Mortgage Defaults May Be Driving Consumer Spending

[meadandale]

[quote=poorgradstudent]
Also, consumer sentiment is improving partially because of real improvement in the economy. Things are still pretty crummy, but by all indicators it looks like we bottomed out around January ’10. At this point there really is no where to go but up.[/quote]

We still have high unemployment and a looming debt crisis at all levels of government that is being virtually ignored.

Any call of a bottom is extremely premature and certainly qualifies as ‘irrational exuberance’.

[(former)FormerSanDiegan]

[quote=jpinpb][quote=CA renter]JP,

Weren’t other posters giving us a hard time when we suggested that the economy is benefitting from massive numbers of people who suddenly have no house payments? I’ll have to find that thread…[/quote]

That’s right. I think it was FormerSanDiegan that explained his point of view and I understood it. However, in the immediate sense, money that is being spent into the economy versus their mortgage is keeping the wheels moving.

In any case, I remember saying this a long time ago when someone, I think TG, was mentioning how the economy wasn’t so bad and lines/wait were long at restaurants. I think that was the first time I said something about if one isn’t paying the mortgage, they can afford to go out to dinner.

In the end, we the taxpayers are propping up consumers who are buying things rather than paying their mortgage. Everyone paying taxes, pat yourself on the back![/quote]

Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.

[(former)FormerSanDiegan]

[quote=jpinpb][quote=CA renter]JP,

Weren’t other posters giving us a hard time when we suggested that the economy is benefitting from massive numbers of people who suddenly have no house payments? I’ll have to find that thread…[/quote]

That’s right. I think it was FormerSanDiegan that explained his point of view and I understood it. However, in the immediate sense, money that is being spent into the economy versus their mortgage is keeping the wheels moving.

In any case, I remember saying this a long time ago when someone, I think TG, was mentioning how the economy wasn’t so bad and lines/wait were long at restaurants. I think that was the first time I said something about if one isn’t paying the mortgage, they can afford to go out to dinner.

In the end, we the taxpayers are propping up consumers who are buying things rather than paying their mortgage. Everyone paying taxes, pat yourself on the back![/quote]

Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.

[(former)FormerSanDiegan]

[quote=jpinpb][quote=CA renter]JP,

Weren’t other posters giving us a hard time when we suggested that the economy is benefitting from massive numbers of people who suddenly have no house payments? I’ll have to find that thread…[/quote]

That’s right. I think it was FormerSanDiegan that explained his point of view and I understood it. However, in the immediate sense, money that is being spent into the economy versus their mortgage is keeping the wheels moving.

In any case, I remember saying this a long time ago when someone, I think TG, was mentioning how the economy wasn’t so bad and lines/wait were long at restaurants. I think that was the first time I said something about if one isn’t paying the mortgage, they can afford to go out to dinner.

In the end, we the taxpayers are propping up consumers who are buying things rather than paying their mortgage. Everyone paying taxes, pat yourself on the back![/quote]

Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.

[(former)FormerSanDiegan]

[quote=jpinpb][quote=CA renter]JP,

Weren’t other posters giving us a hard time when we suggested that the economy is benefitting from massive numbers of people who suddenly have no house payments? I’ll have to find that thread…[/quote]

That’s right. I think it was FormerSanDiegan that explained his point of view and I understood it. However, in the immediate sense, money that is being spent into the economy versus their mortgage is keeping the wheels moving.

In any case, I remember saying this a long time ago when someone, I think TG, was mentioning how the economy wasn’t so bad and lines/wait were long at restaurants. I think that was the first time I said something about if one isn’t paying the mortgage, they can afford to go out to dinner.

In the end, we the taxpayers are propping up consumers who are buying things rather than paying their mortgage. Everyone paying taxes, pat yourself on the back![/quote]

Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.

[(former)FormerSanDiegan]

[quote=jpinpb][quote=CA renter]JP,

Weren’t other posters giving us a hard time when we suggested that the economy is benefitting from massive numbers of people who suddenly have no house payments? I’ll have to find that thread…[/quote]

That’s right. I think it was FormerSanDiegan that explained his point of view and I understood it. However, in the immediate sense, money that is being spent into the economy versus their mortgage is keeping the wheels moving.

In any case, I remember saying this a long time ago when someone, I think TG, was mentioning how the economy wasn’t so bad and lines/wait were long at restaurants. I think that was the first time I said something about if one isn’t paying the mortgage, they can afford to go out to dinner.

In the end, we the taxpayers are propping up consumers who are buying things rather than paying their mortgage. Everyone paying taxes, pat yourself on the back![/quote]

Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.

[Arraya]

Again, we are assuming these people are not going to pay on that mortgage verse going out and renting and STILL not paying on that mortgage. In that regards it is a net gain for the consumer economy and was the context of the discussion.

The damage from not paying is done(or at least temporarily papered over). The effects from them not picking up new housing expenses still distorts the economy in a positive way, at least theoretically.

A safe assumption is the economy takes another leg down when they get kicked out. 1) from them having less money to spend 2) from the additional inventory getting released to the market.

[Arraya]

Again, we are assuming these people are not going to pay on that mortgage verse going out and renting and STILL not paying on that mortgage. In that regards it is a net gain for the consumer economy and was the context of the discussion.

The damage from not paying is done(or at least temporarily papered over). The effects from them not picking up new housing expenses still distorts the economy in a positive way, at least theoretically.

A safe assumption is the economy takes another leg down when they get kicked out. 1) from them having less money to spend 2) from the additional inventory getting released to the market.

[Arraya]

Again, we are assuming these people are not going to pay on that mortgage verse going out and renting and STILL not paying on that mortgage. In that regards it is a net gain for the consumer economy and was the context of the discussion.

The damage from not paying is done(or at least temporarily papered over). The effects from them not picking up new housing expenses still distorts the economy in a positive way, at least theoretically.

A safe assumption is the economy takes another leg down when they get kicked out. 1) from them having less money to spend 2) from the additional inventory getting released to the market.

[Arraya]

Again, we are assuming these people are not going to pay on that mortgage verse going out and renting and STILL not paying on that mortgage. In that regards it is a net gain for the consumer economy and was the context of the discussion.

The damage from not paying is done(or at least temporarily papered over). The effects from them not picking up new housing expenses still distorts the economy in a positive way, at least theoretically.

A safe assumption is the economy takes another leg down when they get kicked out. 1) from them having less money to spend 2) from the additional inventory getting released to the market.

[Arraya]

Again, we are assuming these people are not going to pay on that mortgage verse going out and renting and STILL not paying on that mortgage. In that regards it is a net gain for the consumer economy and was the context of the discussion.

The damage from not paying is done(or at least temporarily papered over). The effects from them not picking up new housing expenses still distorts the economy in a positive way, at least theoretically.

A safe assumption is the economy takes another leg down when they get kicked out. 1) from them having less money to spend 2) from the additional inventory getting released to the market.

[CA renter]

[quote=FormerSanDiegan]
Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.[/quote]

Not a problem when the govt takes those loans off your hands (via refinancing through Fannie, Freddie, and FHA, etc.) at or near par…or when the Fed loans you money against those loans, also at or near par.

A lot of the “bad” debt has been shifted over the past couple of years from the private sector to the public sector. IMHO, this is why prices have been kept so high — they wanted to exchange this debt at a high price so the private market could recoup their money without the political fallout that would have occurred if the govt paid par AFTER it had already tanked. This way, it looks like they are doing J6 a favor by refinancing their “toxic” mortgage into a 30-yr FRM at very reduced rates. In reality, they are only interested in helping the banking sector.

[CA renter]

[quote=FormerSanDiegan]
Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.[/quote]

Not a problem when the govt takes those loans off your hands (via refinancing through Fannie, Freddie, and FHA, etc.) at or near par…or when the Fed loans you money against those loans, also at or near par.

A lot of the “bad” debt has been shifted over the past couple of years from the private sector to the public sector. IMHO, this is why prices have been kept so high — they wanted to exchange this debt at a high price so the private market could recoup their money without the political fallout that would have occurred if the govt paid par AFTER it had already tanked. This way, it looks like they are doing J6 a favor by refinancing their “toxic” mortgage into a 30-yr FRM at very reduced rates. In reality, they are only interested in helping the banking sector.

[CA renter]

[quote=FormerSanDiegan]
Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.[/quote]

Not a problem when the govt takes those loans off your hands (via refinancing through Fannie, Freddie, and FHA, etc.) at or near par…or when the Fed loans you money against those loans, also at or near par.

A lot of the “bad” debt has been shifted over the past couple of years from the private sector to the public sector. IMHO, this is why prices have been kept so high — they wanted to exchange this debt at a high price so the private market could recoup their money without the political fallout that would have occurred if the govt paid par AFTER it had already tanked. This way, it looks like they are doing J6 a favor by refinancing their “toxic” mortgage into a 30-yr FRM at very reduced rates. In reality, they are only interested in helping the banking sector.

[CA renter]

[quote=FormerSanDiegan]
Yes, that was me. Just caught this thread.

For every dollar not paid back to the lender, there is one less dollar for the holder of the note that was secured by that property. The holder of that note has one less dollar to spend, be it on pension payouts, development, venture capital or whatever.
The net sum is not positive, since we have an economic system based on credit. For every dollar lost in reserve at a bank there are several dollars not available to lend. The net effect is negative.

If people NOT paying their mortgages is a net positive to the economy, why did our economy approach the brink of the next great Depression when the sub-prime borrowers stopped making payments ?

Paul Jackson’s analysis quoted in this CNBC article ignores the other side of the ledger and is thus incomplete.[/quote]

Not a problem when the govt takes those loans off your hands (via refinancing through Fannie, Freddie, and FHA, etc.) at or near par…or when the Fed loans you money against those loans, also at or near par.

A lot of the “bad” debt has been shifted over the past couple of years from the private sector to the public sector. IMHO, this is why prices have been kept so high — they wanted to exchange this debt at a high price so the private market could recoup their money without the political fallout that would have occurred if the govt paid par AFTER it had already tanked. This way, it looks like they are doing J6 a favor by refinancing their “toxic” mortgage into a 30-yr FRM at very reduced rates. In reality, they are only interested in helping the banking sector.

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