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coopercash
2714 Posts |
 Posted - 10/10/2008 : 05:00:14 AM
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We here in the USA are faced with a financial challenge that is likely to eclipse the Great Depression of the '30s because in the 21st Century our economy is inextricably tied to trade with the World market.
The Asian economies are greatly dependent on the health of America and Western Europe and when that dependency is threatened, as now, the entire "system" starts to crumble which is exactly what we are witnessing.
We have now entered a vortex of such seriousness that Governments around the World are now concluding that efforts to stabilize the mess will shape up as massive Nationalization of the banking system both domestic and global. This has enormous implications for the fundamentals of capitalism and the notion of "risk and reward" which has largely enabled Western economies to thrive and prosper UNTIL NOW.
Was the "Great America Mortgage Bust" the culprit that started the dominoes to fall?
Was the massive surge in oil prices to above $4 per gallon a contributing factor? Was America's love of credit for "everyone" a part of the mix? Are the costs of stabilizing Iraq and a war in Afghanistan to blame? Have the past two decades of bitter partisanship in Washington DC played their part?
I guess the answer is "YES!" to all of those questions and this has now led us into a
global watershed and an absolute need for a unified strategy that will at least apply a torniquet to stop the bleeding while remedies are debated and applied.
The value of all 401K investments has now suffered a 36% loss which has grave implications for those who have already retired or are planning to do so within the next 3 years. Even the most optimistic pundits figure a 3-year recovery period and most are predicting 5-years.
Virtually every City, County and State Government in America are facing mounting deficits as revenues from property taxes and sales taxes fall. In most cases, citizens are in no financial shape to accept or pay for any tax increases = expect to see an across the board cutting of non-essential services and lay-offs of government employees; a much NEEDED reduction in Public School administrative staffs which are overlaid with expensive "fluff".
The "bright light" is that there WILL be a recovery as Federal Government mandates that mortgages are recast to better reflect actual property value at moderate rates of interest based on income. Better to have houses occupied than vacant!
Will the credit markets unfreeze" Of course, they have to but don't expect to see a return anytime soon to the days when anyone who could "fog a mirror" can qualify for multiple credit cards each with a $1,000 limit.
Will those with blemished credit still be able to function? Of course they will. In fact those with some degree of credit impairment are now close to 50% of all consumers in the USA. Watch for a surge in the numbers of "Buy Here Pay Here" auto lots... watch for a surge in the growth of "Rent-to-Own" furniture and appliance Programs...watch for an explosion in the numbers of consignment/resale apparel stores.
As we stumble towards 2009 one thing is for sure, the so-called "middle class" will be indistinguishable from the "working class" and the "rich" will become richer!
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Scrooge McDuck
8753 Posts |
Posted - 10/10/2008 : 05:30:41 AM
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quote:
Originally posted by coopercash
Even the most optimistic pundits figure a 3-year recovery period and most are predicting 5-years.
great post.
wouldnt you agree that many of these pundits, until not too long ago, didnt see any of this coming?
i feel as though i was late to the game myself, but was on board with the idea that we are about to see blood in the streets over a year ago. i know many people who hold positions at institutions where managing other people's money and making financial decisions is their job, who had no clue until just last week. im sure a few of them still dont get it. |
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darkstar
18092 Posts |
Posted - 10/10/2008 : 05:42:22 AM
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>>>>wouldnt you agree that many of these pundits, until not too long ago, didnt see any of this coming?
I think they were too busy benefiting from it...Great post Richard! |
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ML
3006 Posts |
Posted - 10/10/2008 : 06:03:56 AM
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It ALL started right here with Stated Income loans! You don't see FHA looking for a massive bailout, or multi-billions in defaults. So the goals of housing for low and moderate income borrowers was NOT the problem! The problem started with loan fraud, overstating income, either by the borrower, loan officer, or likely both!
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Scrooge McDuck
8753 Posts |
Posted - 10/11/2008 : 06:28:05 AM
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anyone catch the headline today that GM and Chrysler are in talks to merge now?
http://news.yahoo.com/s/ap/20081011/ap_on_bi_ge/gm_chrysler_merger_talks
what a wacky world we live in. |
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ML
3006 Posts |
Posted - 10/11/2008 : 08:59:10 AM
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Too much capacity, too many models, too many lines. The manufacturers spend too much on "design" and HP, which admittedly is the "sizzle" and not enough on efficiency, which is the "steak", and it has come back to haunt them, just like the mid-70's, which I witnessed first hand. Very sad.
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lunarhamster
4001 Posts |
Posted - 10/11/2008 : 09:54:53 AM
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quote:
Originally posted by ML
Too much capacity, too many models, too many lines. The manufacturers spend too much on "design" and HP, which admittedly is the "sizzle" and not enough on efficiency, which is the "steak", and it has come back to haunt them, just like the mid-70's, which I witnessed first hand. Very sad.
exactly. |
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mykal5
2765 Posts |
Posted - 10/11/2008 : 10:19:51 AM
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quote:
Originally posted by ML
Too much capacity, too many models, too many lines. The manufacturers spend too much on "design" and HP, which admittedly is the "sizzle" and not enough on efficiency, which is the "steak", and it has come back to haunt them, just like the mid-70's, which I witnessed first hand. Very sad.
Agreed, and have to add crippling legacy costs and a corporate culture that severely limited efficient production. The big three have long been known to have the most inefficient production practices in the auto industry.
Those who adopted the Toyota Way, have done quite well.
http://en.wikipedia.org/wiki/The_Toyota_Way
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LoanPro71
2676 Posts |
Posted - 10/11/2008 : 3:55:22 PM
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quote:
Originally posted by ML
Too much capacity, too many models, too many lines. The manufacturers spend too much on "design" and HP, which admittedly is the "sizzle" and not enough on efficiency, which is the "steak", and it has come back to haunt them, just like the mid-70's, which I witnessed first hand. Very sad.
Sure, that's part of the problem.... but why do we, as a nation, continue to ignore the gigantic Pink Elephant standing in the living room?
That Pink Elephant ... is called INFLATION (which is actually nothing more than the Destruction of the Dollar) ... and it's devastating impact on the middle class.
People can't afford to buy cars... plain and simple.
We've exported our manufacturing base, destroyed our currency, taxed our citizens into the dirt, and we've put the Big 3 at a huge disadvantage by forcing them to compete with slave wages through such brilliance as WTO, NAFTA, CAFTA, etc .....
Why don't we talk about the destruction of the Middle Class as THE primary factor that's led to the demise of the Big 3?
Why? ... because we've been conditioned to ignore the Elephant standing in the middle of the living room ... that's why.
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MisterVA
6570 Posts |
Posted - 10/11/2008 : 4:31:10 PM
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quote:
Originally posted by ML
It ALL started right here with Stated Income loans! You don't see FHA looking for a massive bailout, or multi-billions in defaults. So the goals of housing for low and moderate income borrowers was NOT the problem! The problem started with loan fraud, overstating income, either by the borrower, loan officer, or likely both!
Don't forget the appraisers who were complicit. |
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