Poll: 77% of Americans Blame Media for Making Economic Crisis Worse

Sorry—You look at the world through the Keynesian/Chicago school of economics. I view it from an Austrian school. Debt is not money.

Yep, you’re right about that. We can go round and round.

No I don’t expect 7 to 10% decline in GDP from Q3 2008, but even if we had that, it would have to drop still further to be a depression. Mortgage reset may not amount to much since interest rates are so low. That is an over used stat. Lenders are not going to demand that borrowers who are struggling to make payments as it is pay higher interest rates just because that’s the deal they negotiated. And people are refinancing like crazy right now. I’ve got a fixed, and even I’ve been considering it.

If you have cash sitting around, now is the time to invest in heavily discounted property. If you have good credit, I’d even take advantage of the low interest rates. You’ll end up ahead of the poor schmuck who screwed his credit up during the bubble. I’ve been looking for the right distressed property for some time. Unfortunately, my wife has very particular tastes, so I’m having difficulty finding one she likes in the price range I’m looking at.

I will grant you that groceries have been hurt by more than I would have expected. I’m not sure why that is. My first guess would be that a lot of illegal immigrants have moved back to Mexico. Immigrants probably spend most of their income on groceries. But even that seems somewhat hard to believe.

It may be that the problem is not at the consumer level, but at the store owner level. The disruption in the real estate and financial markets might be pressuring their bottom lines, and forcing them to reduce their purchases of inventory.

Whatever it is, though, the market will adjust. That’s the genius of free markets, and the reason that political processes are vastly inferior when it comes to making economic decisions.

Federal debt is, or could be money at a moment’s notice. Right now, treasuries are yielding 0%, just like money. Instead of stuffing their money into mattresses, people are putting it into treasuries, which they view as the equivalent, except safer from burglars and fires. I’m a lawyer. I see people use treasuries as money all the time. Long term federal debt is not money, because you have to wait for it. But it is used as money nevertheless, based on the prevailing discount rates, because folks know that they can easily liquidate it at the prevailing rates, if they want.

One of the reasons why the economy has been slow to respond to the Fed’s massive increase in the money supply is that the Fed has focused on turning treasuries into money, which does very little to increase liquidity since treasuries are already very liquid and are actually used as money anyway. They need to buy nonliquid assets, and they are finally beginning to realize that with their expanded purchases of asset backed securities coming up shortly.

10% drop in GDP = depression.

Those mortgage resets are HUGE--you must not understand how Option ARM (pick a payment) and Alt-A (interest only--stated income) work. A lower interest rate will help but is not the reason the payment is going to skyrocket. With the Alt-A, you only pay interest for a set # of years--usually 3-5. After that year, the loan turns into a conforming loan with principal required and obviously you must pay it in 25-27 years, and not in 30 years so payments jump 50% or more. An option arm is even worse--You can choose to pay less than the interest so your principal gets bigger and bigger each month (which supposedly 70% are choosing to do). Once the principal hits 110% to 125% or after a set # of years it recasts to a conforming mortgage where you have to pay Principal & interest on 110-125% in the 25ish years. Most people's payments go up at least 80+% upon reset. If your loan was based off a teaser 1-3% interest rate it could more than double.

The grocery chain I work for is on the high end of the market (think Whole Foods--but not them)--we get virtually none of our business from illegals.

People are APPLYING to refinance but only people with 20% equity (which eliminates virtually anyone who purchased since 2004 which are the ones in trouble) are going to get anywhere.

You mean Paulson’s bait (buy assets) & switch (recapitalize banks with equity finance) on the TARP didn’t work? BTW the 10 year bond has jumped over 30 basis points in two days which isn’t a good sign. Short term treasuries are indeed close to 0% but that won’t help lower credit for consumers or business. The long end on both federal and commercial paper need to drop. Only US treasuries have dropped and it looks like it may have already peaked.

If you’re a lender, getting payments from a borrower, and suddenly it’s time to reset, but you know that if you do, then your borrower will stop making payments, what are you going to do? You’d be particularly stupid to just go ahead and do it anyway wouldn’t you? These problems are being worked out now. They aren’t waiting for the magic reset date to deal with them. And borrowers who know that they won’t be able to make the payments in 6 months aren’t waiting for 6 months before they stop making the payments. So if there is going to be a problem, you’re seeing it now for the most part.

Of course, it is true that lenders could be doing more than they are doing, but don’t assume that they are all a bunch of fools who wait until they are already falling off a cliff before making adjustments. If they were really smart, they would figure out what the borrower CAN pay and write down large portions of the debt, if need be to keep the payments coming. In fact, institutional lenders are selling mortgages at discounts to companies who specialize in precisely that kind of negotiation. While the economic adjustment is taking place, there will obviously be dislocations and reallocations of resources that will involve unemployment. But in the end, the machinery will be moving forward at the same speed it has been moving. We may have less accumulated wealth to show for it, but wealth is one thing, and income is another.

You are forgetting that the lenders don’t own most of the paper—it’s been sold as CDOs. They just process it on their behalf. Plus you have to assume that they will require these people to start paying prinpical. Of course, the other statistic that came out recently was that over 50% of modified mortgages are back in default land within 6 months. Just today CNN Headline news had a lady on from Zillow.com talking about how there are currently 4+ million homes on the market vs around 1 million 3 years ago with an estimate 2-3 million foreclosures this year. This is all BEFORE the option arm/alt a reset. We’re going to have housing problems for years. I strongly suspect we’re about to have our “lost decade” Japan style (which of course is now turning into 2 lost decades)

I tell you what—find me one economist who correctly predicted the housing collapse, stock market plunge, and the banking industry effective collapse that thinks we’re due for a turn around in Mid 2009 and I might change my mind.

Well, if you admit that the economists did not predict those things, why should you believe anything they say now when they predict a long and deep recession?

I would not go so far as to say that I “correctly predicted” any of those things, but there are a lot of us who saw trouble on the horizon during the housing bubble, and stayed clear of it. I bought a house in 2002, when the market first started going up, and primarily because I saw that was happening. I had friends who invested $700K in real estate at inflated prices. I tried to convince them it was a bad idea, but they did it anyway. They camped out on the sidewalk when the builders opened their new phase so they could be the first in line to sign a contract for the new houses. When they got inside, they told the builder what they wanted, and were told that they would have to order this extra and that extra, to which they said “But we don’t want those extras.” The builder said that they would then go to the next in line, to which my friends said, “No, no, we’ll take the extras.”

Now they are all in foreclosure. But at the time, my wife was mad at me because I would not get in on the deal with them. I invested most my money in the stock market, and then when Etrade began to crumble in October of 2007, I sold the bulk of my holdings and put it into a money market fund. I took a haircut, but I feel pretty good about how I did. I did a lot better than most.

And I know some other folks who also came out OK because they also smelled the rot back during the bubble. Recessions can sometimes be a good thing because they expose economic foolishness and fraud. If not for this recession, we’d probably still be building homes at a crazy pace, and Bernard Madoff would still be stealing people’s money.

We’ve been fortunate that the effect of this recession has primarily been on the perceived value of our wealth more than the value of our output. And even that is somewhat misleading since while we thought we were all a lot more wealthy two years ago, it was largely an illusion. We still own the same stuff. It’s just that we know now that it’s not worth what we thought then.

It’s been real interesting talking to you. Not very often do I find someone who understands as much as you do about all this. Unfortunately, Monday was my 51st birthday, and I’ve got to go to a belated party. I’m getting to the age when it’s not cause for celebration, though.

Since you’re in management, I expect you to see problems, so I suppose it’s a good thing you do. But you’re in a position to fix them too. The faster you guys in management can adjust to new realities, the better. Good luck.

They justified that comment based on what?
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I only heard the comment itself - no justification or explanation. When I saw the t-shirts using Obama’s image and a crown of thorns with the saying “Obama is my Messiah” or “Obama is my Jesus” I knew we were past the point of no return.

I tell you what—find me one economist who correctly predicted the housing collapse, stock market plunge, and the banking industry effective collapse that thinks we’re due for a turn around in Mid 2009 and I might change my mind.
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The keyword might be economist. Conspiracy theorists have been predicting this for four or five years now, anyway.

Isn’t that the sad truth, even worse is going to be if the democrats bail out the newspaper industry, we will never receive one ounce of honest reporting.