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Housing Bubble Bursting?

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This economy is held together with bailing wire. B of A buys CW to keep it from going belly up, the Fed promises to cut rates so B of A can lose deposits to prop up its capital position, and begging for foreign capital to bail them out. This is just the leading edge of the wave.

Mean while out here in conservative flyover country: The bank I do work for had the most profitable year in history and this has been and will be the best month I have had in my 36 year appraising career. Did a ton of work the first 10 days and they sent over 25 jobs yesterday. Most of my work is coming from defunct operations being sold or refinanced to keep the hounds away. There are deals out there like you would not believe. I have been working on one sale for three days trying to explain why the sale price is so much lower than all data indicates. Those with money are cleaning up and those living on the margins are biting the dust. Just when I planned to cut back my operations.
 
Now IF Hillary were to get elected & the Foriegn Investors call her & say we're calling in the loans or we're going to take over the U.S. Is Hillary going to CRY!! or pick up the RED phone?? I'm betting on her crying.
 
Every politician now sees the problem with housing

Election Notebook: Clinton to unveil economic stimulus plan

WASHINGTON (MarketWatch) - Democratic presidential hopeful Hillary Clinton plans to unveil a $70 billion economic stimulus package Friday in the key battleground state of California, just two days after Republican rival Rudy Giuliani outlined an ambitious tax-cut package.

The Clinton campaign claimes that the plan would "jumpstart our economy by addressing the housing crisis and skyrocketing home energy costs and investing in clean energy technologies," according to a posting on its web site.

In an interview with the New York Times on Thursday, Clinton said the country needs "a jolt of confidence in the economy."

"I have been looking at the latest unemployment numbers, and I really think it is imperative that we start to move to help people dealing with the housing market and give the country a jolt of confidence in the economy," she told the Times in a telephone interview while campaigning in Nevada.

Clinton's plan would include help for low-income families facing mortgage foreclosures, home heating-bill assistance, lengthening the time period for unemployment benefits, and job creation in certain sectors.
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Vote for Clinton, vote for Rudy, vote for the guy that promises the biggest bucks to you personally. It is called vote buying. :new_all_coholic:
 
Denis DeSaix said:
The thought of Hillary telling me, as President, that she's got an economic plan that will help me, strikes me with fear and I find myself reflexively hiding my wallet. :ohmy:
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Well, some people are more astute than other people.

Of course, politicians promise to deliver but seldom deliver what was originally promised. It reminds me of the first Clinton who promised to cut taxes before he was elected president, tried real hard he said after he was elected, but raised taxes instead. And made it retroactive too. :angry:
 
Clinton to unveil economic stimulus plan

-- "I have a SECRET plan to end the Vietnam War" - Tricky Dick
 
http://www.ft.com/cms/s/c6eb81e0-c083-11dc-b0b7-0000779fd2ac.html
Citi looks to secure further $14bn in new capital

By Henny Sender in New York
Published: January 11 2008 22:02 | Last updated: January 11 2008 22:02

Citigroup is putting the final touches to its second big capital-raising effort in as many months, seeking up to $14bn from Chinese, Kuwaiti and public market investors.
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What goes around comes around as they say. Back in the late 60's when I was in college studying economics I remember my macro econ professor laughing and telling us the only thing keeping the communist countries afloat was aid from their cronies in the west. He stated that the communist party USA was financed by money funneled from the FBI. I think he had it right. In those communist circles "Wall Street" was the icon of evil.

Now look how the world has evolved. The socialist commies states are buying and propping up Wall Street. You see, there is a reason for all of this. Without evil capitalism, how do you just communism? Without capitalism how can you keep a socialist-communist state viable? The answer to both questions is you can't because they are mutually dependent.

It is the same in politics. Without Republicans, what would a Democrat stand for? Again, the two sides need each because one is the shadow of the other. :peace:
 
So how do you make the populace spend?

It appears that Christmas sales were not all that most economists were forecasting. Roughly 72% of our GDP comes from consumer spending. As consumers retreat from their spending habits, what is the logical conclusion? Barring any other additional component of GDP doubling to make up for the lack of consumer spending, GDP will be declining. Will that decline in GDP be reflected in the next few quarters? No, judging from how the government reports the figures on GDP. Will employment be impacted? It already has but it is not showing up in the unemployment statistics the way the government tracks employment.

So what happens? You can hear the politicians all speaking about a slow down and maybe a recession coming. How do they know? They can't point to GDP or unemployment data to prove their case. Yet, all politicians are on board with the plan of a tax cut and maybe increased government spending.

Lets look at monetary policy. All last year up until August we hear from the FED that inflation is the problem, not economic growth. We hear that housing is not causing a recession. But then the FED cuts the funds rate by a half of a percentage point. Why? Banks are not lending. And it is discovered that we have a slight problem with credit availability that flows throughout the credit system from commercial paper to Wall Street investment banking. What is causing this? Defaulting mortgages primarily.

Now we see huge write downs of asset backed paper from banks to Wall Street that amounts to 10's of billions of dollars. The FED appears to be concerned more so than before. It now signals that it will take aggressive action on the funds rate when it meets at the end of January. The funds rate stands at 4.25% currently (after cutting 0.75% last year) and the FED is expected to cut the rate by a half of a percent, down to 3.75%, by the end of the month.

Meanwhile, we see mortgage lenders like Countrywide, Washington Mutual and IndyMac tank in their stock price signaling that investors are doubting their financial viability. We see other financial institutions like Bank of America and JP Morgan Chase making the attempt to absorb these troubled lenders. We see foreign investors supplying 10's of billions of dollars as equity to Citibank and Merrill Lynch. This looks strangely like a solvency problem, not a credit problem.

Have you ever seen someone in so much trouble that they deny the existence of a problem? The magnitude of what is visible to us is enormous. Home prices are spiraling down and delinquencies on debt payment is spiraling up. Foreclosures are rising at alarmingly higher rates.

I suspect we are going to find out the hard way just how much of consumer spending was being propped up with increasing debt and increasing home prices and not with basic earnings and employment.

Tax cuts with increased government spending and lower interest rates will help but it may not cause consumer spending to increase. It will be back to easy credit with a twist of rolling over insolvent debt to lower interest rates and lower principle amount owed. Just like bankruptcy, consumers can reduce debt owed, and that gives the consumer a new starting point to spend all over again but with the help of, not taxpayers, but foreign investors that supply equity to these institutions holding insolvent paper.
 
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