backpack couldn't hold more goodies ... I'd have bought home half the continent.

.

lol lol lol lol lol You financial pilager you.

 

[Marc Chevalier]

"All economics is local." -- Milton "Tip" O'Friedman.

.

 

[Lincsong]

Hypothetically

Interest Only home loans are the pig by product of realtors, mortgage bankers and politicians. All three are on my list of useless occupations. Let's see what happened over the past 10 years. When interest rates were 9 and 10 percent the average home price was about what?; $200,000? so that meant a monthly payment on a 30 year fixed interest mortgage would be about $1800-$2100 a month. As interest rates went down all the mortgage companies and realtors did was to jack up the selling price. So a $300,000 mortgage at 7 percent was still $2100 a month. The realtor and mortgage bankers told the buyers; "don't worry about paying $300,000 for this 1200 square foot house, it's only $2100 a month, you can afford it. 18 months ago it was $200,000, 18 months from now it will be $400,000." People have to live somewhere so they fell for these lines and signed onto the contract. Then prices went above the qualifiying monthly amount so the realtors and mortgage bankers came up with the garbage loans where the payments would be fixed for 3-5 years then adjusted after that term. The selling line; "don't worry about it, with the rate these homes are appreciating in 3 years you can cash in on the equity and use that for a down payment on another home and we'll still keep you at the same payment." :eusa_doh:

Too many people are on a payment mentality, "oh I don't care how much the selling price is; what is the monthly payment?". Cars were sold that way then realtors and mortgage bankers felt; "hey if these suckers will buy cars on a payment they'll buy a house".... and they were right. Now the chickens are coming home to roost. Wow, people don't exactly move around homes every three years and they're income doesn't appreciate that much. So what is happening to some people? Well, that $500,000 mortgage they were paying $2100 a month for on interest only has now gone up to $3000 a month, but their incomes haven't gone up $1000 a month. But the Realtors were still charging 6% commission on rising selling prices. Talk about greedy savages. (I never trust any occupation that takes out commercials extolling how honest they are.)

Then there are the politicians. They loved what was happening because with increasing property values they could play around with existing owners in a euphoria over their rising property values. "wow I paid $160,000 for this house in 1992 and it's now worth $562,000 things are great lets re-elect these guys they're doing a great job. So the politicians started giving themselves and government employees huge pay and benefit packages, lowering the retirement age for government workers and increasing government pensions. Then they started taking land out of development for "green belt" well, supply and demand less homes, more demand equals higher prices.

I read an article that in the Denver area the politicians want to buy back some of these homes that are foreclosed and then rent them out to the former owners???? Anyone in Denver heard of this????? Help me out. Great, make the taxpayers bailout the pigs in the mortgage banking and real estate industries.

If people today weren't so gullible and hoodwinked by these blue suede shoed realtors and mortgage bankers they would have had the confidence to say; "no I'm not signing onto this garbage loan and I'm not paying $600,000 on a 50 year old house with avocado appliances and orange linoleum." If existing residents weren't so greedy they would have told politicians; "hey we need homes to live in, the heck with this green belt nonsense, more people need homes every year". (Are more people dieing every year than are graduating high school and college? NO!) But people trusted the untrustworthy, people were greedy and now all involved must pay the price.

 

[carebear]

Interest Only home loans are the pig by product of realtors, mortgage bankers and politicians. All three are on my list of useless occupations. Let's see what happened over the past 10 years. When interest rates were 9 and 10 percent the average home price was about what?; $200,000? so that meant a monthly payment on a 30 year fixed interest mortgage would be about $1800-$2100 a month. As interest rates went down all the mortgage companies and realtors did was to jack up the selling price. So a $300,000 mortgage at 7 percent was still $2100 a month. The realtor and mortgage bankers told the buyers; "don't worry about paying $300,000 for this 1200 square foot house, it's only $2100 a month, you can afford it. 18 months ago it was $200,000, 18 months from now it will be $400,000." People have to live somewhere so they fell for these lines and signed onto the contract. Then prices went above the qualifiying monthly amount so the realtors and mortgage bankers came up with the garbage loans where the payments would be fixed for 3-5 years then adjusted after that term. The selling line; "don't worry about it, with the rate these homes are appreciating in 3 years you can cash in on the equity and use that for a down payment on another home and we'll still keep you at the same payment." :eusa_doh:

Too many people are on a payment mentality, "oh I don't care how much the selling price is; what is the monthly payment?". Cars were sold that way then realtors and mortgage bankers felt; "hey if these suckers will buy cars on a payment they'll buy a house".... and they were right. Now the chickens are coming home to roost. Wow, people don't exactly move around homes every three years and they're income doesn't appreciate that much. So what is happening to some people? Well, that $500,000 mortgage they were paying $2100 a month for on interest only has now gone up to $3000 a month, but their incomes haven't gone up $1000 a month. But the Realtors were still charging 6% commission on rising selling prices. Talk about greedy savages. (I never trust any occupation that takes out commercials extolling how honest they are.)

Then there are the politicians. They loved what was happening because with increasing property values they could play around with existing owners in a euphoria over their rising property values. "wow I paid $160,000 for this house in 1992 and it's now worth $562,000 things are great lets re-elect these guys they're doing a great job. So the politicians started giving themselves and government employees huge pay and benefit packages, lowering the retirement age for government workers and increasing government pensions. Then they started taking land out of development for "green belt" well, supply and demand less homes, more demand equals higher prices.

I read an article that in the Denver area the politicians want to buy back some of these homes that are foreclosed and then rent them out to the former owners???? Anyone in Denver heard of this????? Help me out. Great, make the taxpayers bailout the pigs in the mortgage banking and real estate industries.

If people today weren't so gullible and hoodwinked by these blue suede shoed realtors and mortgage bankers they would have had the confidence to say; "no I'm not signing onto this garbage loan and I'm not paying $600,000 on a 50 year old house with avocado appliances and orange linoleum." If existing residents weren't so greedy they would have told politicians; "hey we need homes to live in, the heck with this green belt nonsense, more people need homes every year". (Are more people dieing every year than are graduating high school and college? NO!) But people trusted the untrustworthy, people were greedy and now all involved must pay the price.

Your rant ignores churn.

Considering the average amount of time a family now spends in a home is only 7 years before either making an up or down move in size and local location or a major move to a new region congruent to a job change it is wrong to look at 40+ or 5-10 yr I/O mortgages as some type of "long term loss" scam.

Every loan is not for every buyer but they weren't developed as instruments of some kind of malevolence. What they actually do is make more house affordable for the short amount of time you are going to actually be living in it. Controlling your finances for a thirty year residency is nonsensical if your financial plan is to move in five.

This sort of thing is explained by ethical originators (like me) to buyers every day. It is not only required by my credit union it is just good business. With the rate of churn nowadays I am not selling a family one house for their lifetime, I am conceivably providing new financing for the same person every 5 years or so, if they so desire.

The information on what financing fits what financial plan and mindset is also widely available from competitors, books, newspaper columns and the internet as well. Anyone who claims "I was tricked" is a self-admitted buffoon, deserving of scorn, not sympathy.

I don't trick or mislead people, in fact I will attempt to prevent people from making poor financial services. but, any buyer who goes in ignorantly has only their own stupidity to blame, they had every chance in the world to not get suckered (if that is truly what happened). Caveat Emptor. Economics is life, I have no patience for the deliberately ignorant.

 

[PrettySquareGal]

Your rant ignores churn.

Considering the average amount of time a family now spends in a home is only 7 years before either making an up or down move in size and local location or a major move to a new region congruent to a job change it is wrong to look at 40+ or 5-10 yr I/O mortgages as some type of "long term loss" scam.

Every loan is not for every buyer but they weren't developed as instruments of some kind of malevolence. What they actually do is make more house affordable for the short amount of time you are going to actually be living in it. Controlling your finances for a thirty year residency is nonsensical if your financial plan is to move in five.

This sort of thing is explained by ethical originators (like me) to buyers every day. It is not only required by my credit union it is just good business. With the rate of churn nowadays I am not selling a family one house for their lifetime, I am conceivably providing new financing for the same person every 5 years or so, if they so desire.

The information on what financing fits what financial plan and mindset is also widely available from competitors, books, newspaper columns and the internet as well. Anyone who claims "I was tricked" is a self-admitted buffoon, deserving of scorn, not sympathy.

I don't trick or mislead people, in fact I will attempt to prevent people from making poor financial services. but, any buyer who goes in ignorantly has only their own stupidity to blame, they had every chance in the world to not get suckered (if that is truly what happened). Caveat Emptor. Economics is life, I have no patience for the deliberately ignorant.

I disagree with you here. Predatory lending and "creative" financing have ruined quite a number of good people because they were deliberately misled. Of course not all loan brokers are that way, but some are. I guess it's like saying if you trust your doctor and they gave you bad advice that led to an injury you should have known better because of webmd and books and it's your own fault.

Here in Maine the state is getting involved:

http://www.responsiblelending.org/press/releases/page.jsp?itemID=28533045

http://www.maine.gov/pfr/consumercredit/press/Predatorylending_reportnews1206.htm

 

[PrettySquareGal]

Interest Only home loans are the pig by product of realtors, mortgage bankers and politicians. All three are on my list of useless occupations. Let's see what happened over the past 10 years. When interest rates were 9 and 10 percent the average home price was about what?; $200,000? so that meant a monthly payment on a 30 year fixed interest mortgage would be about $1800-$2100 a month. As interest rates went down all the mortgage companies and realtors did was to jack up the selling price. So a $300,000 mortgage at 7 percent was still $2100 a month. The realtor and mortgage bankers told the buyers; "don't worry about paying $300,000 for this 1200 square foot house, it's only $2100 a month, you can afford it. 18 months ago it was $200,000, 18 months from now it will be $400,000." People have to live somewhere so they fell for these lines and signed onto the contract. Then prices went above the qualifiying monthly amount so the realtors and mortgage bankers came up with the garbage loans where the payments would be fixed for 3-5 years then adjusted after that term. The selling line; "don't worry about it, with the rate these homes are appreciating in 3 years you can cash in on the equity and use that for a down payment on another home and we'll still keep you at the same payment." :eusa_doh:

Too many people are on a payment mentality, "oh I don't care how much the selling price is; what is the monthly payment?". Cars were sold that way then realtors and mortgage bankers felt; "hey if these suckers will buy cars on a payment they'll buy a house".... and they were right. Now the chickens are coming home to roost. Wow, people don't exactly move around homes every three years and they're income doesn't appreciate that much. So what is happening to some people? Well, that $500,000 mortgage they were paying $2100 a month for on interest only has now gone up to $3000 a month, but their incomes haven't gone up $1000 a month. But the Realtors were still charging 6% commission on rising selling prices. Talk about greedy savages. (I never trust any occupation that takes out commercials extolling how honest they are.)

Then there are the politicians. They loved what was happening because with increasing property values they could play around with existing owners in a euphoria over their rising property values. "wow I paid $160,000 for this house in 1992 and it's now worth $562,000 things are great lets re-elect these guys they're doing a great job. So the politicians started giving themselves and government employees huge pay and benefit packages, lowering the retirement age for government workers and increasing government pensions. Then they started taking land out of development for "green belt" well, supply and demand less homes, more demand equals higher prices.

I read an article that in the Denver area the politicians want to buy back some of these homes that are foreclosed and then rent them out to the former owners???? Anyone in Denver heard of this????? Help me out. Great, make the taxpayers bailout the pigs in the mortgage banking and real estate industries.

If people today weren't so gullible and hoodwinked by these blue suede shoed realtors and mortgage bankers they would have had the confidence to say; "no I'm not signing onto this garbage loan and I'm not paying $600,000 on a 50 year old house with avocado appliances and orange linoleum." If existing residents weren't so greedy they would have told politicians; "hey we need homes to live in, the heck with this green belt nonsense, more people need homes every year". (Are more people dieing every year than are graduating high school and college? NO!) But people trusted the untrustworthy, people were greedy and now all involved must pay the price.

Sadly a lot of military families fall for this. I know because each time we moved we were assaulted with by a barrage of real estate agents claiming that it's cheaper to buy then rent. They never made mention of the moving in three years part, and many a young family desprate to find housing fast often fell for it. Drive by any base and you'll see a large number of vacant properties. Some are due to deployment, others because they couldn't sell when they PCSed.

 

[Paisley]

I read an article that in the Denver area the politicians want to buy back some of these homes that are foreclosed and then rent them out to the former owners???? Anyone in Denver heard of this????? Help me out. Great, make the taxpayers bailout the pigs in the mortgage banking and real estate industries.

I haven't heard of that. But I did read an article about foreclosures in the Denver area. One story was about a family with four children living on $30,000 per year. They borrowed $200,000 and soon fell behind in their payments. One thing the reporter never asked was, "How did you think you were going to make $1,800 payments when you make $2500 per month and have six mouths to feed?" No, the article was all about predatory lenders.

Way back when, lenders required a 20% down payment (so borrowers didn't end up upside-down in their loans) and a mortgage payment that equaled no more than about 25% of income. (A quick calculation you yourself can use is to figure a borrowing no more than 2 to 2.5 times your annual income.)

 

[Small Town Girl]

I certainly do think that we're going to see another Great Depression,though there really isn't anything "great" about it.I think that it's a dirty shame,but think about it...Our country is how many trillion dollars in debt to itself?We import more than we export.Financially,we're in the pits.If you all are at all worried about it, now would be a good time to really stock your pantries(the regular staples and foods that keep well and that you like to eat).That helped many a person during that terrible time(TGD).Besides,I don't think there is really anything more vintage than a well stocked pantry.It shows intelligence,organization,and as a host/ess you are always prepared for when that unexpected visitor stays until your dinner hour.

 

[Marc Chevalier]

Our country is how many trillion dollars in debt to itself?

True, but who is going to try to collect on the debt? And what can they do to collect it? It's the quandary of the lender: Argentina owes X a ton of money in loans, but if X forces Argentina to pay it all back, Argentina will collapse ... which means that X will collapse too. Therefore, X cannot do anything that will make Argentina collapse, even if it means that X will never be able to collect on all that loan money.

.

 

[jamespowers]

True, but who is going to try to collect on the debt? And what can they do to collect it? It's the quandary of the lender: Argentina owes X a ton of money in loans, but if X forces Argentina to pay it all back, Argentina will collapse ... which means that X will collapse too. Therefore, X cannot do anything that will make Argentina collapse, even if it means that X will never be able to collect on all that loan money.

.

Very good. You have been studying economics and coming around.
Even if the debt were called, countries usually get out of it by nationalizing the debt. Foreigners essentially get nothing then. Countries hold the gun to your head regarding debt. [huh]

 

[Marc Chevalier]

Very good. You have been studying economics and coming around.

Living in South America was an education. "The economy, stupid" has been Chile's mantra for decades. Chilean economists with U.S. Ph.Ds are worshipped like rock stars there. Technocrats, not lawyers, tend to become Chile's presidents and ministers.


Interestingly, we haven't had a technocrat as president since Herbert Hoover. He left a sour taste in people's mouths.

.

 

[carebear]

I disagree with you here. Predatory lending and "creative" financing have ruined quite a number of good people because they were deliberately misled. Of course not all loan brokers are that way, but some are. I guess it's like saying if you trust your doctor and they gave you bad advice that led to an injury you should have known better because of webmd and books and it's your own fault.

Here in Maine the state is getting involved:

http://www.responsiblelending.org/press/releases/page.jsp?itemID=28533045

http://www.maine.gov/pfr/consumercredit/press/Predatorylending_reportnews1206.htm

Nope, bad analogy. Medical diagnosis take years of training, all financial planning takes is the ability to add and subtract 4-5 digit numbers, (not even multiplication and division) which just requires an elementary school education.

If you are so ignorant you are mathematically unable to, or are so lazy that you lack the willingness to, create a budget based on your actual income and monthly expenditures, something I have my lower income borrowers do so they can see what they truly can afford versus what they might, on paper, qualify for, then I refuse to feel sympathy when you get yourself, open-eyed, into a hundred-thousand dollar plus loan and can't make the payments.

All the information you would ever need to figure out every facet of the loan process is available for free, including mortgage calculators and the index rates to figure out payment schedules on adj. rate mortgages and the like. The tax history for your area and individual properties is public knowledge, as are local utility rates and costs.

Every facet of the loan and its payment consequences are available in the loan paperwork, and we are required by law to go over it. If folks just glaze over and sign where they're told by some shyster, that's their problem. They could have taken the loan docs home and read them in detail prior to signing. Heck, lenders are competitive, instead of jumping on the "too good to be true" 1% loans that pop up in email, or signed on that "miracle ARM" that person could have gone to a reputable banker or lender and asked them to explain the details.

A lot of these folks crying about being "misled" are "victims" in the same way as any idiots who answer the Nigerian email scam or buy snake-oil, they let their greed and their apathy override their common sense. They thought, against common knowledge and their own experience, that there was a free lunch. If you decide to live as a sheep, be sure there are folks out there just waiting to shear you.

Blaming any lender, predatory or otherwise, for the financial problems of borrowers is shifting responsibility from the one person who could have avoided the whole problem by either being aware of their financial situation and not taking the loan in the first place or by using the good sense G-d gave a goose and doing roughly the same amount of research (and time) as would be required to write a 5-paragraph essay in 6th grade.