Topic: Economics
Woe is US. The recently passed housing bill is a sign of just how very desperate our present situation is.by Jahfre Fire Eater
(libertarian)
Friday, July 25, 2008
Congress passed a very bad bill this week. The bailout of Freddy Mac and Fannie Mae was inevitable, politically. The only other option was to not bail them out and that would have been an obvious disaster. No congressman who wants to be re-elected could possibly sit by and watch that happen. So, for the sake of a few hundred elected officials' careers, the American people have been made ultimately responsible for all the bad mortgage debt involved in those two companies.
We were already being leeched dry to pay for our national debt. The government has an ATM card that allows them to pull money out of our savings, out of our checking accounts and out of our jars full of coins buried in the yard. It is called inflation.
This bailout means inflation will increase and the inflation rate will increase. The FED must continue to print money at an even faster pace now because this bailout has doubled the burden on the American public.
I used to think Socialism was the ultimate evil but this bailout is a horror I hadn't ever envisioned. For the first time ever an enterprise has been set up by a government that ensures all the rewards go to those few wealthy bankers who are on the Federal Reserve Board and their friends while ALL of the risk is borne by the taxpayers. They have an ATM card that will allow them to draw out every last bit of purchasing power and there is nothing we can do to stop them from using it.
In the 95 years since the Fed was created the dollar has lost 95% of its purchasing power. At this rate, it will be worth $0 in 5 years...or sooner if the government gets serious about the printing presses.
Americans shouldn't be letting unelected individuals experiment with our currency. Especially with a 95 year track record of devaluation. We shouldn't assume they know what they are doing because they are "experts". Greenspan and Bernanke and the cowardly, corrupt congress (except for Ron Paul) have led us to the brink of ruin with no outcry from the public. Why? Why would 100 million people let their wealth be drained into a few banker's pockets without a general up rising?
Perhaps T.S. Eliot was right after all. Whimper it is.
The amazing part of what is happening today is that this is just the first skirmish. That our government and central bank would act so desperately at the very first events in a long, deep disaster is a bad sign. The housing market is just gathering speed in its crash. I would not be surprised to see home prices down 70% from their peak within 10 years.
The decline will continue as long as Fannie Mae and Freddy Mac can borrow infinite sums from the Fed they will continue to buy up that bad debt so the homeowners can continue to make mortgage payments rather than investing their devaluing dollars in something that will make them better off in the future. This is a bad, dirty trick on a population who should know better but for our public schools being so adept at turning out graduates like nails.
Oh well, I've done all I can to encourage everyone I know to prepare. The rest is on them. Mrs. Fire Eater should be coming home by mid-august. I'd hate to have her be stranded all the way over in Maine and not be able to get back to Colorado but we can never know the timing of these things. I think bankers around the world will bend our backs over double to keep things "normal" until after the Olympics but I'm not sure it is possible.
Ah but what do I know? I could be wrong.
-Jahfre Fire Eater
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The views expressed in this
article are those of Jahfre Fire Eater only and do not represent
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If you're wrong then alot of us is. What would Uncle Sam do if the wealthy of this country got scared and decided to pull there monies out of the banks and the economy? I alwayse understood our dollar was based on a gold standard. When they left that standard they took us with them. dawgone
Posted By: Jake, the champion of the constitution
Date: 2008-07-25 09:08:39
Dear Jahfre Fire Eater -
I think you are wrong on something - I disagree that home prices will be down 70%. The inflation or hyperinflation should elevate them quite a bit. Perhaps down 70% in inflation-adjusted value though :)
Posted By: Jahfre Fire Eater
Date: 2008-07-25 14:40:03
Hi Jake,
Maybe you're right. Inflation and deflation are both at work on different parts of our economy. I may be wrong but I'll stick to my position for a while yet.
Deflation in housing is a historically common trend subsequent to the collapse of an Empire regardless of what happens to the currency.
It wouldn't take much time for the Mexican economy to start producing jobs that would absorb enough labor to reverse the net flow of workers between the US and Mexico. Once desired demand for housing begins to decline I'll assert I am right I'm right.
Today most of the decrease in demand is not because there are fewer people who want to buy homes but because:
1. Credit is becoming more expensive and harder to get.
2. Speculation in the housing market has mostly ended. This results in greatly reduced transaction volumes. Meaning inventories rise, houses stay on the market longer and prices start to come down. This is where we are today. For speculators, houses are not homes. Potential home buyers numbers haven't gone down much but all the speculators are gone or fending off the wolves in vain.
3. Potential home buyers who can get credit and have time to wait are chosing to wait because of the expectation that prices will continue to fall. The price drop/inventory spike due to the sudden curtailing of speculation reinforces that patience.
4. There will be increased supply pressure as well. More people will move to cities and rent apartments in urban environments. If this becomes a significant trend, and I believe it will, the housing inventories will go up.
So my guess about the ultimate decline is based on a depression scenario and your guess about the ultimate house-price inflation is based on an inflationary recession scenario.
Today I'd rather be sitting on a pile of gold than a pile of houses. I don't think houses will hold their value.
Posted By: Mrs. Fire Eater
Date: 2008-07-30 14:04:14
I think you're right on... except I think the real "hard hit" won't be for a while yet. People are still holding onto their dreams, in spite of what's happening to their neighbors and even to themselves, i.e. going out and getting yet another loan to "weather the storm". It will be a while before they realize this isn't going to blow over. Peoples have a tendency to cover their ears instead of listening.
Just in case, I've let my dad know he has until the Olympics to go in and out of the hospital again. :) See you soonly!
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