Housing Market, Recession and World Economies
 

I see people make a lot of simplistic posts because they don't really understand global economies. The panic right now is about a failing US economy. Many of you have no idea what you're talking about. Some of you much better than me. For the first, and larger group, I'm going to try and help you.

In the world of economics, currencies, finance, banking, etc, it is a system of relativity. The Federal reserve will cut rates. So will the European Central Bank, Bank of Canada, Bank of England, etc. In fact, they'd have already been decimating their rates except they've been worried about inflation and commodity prices. These are the facts on the ground and these relative cuts matter!

Many people are completely missing the primary factor as to what should be strengthening the $US - trade! The US trade deficit has improved dramatically over the last 2 years and is now a significant contributor to economy growth. Why has trade surged? US goods and services are significantly RELATIVELY cheaper than comparables in other plaves such as Canada and Europe. This is the invisible hand at work.

Europe is going in to recession, with three of the EU financial powerhouses expecting to
post a second straight quarter of economic decline. Europe is also facing their own housing crisis. This financial crisis is not limited to the US! Economic slowdown is spreading even to emerging markets and we could very well see a global recession. Only the US economy is the strengest an dmost productive economy out there AND they're much further ahead when it comes to dealing with the problems.

Are many of you even aware that Russia, lately an economic powerhouse has closed their stock echange for 3 days? They're on the verge of a confidence crisis that is manifesting itself in massive money outflows from the country. Anyone remember 1998?

Many of you seem to think the Resolution Trust will take worthless assets and impair the US balance sheet. This is driven by the incorrect assumption that mortgages and houses are worth nothing at all. While not holding the value they once did, they're certainly not worth half of what they once were. Not to mention that it's the financial institutions/investors who hold them that have been taking the losses, not the goverment.

But by all means, keep looking down at the US economy, forecasting doom and gloom for the USA and thinking that you've got it much better wherever you are.

People need to pay more attention to their own bank statements then the news.

The other night I had somebody tell me they were doing so bad financially because of the economy... no buddy, you are doing so bad financially because you don't have a job. Funny how that works...

If we wound the clocks back a year, the prevailing belief was that the US was already in recession and the rest of the world would get through unscathed.

So far the US economy has held up MUCH, MUCH, MUCH better than people expected. Trade has blown the doors off expectations largely on the back of a cheap US $.

Conversely, Europe and Canada hae seen much waker than expected economic performance due to high currencies and high commodity prices. I know this caught many of you by surprise, you thought you had it made in the shade!

Europe is in recession, Canad and Japan close. The emerging markets are going to follow. The US will probably have a mild recession while everyone else goes in to a deep one. Any guesses whow ill accelerate out of the weeds first? Oh, I think you know.

i find it hilarious when someone paid a certain amount for their house and act like their ability to pay their payment is any difference now that the market is down.

You're just as bad as the people you're ridiculing, just in reverse.

The gov't has yet to tell us what price they will be paying for these securities, and THAT is what's going to make all the difference in whether or not this is a good deal for the taxpayer.

Your blind belief that this won't be a bad thing for us is just as bad someone else's blind belief that it will be bad for us.


All of this stuff you've been posting is meaningless unless you have credentials and formal training as an economist, or you add citations to your statements from reputable sources.
Otherwise, it's all just your opinion, which, given your lack of expertise in economics, is worth no more than anyone else's opinion. :2 cents:

:1orglaugh:1orglaugh:1orglaugh

I didn't say it would be a good thing. I said it wasn't the end of the World that's being predicted.

And yes, Europe going in to recession, US closing their trade deficit for the first time in a long time, US currency decreasing, all opinion. :1orglaugh:1orglaugh

I guess we'll see in a few years from now. Don't worry, I'll most certainly be pointing out that I told you so, once again.

Don't lump me in with the people you're poking fun at here, I haven't formed an opinion on whether or not what the government is doing is a good thing. The devil is in the details.

Also, we don't really know how bad this thing is going to get, neither you or I or Hank Paulson really know.......for you to speak with "certainty" about how quick our economy will (or won't) recover and to ridicule people who think this will be alot worse than you think it will be is ridiculous....especially considering that you're not an economist.

It's one thing to have an opinion on these things....it can even be an educated opinion....but to start a thread ridiculing people who disagree with you on a subject in which you are no expert doesn't make them stupid, it just makes you a dick.

Hmmm...maybe the massive layoffs and reduction in available jobs has something to do with it? A lot of people have jobs that are at the mercy of the U.S. economy, and when shit hits the fan their income drops. So a crappy economy can actually impact those that took out honest home loans that were within their means. Not everyone hurting are idiots that took out adjustable rate mortgages w/ 0 down on overpriced homes. The trickle down effect can wreak havoc. I know a few good people that were responsible w/ good paying jobs that are now hurting financially and at risk of losing their homes. Not so hillarious if you ask me.

I guess we'll see. When I'm proven right, again, you can just come back to this thread for the "I told you so".

Oh wait, I'm not a economist, so being right doesn't matter! :1orglaugh

i dont care what side of the argument you are on... whatever happens will be a stroke of good or bad luck... its as simple as that...

even the worlds economists arent really sure how to fix things..

of course the world's govts cant create panic by telling people the truth, but i guarantee you that the biggest economies are shitting bricks... :2 cents:

i think the car manufacturers are going to be next, followed by the airlines.... i dont forsee the govt bailing either out...

imho, we are looking at a poor economy for the next 3-5 years...

hahaha! I keep on saying the same thing . . people just dont take my word for it :1orglaugh

And why doesn't he have a job? uhhhhhhhhhhhhhhhhhhhhhhh

My friend an rnc guy and an executive recruiter. He said all this people dont want to pay their mortgages is bullshit. They are losing their jobs and income is going down. Im on my condo board we have people that always paid and now they cant. We have had 4 out of 28 units foreclose.These arent deadbeats these are people out of work or not making enough anymore.

What exactly do you base that opinion on? What McCain tells you?

"While not holding the value they once did, they're certainly not worth half of what they once were. Not to mention that it's the financial institutions/investors who hold them that have been taking the losses, not the goverment."

Give it a few more years and they will be half. There is a concept called supply and demand.
Stagnant wages, high unemployment, inflation, currency devaluation to name a few
are going to put a squash on the demand. Supply is already at an all time high, coupled with a new wave of foreclosures from 5yr ARM resets and unemployment will push supply
through the roof.
And we as tax payers are taking the loss. In the form of higher interest rates, bank bail outs, inflation due to printing money to bail out said banks...
Doom and gloom? Possibly, nothing is ever too big to fail.

Honestly, I'm just waiting for Zombies to take over the world, much like Dawn of the Dead. :2 cents:

GDP and economic growth. Granted, the EU does have a slightly higher GDP, but soley as a result of population. Three big EU countries will post consecutive LOSS quarters. Their rate of growth is currently not as strong as it is in the USA.

Americans still have the most purchasing power too. You'd have to be making more on the order of $140,000 a year to have the purchasing power of an American making $100,000.

Despite all the doom and gloom, the US will still experience a higher level of economic growth this year than either the EU or say Canada.

So now why don't you tell me what makes you think the US economy is NOT the strongest?

I don't think I've listened to a single McCain speech.

Honestly man, this kind of stuff is so far beyond your pay grade that you'd really be doing yourself a favour by just staying out of this thread. :2 cents:

WarChild is pretty on.

We have been in worse situations, and so have other Countries, we pulled out and so did they. Unemployment has been worse, the housing marketing screwed, stock market totally screwed, banks going belly up.

It happens and each time people freak the hell out and make it worse. That's the real danger. We aren't even in a recession, and if we do slip into one it's from people fraekin the hell out.

We don't always have to be on top, doing the best, #1 at everything.. We haven't always been and we won't always be. But we will be back, like always.

Exactly. The supply of land is not going to grow and the demand of a growing population is not going to shrink. What makes you think housing costs could ever plummet by such a drastic amount? Sure, corrections will happen but not wholesale devaluation.

The number of homes that are currently on 5 yr ARMs reseting or about to reset is not the majority by far.

Remember, that roughly 30% of homes are owned outright with no mortage. That leaves roughly 70% mortaged. Of that 70%, around 70% of those are in standard fixed rate long term mortages. You see how quickly the numbers are falling off here?

Personally, I think the real estate market has a lot to do with the economy. Like you said, a LOT of people are foreclosing because now principle has kicked in on their interest only home loans. I still blame the banks for some of this problem. Greed drove them to give anyone with a pulse a mortgage that was WAY out of their price range.

In 2004 I got approved for a $700,000 loan for a condo in LA. I was making 1/3 of what I make now and had my credit cards about maxed out. Now, I cant get approved for a $300,000 home and my credit is great... im just "self employed." I have friends that bought houses and condos that were way out of their price range. My friend right now is going through the same problem. He was looking for a condo in the $600k price range and the realtor connected him with a bank and got him an $800k loan. I remember him teling me how the interest only loan was cheaper than the fixed rate for $600k. His response was "In 5 years ill be making more money, so Ill be able to afford the principle payment then."

At the same time, I have friends that are looking to purchase a home or condo now but say "its a buyers market, prices will keep going down and loan rates will go down too." So it seems that either people are sitting on their money hoping for prices to drop so low they can afford something that they normally wouldnt be able to, or their homes that they got talked into buying by greedy banks and realtors they now have to foreclose on.

It just seems the rich are getting richer and the poor are getting poorer

I'm not sure what pay grade has to do with understanding world economics, nor do I think you have any idea what my income even is.

I didn't even say that I didn't agree with your main points, but you feel threatened anyhow. It's cute.

However, now that I know you're basing "out there" as a comparison between the US, EU and Canada and not the rest of the world, I have a better understanding of what you're talking about.

It's so cute how many of you don't have any clue at all about economics. Carry on, it's entertaining me.

:1orglaugh

You totally missed the point with the pay grade comment. Imagine that. I for one am stunned.

Of course I used the EU. What other economy is even _CLOSE_ in size? Japan's GDP is less than 1/3 of the USA's. Canada I just sort of through in so you'd have something close to home to compare and make you feel fuzzy.

I'm certainly not an economist, however I do want to say that I'm so tired of the American people blaming the government and greedy business practice for this mess. The American people (for the most part) just can't seem to take responsibility for their actions.

Just because the banks are willing to give you a loan that is blatantly more than you can afford, does not excuse you from making a bad financial decision. If you can't afford it, don't fucking buy it.

Just because there is a McDonalds on every corner, does not make them responsible for YOU being fat. Just because your credit card has a six-figure limit, does not mean you have to max it out.

If you are living or trying to portray an image outside your means, then you don't have anybody to blame but yourself.

It's time we take responsibility for our own actions and perhaps a little 'tough love' is in order.

</rant>

It can be easy to miss the point on things that make no sense.

And the EU's GDP is higher than the US's, in fact if you go per capita, the US is ranked 12th. But please continue on with this great thread of yours. It really makes me feel all fuzzy, especially that you don't know the difference between "through" and "threw". :glugglug


And Verbal, I definitely agree with you :thumbsup

It makes perfect sense. You just don't understand what it means to say something is beyond your pay grade. Look it up.

I know what it means, much like "bought the farm"... someone didn't actually buy a farm.
But the phrase originates from a crop duster who died upon impact into someone's barn and upon suing, he essentially did buy the farm (paid it's full value after death).
And like "beyond pay grade", it derives from somewhere, which is obvious, as is how you intended it.

So no, I didn't miss the point. So get over yourself and try discussing actual topics rather than what you think about me. k?

You need to get on the phone to your broker asap and tell him you want to buy some mortgage backed bonds! If you are right you will make a killing! You say these securities that are referred to as 'toxic' and 'junk' are under-priced?!?! GET IN THERE NOW! Also, when you are ballin after you make cash on them during the upswing you can phone up the losers from Merrill/Lehman/Bear who got it all wrong and missed the windfall profits!

The good news for you is that if you havent bought any, and you are a US taxpayer, Paulson has already done that for you with your tax dollars!

Some of those mortgage backed bonds were selling for as little as $.20 on the dollar. That's ridiculous, and it's driven purely by fear and not the facts on the ground. That's what needs to be stemmed, is the fear.

No question people will still lose money. Many of the institutions that contribued to the excess are gone and the ones that end up surviving will be very different.

Ahh yes. You'r really leading by example on that one too, eh?