Calling all economic experts

[MarNav1]

You know what's even better than that. FDR is quoted as saying the banks have controlled ie taken over things since the days of Andrew Jackson. Thats 1832 friends.

 

[Manzerick]

Very well put! The collective attitude was WAY OFF!!


I had someone tell me that "our parents were house rich... but cash poor" and that by paying down their houses and actually making a down payment was "OLD THINKING".. the "NEW ECONOMY" does not require that and lalalalala we will all be buying houses like this forever!!!! (in a nut shell). I believe it ended with "you should really buy right now.. money is cheap"

Scared!!!! Very scared!!!

thesurefire,

I don't know the answer to that question, but I can tell you that it won't be all that long before the dollar loses a lot more buying power. Every month billions of USD go out of the country--essentially I.O.U's to foreign entities--and those dollars are held because it is thought that the dollar is a good investment, a safe holding for value. In Mexico, when I was there, people would take USD happily. But once the illusion of the strong US economic situation disappears, people will be scrambling to get something, anything, for all those dollars, and they will all come home to roost, and the fed won't be able to do a damn thing about it. Contracting the money supply by raising prime, or increasing M1 won't help in the least--on the contrary. It's going to happen sometime in the next 10 years, in my opinion, and when it does there is going to be a serious revaluation of goods and services.

It's astonishing how bamboozled the public is about very basic issues such as inflation and the basis of our money supply. People think that inflation is "the natural result of an expanding economy" when the exact opposite is true! Inflation results when the power of the economy decreases for the same money supply, or when the money supply increases faster than the economy grows. We have inflation because the Fed is increasing the money supply more than is warranted. This is essentially stealing value, or if you prefer, it is taxation. However, as the Federal Reserve is not a government agency, nor is there anything held in reserve, it's not really taxation per se. But whatever.

Or people have this idea that when the bank lends you money that they are taking their depositors hard earned cash and lending it out to you, and thus that they need to take care regarding the soundness of the loan.

Not true.

The money that you are given is actually created. The strange and uncanny truth is that the money is the debt; the debt is the money. If all debt, including the National Debt, were paid off, there would be no money left. Not Federal Reserve Notes, anyway. The Fed controls when and how the banks can create money out of nothing via various policies, and this allows the Fed to dramatically increase or decrease the money supply and spending power of consumers.

The Fed and the government both have a vested interest in keeping the price of gold and other precious metals low, and they have reserves and powers on hand specifically do accomplish this. But they've been unable to keep gold down, and it's been on the rise for about the last decade. I think the low point was about 265 USD per ounce and it's now about 675. It should, by rights, be about two or three thousand dollars an ounce, given the current purchasing power of the dollar, so gold is still a good investment. Although, if the economy completely collapses, the best thing would be a self-sufficient estate like a small farm, owned free and clear. (or, obviously, BOTH).

I've felt for years that real estate prices and the attitudes of people towards mortgages and home ownership have been INSANE. I had one guy here at work telling me I should buy a home (this was a couple or so years ago) because "money was cheap". What he meant was that lending rates were low, historically low, and thus you could get a low monthly payment ("cheap") on any given sum ("money"). I have to say that that one sentence flabergasted me. It's not that it was any revelation about economics to me, but it WAS a revelation about peoples attitudes towards money and loans.

Most people are only looking at the low monthly payments. That's just about all they see. As if the PRINCIPLE + INTEREST + TAXES + INSURANCE summed up over the 20 or 30 years of repayment were insignificant. You have people buying a house with zero money down! CRAZY! These people aren't home owners! No more than someone who rents! The bank owns their house, just like the land lord owns the house of a renter.

There have been record foreclosures this past year, all due to people over extending themselves and then being unable to keep up when the prime rate went up. Not to mention all those people who took out second mortgages on their homes, which means they monetized their houses. There was a whole lot of money injected into the economy just from all they people that did that--but it didn't represent any actual increase of production or service value in the economy.

Insane. Insane. Insane.

And then there are all the people graduating from colleges with HUGE debt--like $80,000 or $100,000 even--and without any high powered skill to balance that debt out. $80K for a liberal arts degree? WTF? I love the liberal arts and don't for a second think that everyone should be a doctor or an engineer, but COME ON! You can educate yourself and save the 80 grand, or go to a cheaper college. When I went to school, I paid about $5,000 a year, and this included room and board, and I feel pretty happy about my education, and would definitely not have increased my debt fourfold in exchange for graduating from Harvard or MIT or Cornell instead.

And, even more crazy, there are a lot of people who really would be happier and more suited for a trade or skill, such as training to be a plumber or an electrician or a carpenter, and so on. You can even get trained for free, or even get paid to learn the trade, by apprenticing. Why does everyone have to go to college now? It's dilluting the value of a college education, and is dumbing down the curriculum because the colleges can't count on the same minimum level of education and ability that they used to.

There will be signs, I suspect. If I ever hear that China is no longer pegging their currency to ours, that will be a scary bit of news for example.

But, I'll cut myself off as I still haven't answered the question posed by this thread, nor will I be able to anytime today.

 

[js]

Very well put! The collective attitude was WAY OFF!!


I had someone tell me that "our parents were house rich... but cash poor" and that by paying down their houses and actually making a down payment was "OLD THINKING".. the "NEW ECONOMY" does not require that and lalalalala we will all be buying houses like this forever!!!! (in a nut shell). I believe it ended with "you should really buy right now.. money is cheap"

Scared!!!! Very scared!!!

I just couldn't bring myself to buy a house back when the rates were low. The bank approved us for enough money to buy a somewhat liveable house, but I kept seeing these places selling for $90,000 or $110,000 and thinking "these piles of crap are only worth about half that", and thinking about all the work I would have to do and all the money I would have to put into them, and the size of the mortgage payment, and the cost of utilities and maintenance, and our margin, and I was like "NO FREAKING WAY". I just couldn't bring myself to do it.

We live in a good apartment that is very cheap for what we get. And I don't pay real estate taxes on it.

I'm always being told that I'm "throwing my money away" on rent, and I always respond that mortgage holders are throwing their money away in interest and taxes and mortgage insurance (because who puts 20 percent down anymore?)

At this point, I am SO, SO, SO GLAD that we didn't buy a house. I don't care how "cheap" money was a few years ago.

I don't think people really think through some of these MAJOR life decisions, don't run the numbers. They just take it on the word of someone else: "Oh, well, don't forget the tax break you get on your house". Really? Have you ever calculated that? I did. And for me, that was a laughable component for the price range I was looking at.

And when these people are strapped with a mortgage they can barely pay each month, and money gets tight, then tensions run high, and life just isn't as enjoyable. How many marriages did this sub-prime craziness ruin, I wonder? I can tell you for sure who benefited from all that: the real estate agencies. They got their 6 or 8 percent on every sale, and will get a cut of every foreclosure.

I hate the way that houses are bought and sold and financed. It's a whole mindset that has permeated our culture. Does anyone know that the word "mortgage" means, at root, "DEATH PLEDGE". Somehow seems appropriate when you think that you pay like 3 times the value of the house by the time you're done. All on money that was created from nothing. Credit. Fiat. Let there be a mortgage.

USURY.

 

[shakeylegs]

The Economy, What's your take

We hear a lot about the economy lately and I'm wondering how you see it. How have you been affected by current economic conditions? Has your lifestyle changed in any way?

I own a specialty retail store in a town that depends partially on tourists for it's survival. The price of gasoline has definitely changed peoples driving habits, reducing the number of visitors to our region. The profile of visitors and their buying habits has also changed a couple of times over the last few years.

Local business owners of all types are reporting "slump". Wholesalers around the country say the same - small business retail is not pretty right now. And yet, my numbers are pretty descent. I have fewer serious customers but those that buy are spending more on average than in years past. Still, I'm cutting back on inventory purchases, and searching for higher value, lower priced goods.

From what I see, lots of people are up against the wall financially, most people are cautiously conservative with expenditures, and some are flush with $$$$$ and without a financial worry.

With the exception of flashlight parts and knives, I'm in the cautious conservative mode for the time being. I expect this to be a prolonged economic slump similar to the mid 80's, and I'm don't think the recovery will be anything like the 90's. It looks like a long slog back to recovery.

What's your take?

 

[BIGIRON]

Re: The Economy, What's your take

Thanks Shake, that's interesting info from your part of the world.

I can address our real estate market. It has slowed, but to what I would consider a "normal" market. Fairly priced properties are selling and qualified borrowers have no trouble getting funding at reasonable rates. The poorly qualified buyers are no longer able to easily borrow money and the predatory lenders are no longer able to make loans they shouldn't have made in the first place. In other words, the bubble has burst and we're seeing an adjustment to normalcy.

Just yesterday I spent some time with a couple of well-established, conservative stockbrokers who tend to feel the same about the stock markets. The anticipated "adjustments" are occuring and the brokers think (hope) the markets are nearing a "bottom" and will begin a slow climb back to normalcy.

Our personal spending has always been kind of conservative so we aren't making any changes.

 

[raggie33]

Re: The Economy, What's your take

im afraid to be honest.very afraid

 

[Nitro]

Re: The Economy, What's your take

Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.

 

[da.gee]

Re: The Economy, What's your take

Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.

Best advice yet.

 

[LuxLuthor]

Re: The Economy, What's your take

Bigiron is righton about the Real Estate Market. There is nothing wrong with the US Economy. All this negativety is being HYPED by the media, and in-turn scaring Mr. Market. The less you listen to the media, the better off you'll be.

+1 Just would add restricted to Real Estate Market & Banks/Mortgage Companies.

People's outlook and mood (as in many people) cycle between up and down. The longer the period of economic growth, increasing real estate prices (albeit inflated), increasing stock market, decreasing unemployment....the more people get worried that bad times are coming....and in a direct proportional relationship.

Then conversely, once their expectation of the bad times arrives, without realizing they joined in creating the negative reality....they begin believing that things will get better. People collectively react to that sense of optimism, various steps are taken...and sure enough things get better.

Then it starts over again.

Until you die.

The End.

LOL!

 

[shakeylegs]

Re: The Economy, What's your take

Nitro, da.gee, Lux - this thread was meant as an end around the media. Rather than listen to a talking head, I wanted to hear from our diverse membership about their views of the economy. Are your lifestyles and personal habits unaffected by the current state of the economy?

 

[Nitro]

Re: The Economy, What's your take

+1 Just would add restricted to Real Estate Market & Banks/Mortgage Companies.

People's outlook and mood (as in many people) cycle between up and down. The longer the period of economic growth, increasing real estate prices (albeit inflated), increasing stock market, decreasing unemployment....the more people get worried that bad times are coming....and in a direct proportional relationship.

Then conversely, once their expectation of the bad times arrives, without realizing they joined in creating the negative reality....they begin believing that things will get better. People collectively react to that sense of optimism, various steps are taken...and sure enough things get better.

Then it starts over again.

Until you die.

The End.

LOL!

In other words, be optimistic when others are afraid, and afraid when others are optimistic.

 

[Nitro]

Re: The Economy, What's your take

Are your lifestyles and personal habits unaffected by the current state of the economy?

Yes.

 

[MarNav1]

Re: The Economy, What's your take

Everythings Peachy!

 

[shakeylegs]

Re: The Economy, What's your take

Everythings Peachy!

That's what I'm hoping to hear more of.

 

[Nitro]

Re: The Economy, What's your take

Everythings Peachy!

Never is "Everything Peachy". That would be boring.

My point is, our Economy is a long way from being in trouble. UNLESS we allow ourselves to believe the "talking heads". I'm optimistic we won't.

 

[LEDninja]

When I 1st got a job long ago, I wanted to get a colour TV. The ad said $300 or $20 a month for 36 months. Out came my trusty TI-21. $20*36=$720! I was not going to pay more than double and did without for a couple of months. I have paid cash for purchases ever since. (A lot of people would choose $20 over $300)
When I got laid off a couple of years ago I went into a blue funk until I looked at my retirement savings. If the money collapse you guys are predicting does not occur I have enough money for 35 years and took early retirement.

Nowadays they no longer say $300 or $20 a month for 36 months. Just "Will that be on your charge card sir?" And the credit card bill does not tell you what is the total cost if you pay the minimum every month. I am amazed people will run all over town to find a 10% or 15% off deal, then put it on their credit card and end up paying way more than what I pay full price but cash.

 

[MarNav1]

Re: The Economy, What's your take

Never is "Everything Peachy". That would be boring.

My point is, our Economy is a long way from being in trouble. UNLESS we allow ourselves to believe the "talking heads". I'm optimistic we won't.

Okay, whatever you say. Everythings perfect! :thumbsup:

 

[Nitro]

Re: The Economy, What's your take

Okay, whatever you say. Everythings perfect! :thumbsup:

I don't believe I said "Everything's perfect". Did I?:thinking:

 

[MarNav1]

Re: The Economy, What's your take

I'm just agreeing with you.

 

[da.gee]

Re: The Economy, What's your take

Nitro, da.gee, Lux - this thread was meant as an end around the media. Rather than listen to a talking head, I wanted to hear from our diverse membership about their views of the economy. Are your lifestyles and personal habits unaffected by the current state of the economy?

Yes. Unaffected. I have no plans to alter my lifestyle or personal habits. The market is being driven by fear and emotion. This is a great thing for those whose actions do not hinge on the latest "story" coming from the talking heads. The Dow starts out down 300 today and closes up 300; a 600 point swing. Do you believe this is based on fundamentals? Hardly.

All those worrying themselves about their investments, I have a document I saved somewhere from an investment manager about the psychology of negative returns. Might be time to pull it out. You should not make changes to your portfolio based on short-term market fluctuations. Only make changes if your long term goals change. The negative impact to your returns by being out of the market at the wrong time can be significant.

As far as the economy in general, I'm going to bore you with some information from my very good and conservative money manager.

As far as recession are we really in one? Historically a recession occurs when simultaneous declines occur in employment, income, production and sales. So do we have those conditions present?

• We have had no declines in employment at this time. The January report showed an increase in unemployment but actual employment grew (18,000)
• The last reading on Personal Income showed a year over year gain not a decrease.
• Production has fallen based on the last ISM Manufacturing report, but the level (47.7) has historically been associated with a significant economic slowdown, not recession. Historically the ISM index has to fall below 45 before it signals a recession.
• Retail sales fell for the month of December (-.4%) but rose for the full year (+4.1%).

So the fundamentals do not support the current market move at this time.

I tend to let pros do their thing and I have both my Series 7 and Series 63 securities licenses. I don't fret the markets anymore. I watch as an interested party and because it is my industry. I let someone else do the day to day crunching. With good funds/stocks/bonds whatever and with approriate allocations for your situation stay disciplined and stick it out.

I would ask those here on a personal level, have you lost your job? Are you making less money? How about your friends and acquaintances? Except for paper losses in accounts you can't touch until you retire have you lost anything? Guess what you haven't lost a thing until you panic and sell.

Apologies for the long post. The sheep market mentality irks me. Remember your Mom saying, "If Johnny jumped off a bridge would you?"