Do you believe the economic predictions?

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monty wrote:

The U.S. didn’t have as much competition from other nations after WWII like we do now.




Was it really due to spending or was it due to pandering to big business?

Reagan went for a 600 ship Navy, lots of jobs building it, his program was ramp up defense, and it bankrupted the Russians. Bush tried the same, but Iraq and Afganistan were already bankrupt.

The next recession was ended by ramping up home building, lots of jobs, lots of local materials.

Then came buyouts, corporate raiders, and the finance sector grew, and grew, and fed. The Dotcom bust was IPOs going Wild, money trying to buy the future, and when that did not work out, insuring the future through credit default swaps, which grew to at least ten times GNP.

The problem this time is it was all paper, so there is no salvage value. No factories, tooling, nothing to restart.

It was all based on housing going up forever. Mortgages were sold as bonds, but if it paid 6%, when 6% default, the bonds become worthless, but they were insured, so AIG, Lehman, Fanny and Freddie, become worthless.

So to keep any kind of system running, the insured had to be paid off, but the assets are now worth less than half in some areas, which are mixed in with some good, but it is still a long term deal, 30 year, as the good pays, and still a 30% overall loss from now, with prices still dropping.

One answer was used by an Austin bank that financed a California development, new $500,000 houses were dozed as they were worth less than it cost to build them, and the taxes were running. They took TARP money, and sent them to the landfill.

Somewhere around half of all mortgages are for more than the house would sell for, often twice going market, with over a years backlog on the market, from no credit check sales days. The banks are holding a lot more off the market, and foreclosures are coming on strong.

After the Savings and Loan crash, the Resolution Trust sold houses for 12% of what they went for a few years before, with easy finance. This time it might take cash, but the deals will be great.

It is politics, so just before the 2010 elections, look for the buy of a lifetime.

As for our world position, what can you do the Chinese can't?

They are now the largest banks, car makers, and lots of other things.

They refuse to buy our bonds, and the US credit rating may drop below AAA.

Bonds have been the national credit card, and they are maxed out.

I expect a long recession, a decade.