Calling all economic experts

Re: The Economy, What's your take

IMHO The bosses choose the statisticians, the statistics look decent/glowing .The glowing statistics indicate now is the time to buy. Less monied folks are generally more cautious/ willing to embrace negativity as a default way of thinking. Pyramid schemes always involve unfathomable positive/ magical thinking to continue pulling money up from the new layer of investment. The flashlights I want are not in my price range yet...In other words I am positive I need more lights.

Re: The Economy, What's your take

shakeylegs said:

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.

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Nuff said.

Re: The Economy, What's your take

There's a local financial advisor who has a weekend radio show that I've listened to for the last 10 years. He was addressing the latest worries and investing on this weekend's show. He mentioned that when you look at the actual P/E ratios of most stocks right now, they are actually bargains in comparison to long term historical trends. His training initially was as a cultural anthropologist so he tends to relate a lot of the current market/financial trends to how people's natural behaviour has historically led to similar trends in the past. He points out that people's memories for negative happenings last three times as long as they remember positive things. And that tends to lead people to believe things are worse than they've ever been when an objective look at the actual numbers show them to be better than ever.

As for people's behaviour with their 401K and other investments, he was discussing the long term performance of the market in general as opposed to the return seen by the casual investor. (FYI: This is from memory, so my recall of the numbers may be off.) He mentioned a study that showed the average return for the market as a whole over the long term was 12% annually. But over the same time frames, the casual investor only saw a 6% average return. The same study also looked at the cause for the difference. It was found that by the time the rises and falls of the market started making news, which was when the casual user was taking action, the market had already moved 2/3 of the way through it's swing. So the casual investor was getting in after missing 2/3 of the gains and getting out in time to only miss 1/3 of the losses. The study also showed that missing just 1% of the "UP" days in the market resulted in missing 50% of the total gains.

Personally, I made my 401K choices based on the long term numbers and stuck with them. Yep, sometimes I was down 30% as the market experienced it's normal fluctuations. But then at the high side I was up 60%, and even with the latest down turn I'm still up 40%. I understand the temptation to panic when you see the losses on your quartely statements. But you only make those losses real if you move the money while it's down. If you leave it alone and the initial decision was a sound one, history shows it will most likely come back up. No guarantees that it will go back up, but if you get out you are locking in the loss.

I think how the personal effects of the normal economic swings is highly dependant on how you choose to make your money and how you choose to live your life. Personally, I work in the water supply business. It's a steady and slowly growing business that is not affected much by a temporary downturn in the economy. People use the water they need and don't let the costs change their habits much. So there is a certain safety in the bad times. But the other side of that coin is that things don't really get any better in the good times either. When the economy is booming, there's not a lot of extra money to be made either. People still use the same amount of water and still pay the same price. You might get a slight uptick from new businesses and new big homes, but nowhere near the growth that the rest of the economy is seeing.

On the other hand if your business is in luxury goods, you probably see a big boost in sales and profits when times are good. Of course, that also means you will see bigger drops when times are bad. It's a personal choice: boring, steady pay, with job security; or exciting, chances for big payoffs and losses, with the possibility of losing your job entirely. I'm paranoid and always planning for the worst to happen, so I'm in the water business. And I always plan on the lowest possible paycheck when planning my bills. Times like this christmas when I work a ton of overtime, that's when I treat myself to a few extra toys.

Re: The Economy, What's your take

Both the US and UK are in a dire economic situations at the moment.

OK as the OP said let's forget the stock market and let's forget share prices (US = stocks) and I'll talk about the UK as that's where I have interests but the UK is much the same as the US at the moment.

How is the economic situation affecting me?

Well over the last few years, taxes are up and there are more of them, government provided services are being reduced, prices are up (fuel is €10 a gallon in the UK) Credit is harder to get, and the interest rates charged are starting to increase. My customers are demanding lower rates and my suppliers are increasing prices, capital gains tax, as applicable to my company, has in effect been doubled. My pound is weaker against the Euro. The UK chancellor has quietly sold off great chunks of the UK's gold reserves so the £ note (like your $) isn't worth the paper its printed on.

Banks are having to be propped up by the government because they can't borrow from other banks to support the sub prime lending they have been doing.

The housing market has stalled and repossessions are up.

I could go on and on. If you think everything is OK you are sticking your head in the sand.

Have a look at this thread https://www.candlepowerforums.com/threads/170424

especially the posts by JS

The US and UK are in major trouble. One of the main reasons is the fact that we have massively over borrowed both personally with credit and mortgaging over inflated property and nationally by printing £ and $ that have no real backing. We then use these bits of paper to import good that at some stage will have to be paid for with real value, real goods or commodities that we don't have.

Anyway, back on topic, the economy is affecting everyone who has a £ or $ in their pocket, no matter if they realize it or not.

Re: The Economy, What's your take

There's some good common sense in this thread, but it is useful to face the reality that most people grow increasingly pessimistic the better things get factually. We could elect the most inspiring and great leaders at any level of society, and we will begin immediately to tear them down.

You can learn a lot about the general public watching the insane popularity of "tabloid/Hollywood" or other stories that have no direct effect on your daily life, or just watching the local news in most cities. Good or "positive" news is almost not on the radar for most people, and knowing that is useful in staying above the fray. People in general are "at home" or even addicted to hearing negative/bad news....they look for it rather than something uplifting. People are all talking about the stock market and possible recession (despite the facts) because bad news is REAL news to most people, despite no facts to support it.

For me personally, none of the economic, political, or global events has affected me or my lifestyle since 9/11/01 when I lost 3 personal friends working in NYC that day.

Re: The Economy, What's your take

reading a thread like this and I feel like I am in the presence of what is probably one of the smartest online communities around.

Have changes in the economy effected my life:
YES, definitely, I deliver pizzas right now (still), I'll just say I work for a major national chain.. lol, I've watched a notable reduction in overall sales in the last 1-2 years, (steady decline, but nothing major). I am one of those drivers who has been around long enough to have an interest in the books. So I know how much was sold for the day, the week, the month. I look at the history for the store and see changes.... I should also point out that the store I work at is on what used to be the edge of town and the area has been expanding rapidly for most of the last 20 years or so. I have watched the "servicing area" expand about 25% in the 5+ years I have been there.... That expansion always resulted in continuously increasing business, with things at a halt, we are not only experiencing no new business, but I think consumer confidence is down a bit, causing less pizza purchases as a whole. Obviously this is only 1 mans observation from one little pizza store on the edge of one little city. So I don't speak for the nation

Anyways... The other component that has really effected the business is the cost of gasoline and the effects of Ethanol on the food market. The cost of gas has tripled since I started delivering. My operating costs went way up. The amount I am being payed to compensate for that change did not change more than 15%, and that compensation keeps getting cut back as of late. The effect of ethanol on corn has substantially increased the cost of many food products that are linked to corn. Cheese costs have ~doubled, and many other ingredients have increased in price anywhere from ~10%-50% depending... Minimum wage was forced up in our area by vote (I was already above the amount it was raised to, so it was pointless for me).... the result was another pay cut on the side of milage reimbursements. The cost of running the joint has forced price increases on the menu, and pay cuts for drivers. I make less today than I did 4 years ago by a noticeable margin. I should point out that the management team is no longer a very profitable arena to be in either, 3-5 years ago managers made big bonuses and took home respectable pay, (enough to support a family in a decent house in a decent neighborhood), that is no longer the case, the "bonus" structure has been re-evaluated and re-structured multiple times, the result is substantially lower income for the management team. You might say that spirits are lower overall. I used to work for happy people, now I work for people who are less than thrilled. It's frustrating. oh well.

Anyways, my point is, after all that is said and done, me and many of the people I work with have less buying power than we did a few years ago. In the end, it is my fault for staying with them and gracing them with my talented presence and letting them take advantage of me over and over, I should have been long gone a long time ago.

however, I'm a firm believer that we have the media to blame for shifting public opinion negatively and in turn causing some reduction in economic growth that otherwise could have occurred... We have a republican president, the media wants to make sure they get their point across that it's the republicans fault that things are "bad" even though it's the left media causing most of the problems to begin with. I don't particularly like Bush as a president, but blaming him for all problems is ridiculous. Do I sound like an AM talk show yet?

Mostly I am sick of a world that thinks governments are supposed to be in place to solve your personal problems. Take our irresponsible government out of the picture, and the economy would be much better off and our dollar would be a lot stronger.

Re: The Economy, What's your take

This really isn't about the stock market. In fact, the focus on the DJIA is really what hurt us. So long as the market was rising, which it was for a long time, people assumed the economy was hunky dory when it wasn't. The stock market can be made to rise or fall by the actions of a few large speculators, same as the housing market. The current still high stock market doesn't mean we're doing well. It just means lots of people overpaid for stocks, same as lots of people overpaid for homes in recent years. Home prices in most areas are still 2 to 4 times above what they should be based on prevailing inflation rates. The $52,000 home my parents bought in 1978 should be worth about $175,000, not $575,000. There's still a long way for both the stock market and real estate market to fall.

The fundamentals in the economy are what's lousy. We supposedly had all this prosperity in recent years (another myth but that's an entirely different story) and what did we do with it? Did we do sensible things like invest in the decaying infrastructure, bolster our electrical grid, develop alternative energy, build more sorely needed public transit, or anything else which might have helped us long term? Noooo. Instead we spent the prosperity on stupid consumer crap, or literally burned it taking a gazillion pointless trips. We didn't save one dime, or invest one penny for the future. That is what will kill us. It may not be sexy, but spending money to provide power, or transportation, or manufacturing capability is what would have put the US on solid footing. The US was a power to be reckoned with when we actually produced tangible goods for the rest of the world. Now we're a joke. All we do is import consumer crap, and lead profoundly ignorant lives watching inane reality shows or worrying about the latest celebrity gossip. Bread and circuses the Romans called it. The coming hard times will fall on the typical blissfully unaware American like a ton of bricks. I'm glad the board members here aren't typical of that, but willing to listen to bad news as well as good.

Besides all that, the coming bankruptcy of the federal government has been a topic of conversation for me for quite some time. After all, we owe ten trillion dollars. We just added an expensive prescription drug benefit to Medicare. We'll spend over a trillion dollars on the Iraq fiasco before all is said and done. We're talking about funding national health care with money we just don't have. And on top of that a bunch of Baby Boomers are starting to enter retirement. They're healthier than any previous generation of retirees, which means they'll be drawing Social Security checks longer. The ratio of workers paying into the system versus those collecting is going down. 2.1 people with McJobs can't afford to pay for one retired Baby Boomer. What usually happens to an individual when they have more debts than assets is what will happen to the US government. Nobody should be surprised. Debts eventually have to be repaid. Entitlements have to be reined in. The political will to do either astonishingly still isn't there. When the US government falls, it will take the entire world economy with it. The fall can still be prevented by quick, decisive action, but nobody's listening.

Re: The Economy, What's your take

In light of all this turmoil I've recently converted most of my savings into gold bullion. I think I paid about $795 an ounce, so I'm already up a fair bit. I plan to hang onto it for at least five years, although who can tell!

Re: The Economy, What's your take

As far as my personal situation, the economy hasn't affected me too much. The rising price of gas and a few other things definitely counts for something in my bottom line, but mostly over the last 5-10 years I've been focused on paying down debt. First my credit card debt, then my student loans. In just a handful of months from now, I should be debt free, except for a bit left on my car loan.

When doing this, I watch my checking account balance to determine how much I pay on my debts. So, unless I really went back and ran the numbers, I wouldn't know exactly how my free income has been changing over the last 3 or 4 years.

The availability (or not) of easy credit doesn't have much bearing on me.

That said, I think that over this coming year we will see economic changes that will affect everyone. Perhaps I'm wrong. I hope I'm wrong. But, I can tell you this: I'm not buying any luxuries or extravagances. I'm battening down the hatches. But that's not that different than previous years, I guess. I don't earn a lot of money, and I don't trust that my job is secure, so I don't want to be in debt and I don't want to gamble anything, and I want as much security against the coming economic crises (plural) as I can get. I bought into gold and gold stock portfolio back when it was $325, and as you might imagine, it has performed spectacularly. But I wasn't in it for the short term. I just wanted a base investment that couldn't evaporate overnight due to unscrupulous and idiotic behavior of the powers-that-be.

YMMV.

Re: The Economy, What's your take

I could go on and on about the current stuff going on, but I no longer have the patience. In a nutshell I have returned to the financial principles of my grandparents that got married in 1924. We live way below what we make. We have nine months of expenses in reserves. We do invest in my wife's retirement fund because we have faith in our Country. Some of my great aunts and uncles became millionaires because they had faith during the depression. We just bought a car for my wife and gave the old one to the mother in law without a penny of credit. It is unlikely we will ever buy anything again on credit except for property. For the most part that was how it was done years ago because you never know what the future will bring.

Have faith and invest your furture in physical assets that will always be needed.

Re: The Economy, What's your take

The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy as posed by the OP. Clearly there is a slowdown in the economy. Everytime there is people freak. In most cases people need to be hit over the head with a bat to think beyond next week. Once again I bring it back to the personal level, If you have skills or services in demand on a personal level you will likely be fine. If you're depending on the government or the psychology of the consumer for your support than you are subjecting yourself to the vagaries of those entities.

Re: The Economy, What's your take

London Lad said:

Both the US and UK are in a dire economic situations at the moment.

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Dire? Not hardly.

The prime rate hit 21.5% in December 1980, the highest rate in U.S. history under any President. Inflation increased every year from 1976 through 1980, peaking at more than 12%. Unemployment hit 7.6%.

And even then, it was not dire. There were no food shortages, no riots, and anyone who wanted a leisure suit could find one at the nearest mall.

In the last 18 months, parts of Africa experienced an inflation rate of over 900%. Citation to authority. Now thats dire!

The American economy remains strong. Inflation is low, unemployment is moderate (around 5% last I heard), and the stock market is up. The residential real estate market is feeling a slight pinch, but thats because of dimwitted lenders loaning money to dimwitted borrowers who could not pay repay the loans and should never have received mortgages in the first place.

Most of what we hear in the media about the R word is pure hype, the purpose of which is to harm economic activity for political purposes.

And one more thing. Consumer optimism is "inexplicably" (in liberal speak) up. Citation to authority. Thats is (realistic) optimism, and indicatates to me that - when digested together with the economic numbers - America's economic future is anything but dire.

Lastly, I've chosen a vocation that is insulated from economic downturns. So even if the R word did happen some day, I'm not going to participate. If anything, its would be an opportunity for me to throw some cash into an S&P 500 fund while its down.

Re: The Economy, What's your take

da.gee said:

The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy as posed by the OP. Clearly there is a slowdown in the economy. Everytime there is people freak. In most cases people need to be hit over the head with a bat to think beyond next week. Once again I bring it back to the personal level, If you have skills or services in demand on a personal level you will likely be fine. If you're depending on the government or the psychology of the consumer for your support than you are subjecting yourself to the vagaries of those entities.

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People who are really aware of what is REALLY going on with our economy, our money system, our banks, our currency, our trade situation, and related topics, are WELL AWARE of the puppet show and the psychology of consumers and investors, and how that is played by the "man behind the curtain". The Fed actually causes many of these so called "cycles".

The media does indeed sensationalize and hype all sorts of news, including doom and gloom predictions of recession. And even economists do this to some extent, although with more sincerity: Larry King joked that "economists had correctly predicted 36 out of the last 2 recessions"! LOL!

That's all true. But it doesn't mean that anyone who sees trouble ahead is just a "nervous nellie" or a sensationalist.

And I totally disagree that "The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy."

It won't be (can't be) separate for long.

Let me put it this way: if there was a confidence man we knew, who went around trading on his goodwill and charm, issuing IOU's to a lot of people around town, including some rather powerful people, and pretending everything was fine, and manipulating things so that his financial situation looked better than it really was, -- and he kept at this life style for months and months, putting people off with even more IOU's, and paying off IOU's in money gotten from new IOU's, continually and consistently living beyond his means, never balancing his income and expenses. Month after month after month.

And then someone says "OMG! This can't continue! This isn't good! This guy is going to meet a sticky end, and lose many of these nice things, or at the very least, have to change his lifestyle." But, then someone else said "Oh, this guy will be fine. I believe in this guy. There are always these cycles. People are too gullible and need to look to the long term."

HELLO!?! The first person IS looking to the long term!

WE'VE ALL BEEN LIVING BEYOND OUR MEANS. Every one of us. Not at a personal financial level, but in the sense that what the dollar actually buys right now in terms of real goods and services IS WAY MORE THAN IT SHOULD BUY. All because we have been playing a confidence game with the world.

It can't continue. It will end. And we will have to meet this sticky end. And it will affect all of us.

Unless we make some significant and far reaching changes, within a decade, or probably 5 years, you will see food prices rise dramatically, and oil prices rise dramatically, and unemployment rise dramatically, and the so-called 'standard of living' fall somewhat. And the US will lose it's unique place as the worlds only super-power, or even as the most important super-power.

I say this not because I don't love my country. I say it because I do love my country.

I suggest that people might find Francisco's Money Speech from Ayn Rand's "Atlas Shrugged" worth reading, although I definitely don't agree with every single word of it. Still, it's well worth reading.

Re: The Economy, What's your take

frosty said:

In light of all this turmoil I've recently converted most of my savings into gold bullion. I think I paid about $795 an ounce, so I'm already up a fair bit. I plan to hang onto it for at least five years, although who can tell!

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That's one thing I would never get into, Gold. I guess it's because I remember all the hype in the 80's when it was up over $800 an ounce and everybody was being urged to use it as a safety net. Then it dropped like a rock and stayed down for the next 20 years. I've heard a financial advisor mention that the long term price of gold will probably be in the $300-$400 range because once it stays above that range, a bunch of different techniques for recovering the gold become profitable and the supply will just increase to bring down the price as more mining is done.

Here's a source I found that has a 1975-2008 chart of prices. The current runup looks too much like the pre-1980 runup. I'm a chicken and would be afraid the next 20 years would look like that middle section of the graph. I did buy my stepfather some 1 oz. gold coins at $300 each for his collection several years ago. In a sense it would be nice to have extras to sell, but since it's impossible to predict the swings and the time to recover losses can be so long, there's really not a lot of regret. But I did tell my stepfather that I wouldn't mind a bit if he sold them now that prices ar so high. He declined, I think he likes that they are the one thing he has in his collection that is better than his richer brother who sells as soon as the price goes up.

Re: The Economy, What's your take

99% of the general population do not truely understand what is going on behind the scenes. What most of you see is what's provided by the media and it takes a few weeks afterward for most to learn what actually happened.

The first two days of this week was a direct reflection of a specific problem in the financial markets. We're talking about bond insurers (aka monolines, aka guarantors). If you've been following the market closely, you will probably see names like ACA, AMBAC and MBIA flashing across the headlines. As an industry, the bond insurers provide guarantees to bonds and loans for a total of approximately $2.5 trillion. AMBAC and MBIA take a large share of the market with over $1 trillion. Until recently, these monolines held AAA ratings (which is the top credit rating possible). They use this high credit rating to provide guarantees (or insurance) to bonds so that these bonds will also get AAA ratings as opposed to the rating from the issuer. Having a AAA-rating on your bond issue is advantageous, because it opens up your target market signficantly since many pension funds and other regulated portfolios are mandated to hold only the top tiered debt. Unfortunately, these monolines also provided guarantees to assets related to subprime mortgages and high-risk, highly leveraged instruments like CDO's (collateralized debt obligations) which are also linked to mortgages. As we all know, the meltdown in subprime has caused a lot of these instruments to go south and being the guarantor, the monolines are contracted to step up and make these instruments whole. Needless to say, these monolines have suffered losses and writedowns in the billions. So much so that their very solvency is now at stake. The credit rating agencies have taken notice of the dire situation these guys are in, so they are stripping the AAA ratings by several notches. ACA went to junk status. The others, not so bad...yet. This is not the real problem. The real problem lies with the insured assets because once the guarantor is downgraded, the billions upon billions of assets that they insure all get a simultaneous downgrade as well... the credit rating of an asset is only as strong as its strongest backer. So, what does this mean? Well, I alluded to earlier that many portfolio managers around the world are mandated to hold AAA assets.....well, they will now be forced to sell in the market.....at the same time. This is what is called a firesale. If the entire monoline industry got downgraded, the losses that would be incurred will be catastrophic. Also, there are behind-the-scenes derivative instruments that would default because these monolines are also counterparties to these instruments. We will be the generation that will witness the first complete collapse of the U.S. banking system.

That was Monday and Tuesday. There has not been a firesale yet, because AMBAC only received a two notch downgrade (but still placed on a credit watch list) and MBIA has not been downgraded (yet!).

Late Wednesday afternoon (that's yesterday), we receive rumors that a bailout plan by the government and big banks was in the works. A bailout would entail an injection of billions of dollars of new capital into these struggling monolines so that they can make good on their obligations and get to keep their AAA rating. Just the rumor alone caused the Dow to do a 600+ point swing into positive territory. The New York State Insurance Department confirmed that bailout talks were, indeed, underway, but no concrete plan has materialized yet. But, obviously, this was good enough for the market, because a potential disaster beyond all comprehension is being addressed. Whether or not a plan is put into place will determine where our market will ultimately go. This is huge.....because we are talking about trillions of dollars at stake. All the writedowns to date relating to subprime mortgages totaled a little over $100 billion, and that cause a lot of heartache. Imagine a number 5 to 10 times that.

So there you have it. That's what happened over the course of three days. More volatility to come, you can count on it. The media is always the last to know things and they don't necessarily know the truth. But I do, because I am in the thick of the action in my day job.

As to how this downturn affect me here in Canada? Well, I am enjoying the volatility and have turned some profit in this ordeal as I have been betting on a serious downturn for the U.S. market. I've closed out my positions now and will sit on cash until I can see some stability in the market.

But to tell you the truth, guys.....if you can ride out the storm, then ride it out. Recessions are part of the economic cycle. They are as ubiquitous as taxes. The long-term investor is always rewarded. Just ensure you maintain liquidity through the process and you will come out alive.

Re: The Economy, What's your take

js said:

And I totally disagree that "The failure of government and our elected officials to address the issues of infrastructure and debt is indeed outrageous but it is a separate discussion vs. the current economy."

It won't be (can't be) separate for long.

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That is one of the bats to which I refer. Unless people see it in front of their face right now, affecting them tangibly right now it is merely an abstract concept that most won't or don't grasp. I would like nothing better than for this to be addressed but who can win an election on that platform? Who has the balls to tell people put down your Wii numchucks and wake up. Who would listen if they did?

js said:

WE'VE ALL BEEN LIVING BEYOND OUR MEANS. Every one of us. Not at a personal financial level, but in the sense that what the dollar actually buys right now in terms of real goods and services IS WAY MORE THAN IT SHOULD BUY. All because we have been playing a confidence game with the world.

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Elaborate. Are you saying we have fooled the world into thinking what we give them for their product is a sham (i.e our worthless artificially propped up dollars)?

js said:

It can't continue. It will end. And we will have to meet this sticky end. And it will affect all of us.

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Apocalypse Now? Anarchy? Rule of Force over Reason?

js said:

Unless we make some significant and far reaching changes, within a decade, or probably 5 years, you will see food prices rise dramatically, and oil prices rise dramatically, and unemployment rise dramatically, and the so-called 'standard of living' fall somewhat. And the US will lose it's unique place as the worlds only super-power, or even as the most important super-power.

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Oil prices haven't risen dramatically? Processed food may get expensive but i can't see basic staples ever getting beyond the average citizens reach but I'm open to your theory.

Perhaps a fall is needed to rise.

js said:

I suggest that people might find Francisco's Money Speech from Ayn Rand's "Atlas Shrugged" worth reading, although I definitely don't agree with every single word of it. Still, it's well worth reading.

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All opinions are worth a read.

Re: The Economy, What's your take

Wave Particle - You have a good, sophisticated short term analysis of the credit challenge. There have been articles on how this part of the market was subject to some interesting manipulation for similar reasons - profit.

My concern is not particularly that there was a short term bond rating / insurance problem, but the fundamental reason for the defaults in the first place. While it is useful (and at least partially correct) to blame certain firms and sub prime debt defaults for the "problem", the real issue is "why can't people pay their debt off in the first place ?".

Paying bills and debt requres jobs, not just retail jobs, but manufacturing or decent technology jobs. Government related workers are somewhat insulated from this, but most people are not. A large, long term trade deficit of goods is not a viable economic situation for any country. France, UK, Germany, etc, along with the US face these same problems.

BTW, for those who imagine that the official rate of inflation of approx 5% is accurate, please keep in mind that once unemployment benefits stop (6 months) you are now considered "officially employed" - regardless. The Great Lakes region of the US has "real" unemployment well above 15 %.

As far as "retraining and re-education" being the answer, I know a bunch of unemployed PhDs under 35 years old with an education in various high technology areas. This is not the answer. The answer lies in converting our tax system from an income basis to a Sales Tax (on all goods and services) bais.

JS, there are various ways to look at the concept of a home mortgage.

When I was renting, my rent would increase at least 5- 10% per year. The same place I was renting when I purchased my home now rents for nearly 2x what it did back then, and much more than my mortgage is.

Buying a home under a mortgage essentially let me achieve a "predictable rate of monthly rent". My property taxes keep rising, but that is a different matter. Yes, I have to do home fix up, but my experience is that I had to do this when I rented as well, or it did not happen.

I had an interesting discussion with a VP at B or A regarding the idea that if your home is destroyed in a disaster, is it better to have a mortgage, or have it paid off. She told me that in the case of her parents, they owned a home free and clear that was destroyed in a flood. FEMA gave everyone around them with motgages all kinds of help - they gave them none at all. Bottom line, if you have a loan, it carries with it a hidden insurance policy.

There are a lot of nasty things buried in loan contracts - My wife and I actually read our loan agreement before signing our life away, but in the end, I am happy to be paying a mortgage instead of renting. Frankly, it is the same thing in the end. If we had kept renting, we might actually be homeless today.

If the trade deficit can get under control, then I will actually make enough money in the long term to keep paying the bills.

From a very practical matter, my health insurance monthly premium (self employed) is now about the same as my mortgage - around $ 1300 / month each. Take a guess at which one I hate to pay the most ? Guess why I would like a greater role of government in Major Medical costs ? I can pay my normal bills just fine, it is the "big surprise that might happen" that gets to you, especially if you have a family.

HarryN,

Sure. Absolutely! I wasn't saying that a mortgage was generally a bad idea, only that in my case it was. My rental is a very good deal. A very, very good deal. So that's part of the equation.

Another part is me not having enough savings to put down 20 percent like I would want to.

The final part was the inflated home prices due to all the easy low interest loans chasing the same amount of houses around: result: inflation of house prices.

There ARE various ways to look at, and to reckon, the pros and cons of house mortgages, and I wasn't trying to say that they are always a bad idea. The point is just that they aren't ALWAYS a GOOD idea, unequivocally. It would depend.

Re: The Economy, What's your take

da.gee,

I don't really want to elaborate. Lately, I've had an overdose of disagreements with people about things. I'll just say that it's not a case of anarchy or apocalypse now of the "rule of force over reason" or whatever other glitzy terms you might want to slap on it. It's simply a matter of economics.

Back when I was taking first year physics, I remember a really complicated problem with a rope coming down, around a pulley attached to a platform, back up through something else, and then a change of direction and another pulley, and then a guy standing on the platform, pulling up on the rope (and thus pushing down on the platform). It was a bit of a nightmare if you were trying to really figure out all the forces and the tensions of the rope at various places, and so on.

BUT, if you simply drew the right circle around the whole damn thing, and considered a free-body diagram of THAT, everything became clear, and all the unimportant internal force-reaction pairs just vanished. And then you saw what the answer was.

In the same way, it's very easy to get focused on all the many sophisticated and complicated and difficult to understand and predict details of the credit economy of the US, and how it relates to and interacts with the world economy. And I'm not saying that that isn't worth studying! And I very much enjoyed reading the really great post by WAVE PARTICLE.

But, ultimately, you simply can't get something for nothing, and you can't create something out of nothing.

It's that simple.

You can live on credit for only so long as your creditors/supporters are willing to extend you credit and/or sell you things on credit.

We're coming to the end of that situation now (or soon).

And, no, I'm not saying that staple food will be beyond the reach of the average citizen. That's not my "theory".

I'm saying that food should cost a lot more than it does right now. I'm saying that oil is going to get a lot more expensive than it is right now. I'm saying that the buying power of the dollar is going to take a serious hit.

And that's about as much elaboration as I'm going to do.