global depression?

[gatorback]

What you gonna spend your $600+ tax credit on then?

[RiversideGator]

http://www.metrojacksonville.com/forum/index.php/topic,1236.msg8516.html#msg8516
November 26th, 2007

BTW, I have heard that "house of cards" nonsense about our financial system and real estate speculators for many years and it is just that - nonsense.  Of course there is an element of unreality in our economic system in that we are basically trading around pieces of paper (literally or digitally) in exchange for goods and services.  This is fundamentally the same ancient concept as gold as a currency though except that the paper has no intrinsic value except for the backing of the government and the people.  However, the system works because everyone abides by it.

As for the dollar, look for it to come back soon.  It isnt a trash currency and these things go through cycles.  Also, for many years the dollar was unusually valuable due to our preeminent position at the end of WWII so it is natural to see some devaluation.  As for our public debt, it is actually better than many other highly industrialized nations like Britain and Japan in relative terms.  And with inflation, it is rising a bit but it is still historically low.  And, a healthy economy needs modest inflation to provide a moving target for growth and to inject money into the system.  Deflation and difficult credit is a far more dangerous problem and was seen in the US during the Great Depression and in Japan during their 1990s depression.  Dont believe this Paul nonsense - he simply trades in scary figures which seem scary until you actually do some research and become more economically aware.

In any event, the long and the short of it is Paul is basically a nice guy but an economic ignoramus and has zero chance of winning any primaries.

this is actually a great thread, btw---from november
http://www.metrojacksonville.com/forum/index.php/topic,1236.0.html

ok, let's examine my previous statement, line by line:

BTW, I have heard that "house of cards" nonsense about our financial system and real estate speculators for many years and it is just that - nonsense.  Of course there is an element of unreality in our economic system in that we are basically trading around pieces of paper (literally or digitally) in exchange for goods and services.  This is fundamentally the same ancient concept as gold as a currency though except that the paper has no intrinsic value except for the backing of the government and the people.  However, the system works because everyone abides by it.

Are you still taking dollars at Boomtown, Stephen, or have you shifted over to only accepting gold nuggets, sea shells of Springfield Bucks yet?  Since I assume you are still accepting our legal currency, my point is still true.

As for the dollar, look for it to come back soon.  It isnt a trash currency and these things go through cycles.  Also, for many years the dollar was unusually valuable due to our preeminent position at the end of WWII so it is natural to see some devaluation.

On November 26, 2007, the day I made this statement, it took $2.0679 to purchase one British pound and $1.4840 to purchase 1 Euro.  Today (January 24, 2008), $1.9717 will buy you a British pound and $1.4713 will buy you 1 Euro.  This amounts to the dollar appreciating by roughly $.09 against the Pound and just over $.01 against the Euro in the last two months.  So, turns out I was right here too.  Perhaps I should get into foreign exchange trading.  Also, currency traders are betting on a further roughly $.05 rise for the dollar against the Pound over the next year and a roughly $.02 rise against the Euro over the next year.  A little basic research would make your posts so much more relevant, Stephen.  For foreign exchange info, I suggest this site:  http://markets.ft.com/ft/markets/researchArchive.asp?report=DSP   

As for our public debt, it is actually better than many other highly industrialized nations like Britain and Japan in relative terms.

Looking at the actual data, I am correct again.  Japan has public debt of 182.4% of GDP, Italy has 105.6% of GDP, Belgium 86.1% of GDP, France 66.6% of GDP, Germany 65.3% of GDP, Canada 64% of GDP, Switzerland 50.2% of GDP, Netherlands 47.7% of GDP, United Kingdon 43.3% of GDP, Norway 39.1% of GDP and the US has just 36.8% of public debt to GDP.  https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

And with inflation, it is rising a bit but it is still historically low.  And, a healthy economy needs modest inflation to provide a moving target for growth and to inject money into the system.  Deflation and difficult credit is a far more dangerous problem and was seen in the US during the Great Depression and in Japan during their 1990s depression.

This chart will confirm that my statement was true.  Inflation is a bit elevated lately but not historically high by any means.  Also, deflation has occured in the past and this usually coincides with recessions.  See, when you actually look at the data and read economic history you are a lot more informed than if you simply read Mother Jones, the Huffington Post and the rantings of Ron Paul.  Enjoy the education:


http://research.stlouisfed.org/fred2/fredgraphfile/?height=378&width=630&bgcolor=%23B3CDE7&txtcolor=%23000000&recession_bars=On&s[1][id]=CPIAUCNS&s[1][transformation]=pch&s[1][scale]=Left&s[1][line_color]=%230000FF&s[1][range]=Max&s[1][cosd]=1921-01-01&s[1][coed]=2007-12-01

In any event, the long and the short of it is Paul is basically a nice guy but an economic ignoramus and has zero chance of winning any primaries.

And finally, Ron Paul has obviously not won any primaries.  Thanks for that trip down memory lane though, Stephen, and for pointing out how prescient I really was just 2 months ago.   

[RiversideGator]

What you gonna spend your $600+ tax credit on then?

I'll give it to my painter, of course.   

[stephendare]

well you deserve a hat tip on the ron paul prediction, at any rate.

you are entirely welcome for the trip down memory lane.

[stephendare]

Riversidegator, responding to data that the Republican Economic Policies of the past 8 years are causing the economy to tank.

New Depression Causes Blighted Suburbs, Renewed Urban Cores.

The streets are empty. Trash rustles down the road past rusted barbecues, abandoned furniture, sagging homes and gardens turned to weed.

This is Shaker Heights, a suburb of Cleveland and a town ravaged by the subprime mortgage crisis roiling the United States.

Faded "for sale" signs sit in front of deserted houses. The residents are gone, either in search of new jobs after the factories shut down, or in shame after being evicted for missing their mortgage payments.

A red, white and blue American flag flies over windows and doors which have been boarded up to keep the drug dealers away.

Thieves have stripped many homes of the plumbing, the doors, the windows, the aluminum siding.

The police station parking lot is full. The officers, who have seen their numbers triple since 2006, are coming back from their rounds. They speak of installing alarms in some of the homes claimed by squatters.

At 9422 Chagrin Street, a hand-scrawled sign attached to a window indicates someone lives there: "Please Used."

After three rings of the bell, Sarah Evans, 60, opens the door with a mixture of curiosity and alarm.

She says she is one of the last people left on the street. And she is on the verge of losing this two-bedroom house in which she has lived for more than 30 years because she simply cannot afford her monthly payments.

It is a complicated story. She refinanced in 2003, but did not realize the document she signed included provisions to radically increase the interest rate.

She stopped making payments in 2006 and shows her unpaid bills totaling 24,000 dollars.

Her bank is in the midst of eviction procedures.

"When folks buy a home they expect to die in it, I guess," she said as she stood outside in the cold. "I had my American Dream but it became a nightmare."

Her words are echoed by the angry barks of the guard dogs pacing behind a chain link fence two houses away that was installed by the new owner: a bank.

The massive parking lot of the Eagle Fresh supermarket is empty.

Behind her till, Myra Bibldwit lifts her head when a bell signals the entrance of a customer.

"Not many folks come anymore. We're used to it," said the 24-year-old cashier, one of the few in the neighborhood who managed to hold onto her job.

In the five hours since she started working today she has served just 10 customers. "Maybe you will buy something," she says with a smile.

Then comes customer number 12.

Laura Johnston, 50, says that her street -- about 10 minutes away by car -- was alive two years ago. Today, half the houses are abandoned.

"Folks could not afford their payments. They were asked to pay loans which doubled. They could not afford it, some lost their job. Lenders were greedy. They threw them out of their homes," she told AFP.

"I'm very upset. I missed my friend Helen. She disappeared overnight. She did not even say goodbye."

There are plenty of cases like Helen. They are called the neighbors who disappear in the night.

For county treasurer Jim Rokakis, the greed of the banks is to blame for this man-made disaster.

"All you needed was a pulse to buy a house. Some loans were written with no money down, no proof of buyer's incomes. They did not even check what people were saying. Most of those folks were jobless," he said in an interview.

"Shaker Heights was the perfect storm: poor folks, unemployed and a desire to get a piece of the American Dream."

[RiversideGator]

Interesting photo, Stephen.  Is that one of your relatives?

As for the article, it is loaded with nonsense.  Let's look at the "victims" of Republican economic policies (whatever that means in a free market economy).

1)  Lady named Sarah Evans has lived in the same home for 30 years, presumably paying it off at some point.  She then refinances in 2003 to take a load of cash out for walking around money or whatever.  She claims she "didnt realize" that the loan had an adjustable rate which could increase her payments significantly.  This is in fact what happened.  So, we are supposed to blame Bush or the Republicans for her unwillingness or inability to do basic financial research or even to read the documents she was signing?  Sorry, but that dog wont hunt.

2)  Woman living on street complains that all of her neighbors have left: 

"Folks could not afford their payments. They were asked to pay loans which doubled. They could not afford it, some lost their job. Lenders were greedy. They threw them out of their homes," she told AFP.

Again, why did these people agree to adjustable rate mortgages?  Did they realize the dangers and just take a chance maybe?  Maybe they had bad credit because they didnt pay their bills and couldnt get approved for anything better.  Should people be held responsible for contracts into which they freely and voluntarily enter?  I think so.  I dont think this is a failing of government except that government schools graduate people who are woefully unprepared for life in modern America.

3)  And finally we have the county treasurer (who really should know better but is probably a Democrat) stating the following:

For county treasurer Jim Rokakis, the greed of the banks is to blame for this man-made disaster.

"All you needed was a pulse to buy a house. Some loans were written with no money down, no proof of buyer's incomes. They did not even check what people were saying. Most of those folks were jobless," he said in an interview.

"Shaker Heights was the perfect storm: poor folks, unemployed and a desire to get a piece of the American Dream."

What I think people need to consider here is that perhaps the real victims here are the banks and lenders.  There was massive fraud by mortgage applicants which allowed them to buy homes and get approved for mortgages when they were totally unqualified for the loans.  They were then able to live in the places for a time until things caught up with them.  Investors around the world were left holding the bag when these people stopped paying their bills.  Hence the subprime lending crisis.

BTW, I have been a aggressive real estate investor and have made some deals which had a great deal of risk.  Now, with the real estate market temporarily in the tank, I am not able to do as much as I previously did because the lenders are scared to death by all the defaults that have occurred so many investors cannot get financing.  And, for some reason, I doubt the liberal media would have a lot of sympathy for me if things went bad.  In bad times though, all you can do is man up and keep going forward.  This is my simple advice.

[RiversideGator]

Oh, and another point I forgot to mention:  Shaker Heights is not a city loaded with poor people.  This whole article is nothing more than fraudulent hyperbole when you look at the real numbers.  According to the 2000 census (and these numbers have inevitably gone up since then), Shaker Heights is actually a fairly wealthy streetcar suburb of Cleveland, OH:

The median income for a household in the city was $63,983, and the median income for a family was $85,893. Males had a median income of $61,768 versus $38,606 for females. The per capita income for the city was $41,354. About 5.3% of families and 6.9% of the population were below the poverty line, including 8.1% of those under age 18 and 6.5% of those age 65 or over.

http://en.wikipedia.org/wiki/Shaker_Heights

Again Stephen, some basic research on your part would be nice here.  I recommend that you stop reading the Daily Kos and similar tripe and start reading bloomberg, the Wall Street Journal or even this great blog http://mjperry.blogspot.com/

[gatorback]

So, there is no housing crisis rather just a  banking crisis.  After all, you'd figure the leander knew what THEY were getting into.  And isnt' there that buyer beware on both parts?  I'm sure the banks did their due dilagense. 
They knew what they were getting into.

[stephendare]

Oh, and another point I forgot to mention:  Shaker Heights is not a city loaded with poor people....  According to the 2000 census (and these numbers have inevitably gone up since then), Shaker Heights is actually a fairly wealthy streetcar suburb of Cleveland, OH:

wow, river.

you finally got it.

[second_pancake]

What I think people need to consider here is that perhaps the real victims here are the banks and lenders.  There was massive fraud by mortgage applicants which allowed them to buy homes and get approved for mortgages when they were totally unqualified for the loans.  They were then able to live in the places for a time until things caught up with them.  Investors around the world were left holding the bag when these people stopped paying their bills.  Hence the subprime lending crisis.

Not all banks originate mortgages, that is especially true with subprime lending.  In most cases, a bank will do business with an origination company that specifically deals with subprime lending.  They create and book the deal and the bank funds it.  That asset is almost immediately sold in the secondary market as a mortgage-backed security, and serviced through a mortgage servicing company on behalf of the investor. 

When a mortgage is 'A' paper (prime) it is usually not bought and sold, rather stays with the lending institution or bank on their portfolio as a performing loan and any servicing is done in-house.  That doesn't mean that these loans never go bad, just that the odds of them going bad are little so the bank would rather retain these then sell them in a pool to an investor.

I said all that to say this, just like there is predatory servicing (those nasty collectors that tell you you're a deadbeat), and predatory lending (a bank or lending institution selling you on something that they know is not in your best interest just to make some money), there is also predatory selling/marketing with real-estate companies.

There were many realtors in the market that were also acting as brokers during the housing boom.  They received incentive from the lending institutions that booked their deals.  Even the realtors that weren't brokers had deals with banks in the form of the realty firm having a contract directly with a bank.  You would see this alot when looking for a home through a Watson or RiverOaks, for instance, in which they would advertise a home selling for $340,000 and next to it would read, "only $900 a month!"  This was a way to get buyers interested in how they could own a home that costs far less than what it cost them to rent.  It's the old bait and switch...get em in the door with promises of low monthly payments and then gloss over the part of the contract indicating their payment would be $1500 per month after property taxes or an interest rate adjustment.

The victims are not the banks and the lenders nor the investors.  They brought all of this upon themselves.  I have been in the industry for most of my working life and I remember precisely when this shift occured.  I was working for a subprime lender/servicer and I saw why types of deals were being written.  I also saw the types of brokers we were dealing with.  It was very cut-throat in terms of competition out there.  If we didn't write the deal, the broker would find someone else that would...and they would.  The expectation was that we wouldn't have to worry too much about a non-performing loan, because this would be a customer that would refinance in a year and we'd just stand to make more money off of them.  That company is since out of business, was taken over by the FDIC and went into bankruptcy.

Yes there were mortgagors that weren't completely honest on their mortgage apps, but that's nothing new.  The only difference is, when the origination regs were more strict, lenders caught the fraud. Within the past 5-7 years, they just didn't care and turned a blind eye. 

I dont' feel a bit sorry for the lenders, the lenders worked with realtors to market their special loan products and paid them to push these products on the borrowers.  It was all marketing and sales...smoke and mirrors.  I also don't feel sorry for the investors; every pool of loans sold to an investor is fully disclosed and they know what they're buying into.  If they feel they've been given the shaft then they demand the lender repurchase the assets.  Trust me, the investors have teams of highly skilled attorneys who are very good at getting lenders to repurchase crappy assets.

It's a shame that people can still get taken like this, but I do think they were taken.  There are a heck of a lot of uneducated, simple-minded people out there in the world who just want what everyone else has and they don't understand the work that went into getting there. Instant gratification in the form of the "american dream" of home ownership is what got them here.  Tomorrow, it will be something else.

Incidentally, there was a huge government initiative in the last 10-12 years for every person in America to own a home which also contributed to the special loans the banks funded.  I could go on and on about that, but I'll just leave it here for now.

[RiversideGator]

Oh, and another point I forgot to mention:  Shaker Heights is not a city loaded with poor people....  According to the 2000 census (and these numbers have inevitably gone up since then), Shaker Heights is actually a fairly wealthy streetcar suburb of Cleveland, OH:

wow, river.

you finally got it.

The point is, Stephen, that there is nothing to get.  There is no there there.  The whole article is fraudulent nonsense drizzled with a nice layer of cheap sentimentality.

[midnightblackrx]

Its both the banks getting greedy and citizens not doing their due diligence causing this catastrophe.

No worry for the lenders though, the Federal Govt will bail them out. Always there to pick you up when you fall down scrape your knee...   

[stephendare]

River,

When even the affluent middleclass gets wiped out of a development due to this predatory banking nonsense, something is wrong.

seriously wrong.

You seem to seriously think that only the poor suffer during recessions.

[gatorback]

Well, the rich do tend to help the rich out stephen

[RiversideGator]

River,

When even the affluent middleclass gets wiped out of a development due to this predatory banking nonsense, something is wrong.

seriously wrong.

You seem to seriously think that only the poor suffer during recessions.

Stephen:  Apparently you didnt read the article very closely.  The article explicitly blames this problem on the fact that Shaker Heights is a poor section of Cleveland in which the poor have been taken by lenders.  See this excerpt:

"Shaker Heights was the perfect storm: poor folks, unemployed and a desire to get a piece of the American Dream."

And, some middle class and wealthy people, as well as some poor people, have been caught up in the real estate downturn.  This is just part of the business cycle.  Periodically real estate slumps occur and you have to hang on by your fingernails if you are on the margin.  But, real estate always comes back.  And, I wouldnt say that the middle class is being "wiped out".  This sort of hyperbole is sort of a Stephen Dare hallmark but it really makes your arguments much less persuasive.  BTW, there are some trememdous deals out there nowdays.  If people are looking to buy, this is the time.