Calling all economic experts

[jtr1962]

Protect yourself? Sell that overvalued house and buy a cheaper place with the money. Then do something with the tons of leftover $. Ta Da!

It's not mine to sell. Besides that, not too many places in the US where you can get by without a car. That's a load of savings right there which makes up for the more expensive housing. With gas pushing $4 a gallon the last thing I would do is move anyplace I needed to drive. Honestly, the last thing I want to do is move, period, even locally. Oh, and last I checked, the prices in the suburbs weren't a whole lot cheaper (400s versus 500s). The real estate taxes in the 'burbs are totally ridiculous compared to here (~$10K versus $3,400). That's equal to another ~$100K in mortgage.

Good idea though on buying stocks of companies unlikely to be affected by a downturn. I'll add anything having to do with basic food to your list. People have to eat.

 

[turbodog]

It's not mine to sell. Besides that, not too many places in the US where you can get by without a car. That's a load of savings right there which makes up for the more expensive housing. With gas pushing $4 a gallon the last thing I would do is move anyplace I needed to drive. Honestly, the last thing I want to do is move, period, even locally. Oh, and last I checked, the prices in the suburbs weren't a whole lot cheaper (400s versus 500s). The real estate taxes in the 'burbs are totally ridiculous compared to here (~$10K versus $3,400). That's equal to another ~$100K in mortgage.

Good idea though on buying stocks of companies unlikely to be affected by a downturn. I'll add anything having to do with basic food to your list. People have to eat.

No, I mean really move.... like to the right small town. There's a town not far from where I live that the mayor's making bike/walk friendly. Solid houses there are available in the very low 100's. This is a town on the top 50 places to live in the US.

Then, invest the extra 400k.

You see problems. I see solutions I suppose.

 

[jtr1962]

No, I mean really move.... like to the right small town. There's a town not far from where I live that the mayor's making bike/walk friendly. Solid houses there are available in the very low 100's. This is a town on the top 50 places to live in the US.

Then, invest the extra 400k.

Homes are really cheap in upstate NY, too. I suppose a drastic move like that is a thought if things got really tight, but I'd still be like a fish out of water. I lived in NJ for three semesters in college (small town atmosphere) but couldn't really adjust to it. I guess try to imagine yourself living maybe in a midtown Manhattan apartment compared to your present lifestyle. You would have as difficult a time as I might in a small town. Don't get me wrong, there are a lot of positive things about the middle America small town experience. I just know it would never work for a born and bred city person like me based on my own personal experiences.

You see problems. I see solutions I suppose.

Well, I had a great aunt who became a millionaire buying foreclosures during the Great Depression. I can certainly smell another opportunity like that coming. Southeast Queens right now is ripe with homes bought with sub-prime mortgages. I just want to make sure I still have cash to do something with if the opportunity comes along.

I hate to say it but this thread has really got me worried. A lot of intelligent people are saying basically the same thing-the chickens will come home to roost, and it isn't going to be pretty when they do. I personally feel we'll soon be looking at the greatest economic downturn since 1929 regardless of what government does or doesn't do. The only question then is how to avoid being someone in a shanty town.

 

[jtr1962]

But even if that never happens, silver isn't a bad investment. I bought all of mine back before it jumped in price. I think I paid only 4 times face value for all of it. And gold was $325 when I last bought it. Now it's $900.

I remember when gold was at $325. My dad was mulling over buying some $20 gold pieces (the real ones from the 1800s thru 1920s, not the bullion coins). I tried to talk him into it, saying that gold probably isn't going to go much lower. How I wish he would have listened instead of spending it on baseball cards and figurines (his idea of an "investment"). At least we have a fair amount of silver, almost all of it pulled from change at face value in the 1960s.

 

[turbodog]

Not *too* small town..... it's about 400k people.


I don't see things getting too bad. A lot of that's a load of crap. The subprime DEFAULTS are a tiny fraction of a small fraction.

The stock market...... it's down ~10% or so from a recent peak, but that's less than the 2000 dive.

A whole lot of companies made plenty of cash in the past 2 years. I see business booming practically everywhere I look. The up and down is all part of life.

US exports are up and gaining due to the weaker dollar, so that buffers the US economy to a degree. And there are so many buffers that's it's impossible to predict (short of a nuclear war) where it will all end up.


This reminds me of a joke....

If you lined up all the ecomonists end to end, they still wouldn't reach a conclusion.

 

[daveman]

What has already floated to the surface is very bad, what will happen rest of this year will be even worse. The party is over, nothing but bad news for the U.S. economy for the next 12 months, if not 12 years. Watch and see.

 

[London Lad]

There is an excelent chapter from a G. Edward Griffin book called The Mandrake Mechanism, you can read it here It goes all the detailed way about what JS explained about the US monetary system.

I saw Argentina mentioned in a previous post, we go thru economic crisis about every ten years, last one was in 2001... but I will refer you guys to the wikipedia entry of what happened in 1989 when we had hyper inflation.
Can you imagine all your bank deposits transformed into bonds cashable in ten years? without prior notice... compulsory... and overnight? no? well it happened here TWICE!
Can you imagine not being able to withdraw cash from your bank? no? well it happened here too.

All these disasters have the same root, currency devaluation due to lack of reserves, not thats the only cause (corruption comes to mind too) but its a very important one.

Lets hope for the best


Pablo

This sort of think always seems less of a threat when its in someone else's country..................

But it soon makes you jump when it happens in your own.

Lines of people outside a Northern Rock bank branch in September 2007 in the UK.


The banks share price collapsed partly due to its heavy investment in the UK and US sub prime markets. The Bank of England had to prop it up with tax payers funds and guaranteed savers money but the savers didn't trust them and started a run on the bank.

Who knows how many other UK banks are now being propped up by the UK government secretly?

 

[PEU]

This sort of think always seems less of a threat when its in someone else's country..................

But it soon makes you jump when it happens in your own.

Lines of people outside a Northern Rock bank branch in September 2007 in the UK.

Yeah, I recall that, thats a quiet crowd compared to the riots and death by the dozens we had here in 2001

Well, I had a great aunt who became a millionaire buying foreclosures during the Great Depression. I can certainly smell another opportunity like that coming.

It looks like the same, but IMO its not, at that time homes had a reasonable price, now the price, even at foreclorure values, is over-inflated.


Pablo

 

[js]

jtr,

Don't do anything drastic based on the advice of a bunch of arm chair economists (and I DEFINITELY include myself in that description). Be conservative, I would say. And be mindful of your own happiness. If you like where you are, stay there. Besides, real estate is still over-inflated in my opinion (as PEU said above), and it's not a great sellers market on top of that. It's not that the idea of cashing out and moving to small town is a bad idea. It's not--in general. It just may be a bad idea FOR YOU. In fact, it sounds as if maybe it is.

Reduce or eliminate debt, reduce expenditures on luxuries and superfluous stuff, have 2 to 3 months of income in the bank, and then look to investments. And a good investment plan is diverse, not all in gold. I did what I did because the gold portfolio was just such a damn bargain and I knew it. But soon I will start buying stocks when they fall even lower and when gold rises even higher.

Don't go selling your house based on anything I've said here! Please! A community you like and are familiar with, with friends and family and favorite spots, is worth a lot. What good does it do you to be a bit more "financially secure" and depressed?

Besides, THERE IS NO FINANCIAL SECURITY for most of us. That's the point of much of what I've said. When the currency is a fiat currency and is being manipulated left and right; when there is a continual, massive trade defecit and continual inflation, there's really no security for anyone, --or at least for only a very few. Abandon all hope ye who enter here. :devil: Go have a cup of coffee and laugh about it with your friends. Being poor and happy beats being rich and depressed any day.

 

[KC2IXE]

Remember back in the late 70's early 80's when all those South American countries defaulted on their loans? Bank of America almost ceased to exist. Hell, even the State of New York went belly up. President Ford had to bail them out. ...snip...

It was the city of NY - and to quote the NY Post headline of what Ford said when NYC asked for a bailout "Ford to NY: Drop Dead" - NYC had to bail their own butt out

 

[MarNav1]

In politics nothing happens by "accident". If it happens it was planned that way. FDR

 

[kelmo]

It was the city of NY - and to quote the NY Post headline of what Ford said when NYC asked for a bailout "Ford to NY: Drop Dead" - NYC had to bail their own butt out

I stand corrected. Many brain cells have parished since that time. Besides, what do I know, I live in a flood plain...

This is for js.

Through me you pass into the city of woe:
Through me you pass into eternal pain:
Through me among the people lost for aye.

Justice the founder of my fabric mov'd:
To rear me was the task of power divine,
Supremest wisdom, and primeval love.

Before me things create were none, save things
Eternal, and eternal I endure.
All hope abandon ye who enter here.

Such characters in colour dim I mark'd
Over a portal's lofty arch inscrib'd:
Whereat I thus: Master, these words import.

Is our economic woe(s) a "Divine Comedy?!"

 

[js]

There's something diabolical about the Fed and fiat currency, yes. It's certainly diabolically clever and obfuscated, I would say.

The analogy with the Divine Comedy is most appropriate in that when Dante realized that midway through his life's course he had lost the way, he couldn't just go straight back to the clear, but instead had to go all the way to the heart of hell before he could start back up again.

That seems to fit the situation, actually. hehe.

 

[thesurefire]

All the signs are pointing at the same thing; the dollar is going to fall like a rock in the next months.

I've learned much about the economy over the last few years and feel that things are getting worse and worse.

Its not a bad idea to have at least 6 months of food and 1000 dollars in cash, or enough money that you can run out and buy 6 months of food if things get really bad quickly. I've heard people speculating that the government may outlaw gold ownership again as well. The introduction of a new currency is another possibility.

The bottom line is there is very little good that can come of our current economic situation.

If you don't think things are getting bad look at the USD index, the DJIA, gold and siver prices, and the credit crunch over the last 5 years.

 

[HarryN]

BTW, none of the sales tax proposals will tax used goods, only new goods. I can't think of any valid reason to tax used goods. The tax is a value-added tax. There is no net value added to the economy when a used good changes hands. This occurs only when a new good is produced.

You are right that the proposals usually don't include tax on used goods, but this is a point I don't agree with at all. The idea of a Value Added Tax - to me, this is actually worse than a "Sales Tax".

a) Imagine if you will a tax based only on "new items". It takes only the smallest imagination to see that a clever person in China will simply take a toy ball, roll it 3 inches across a table, and now it is "used" - ie, free of tax on used goods.

b) It would be quite easy for tax collectors to simply force firms like "EBay" to collect a 10% sales tax on every transaction - if it is across the board. How are you ever going to decide what is "new" vs "used" when we can't even tell the difference beween melamine sawdust + flour does not equal wheat glueten ? Fraud must be an assumed part of the system.

c) The proposals for sales tax on "new goods only" are something like 28%. That is simply too high. Rich people will go overseas to buy expensive things, and the locals will be left holding the bag.

d) If you eliminate the income tax as a whole, you still need to find a way to tax the very wealthy - remember, the guys that make $ 100 million off of a stock transaction. We also need to try to keep the Chinese from owning the entire equity of the US by buying up the stocks.

Applying the 10 % sales tax to ALL transaction, including stocks (a used good, not a new good) is perhaps the most important part of any attempt at a sales tax based strategy - in fact, one could argue it should be the starting point. I would gladly see an arrangement where there is no income tax on stocks / equity transactions in exchange for a flat 10% of its value, especially if you stay with the concept that an option is just an alternative payment plan.

FICA is a separate issue from income tax, but obviously, it is not practical to keep the cap on income level where it is and charge such high rates on the sub $ 100 K income group.

 

[LEDninja]

I was reading the news on the CTV website:
Bush seeks economic boost package worth $145B
http://www.ctv.ca/servlet/ArticleNe...17/economy_bush__080118/20080118?hub=CanadaAM
I scrolled down and read some of the other viewers comments.
For a while I thought I was reading this thread.

 

[jtr1962]

b) It would be quite easy for tax collectors to simply force firms like "EBay" to collect a 10% sales tax on every transaction - if it is across the board. How are you ever going to decide what is "new" vs "used" when we can't even tell the difference beween melamine sawdust + flour does not equal wheat glueten ? Fraud must be an assumed part of the system.

And the minute such a tax is passed you'll see a lot of $20 items selling for $1 plus $25 shipping (to be added after the auction so eBay doesn't know about it). Sellers and buyers will find ways around such a tax, believe me. I agree that the proposed VAT tax of 23% (not 28% as you say) on new goods only is too high. It doesn't have to be that high if the US government reigns in spending. A 10% VAT tax only might well be enough. As skirting around the tax by saying slightly touched goods are "used", that probably won't fly. If a shipping container of stuff from China comes in, the blanket assumption should be that it's all new stuff.

FICA is a separate issue from income tax, but obviously, it is not practical to keep the cap on income level where it is and charge such high rates on the sub $ 100 K income group.

The current proposal also eliminates FICA tax as it should, instead funding SS/Medicare from the VAT tax. People would be screaming bloody murder if the politicians said they were getting rid of the income tax, and they still had FICA deducted from their paychecks. To most people, FICA tax is just another income tax. I agree that if we keep the current system in place the FICA rates on the sub-$100K group need to be reduced. A good idea might be to exempt the first $15,000 or $20,000 in income from both FICA and income taxes. And the rate for self-employed persons should be the same as the rate for every else. Charging double, and starting taxes from the first dollar of income, is highly regressive.

 

[jtr1962]

I was reading the news on the CTV website:
Bush seeks economic boost package worth $145B
http://www.ctv.ca/servlet/ArticleNe...17/economy_bush__080118/20080118?hub=CanadaAM
I scrolled down and read some of the other viewers comments.
For a while I thought I was reading this thread.

Yep. I get annoyed every time I read about proposed bailouts. If people made bad financial decisions, such as using their home equity to fund vacations, new cars, or useless consumer crap, then they should live with the consequences. Moreover, they should accept the fact that there going to have to live within their means. That means only buying what you can pay in full when the bill comes, driving your car until the wheels fall off, not flying to some tropical island every time there's a snow storm, not buying stupid, expensive prepackaged foods, etc. Those of us who already live like that should not be forced to bail out those who won't. If nothing else, the times ahead are going to be a reality check for lots of people.

I always used to wonder how people I knew with mediocre jobs were always buying stuff that I couldn't afford, taking vacations, etc. Now I know-they were living on the rising tide of real estate prices, pulling every dollar in equity out of their homes. Now that real estate is falling, the party's over. Even worse, they're stuck in homes which are worth less than what is owed on them. In essence these people have a huge negative net worth.

 

[9volt]

I think most people in the US don't know what living within their means means. Even fewer realize that if they aren't increasing their income every year that they need to buy less every year.

 

[HarryN]

JTR, just so you know, a surprisingly large amount of stuff from China / far east in shipping containers that is called "packing". Packing can be any loosely set in item, but clothing is pretty common.

Regardless of E Bay, shipping can be a taxable transaction. I suspect that it would not be hard to ensure that shippers like USPS, UPS, Fed Ex, etc collect sales tax on the cost of shipping.

The "underground" economy of cash transactions / hand carrying items is not really the main concern anyway, nor is grandma with a few chickens selling some eggs at a Saturday market. The primary goal is to capture tax revenue from equity transactions / stock / options / derivitatives, Walmart / target, and auto / home sales.

There are no favorites for exclusion in my book.