[bsrsharma]

Another depression is inevitable

My guess is this is going to be an extended stagflation (stagnation + inflation). i.e. a period of low to no growth combined with inflation. The best analogy is the late Nixon years through early Reagan years (including Ford & Carter years) 1974-1982. Almost 8 years of low growth, high unemployment and high inflation.

 

[bsrsharma]

Another depression is inevitable

My guess is this is going to be an extended stagflation (stagnation + inflation). i.e. a period of low to no growth combined with inflation. The best analogy is the late Nixon years through early Reagan years (including Ford & Carter years) 1974-1982. Almost 8 years of low growth, high unemployment and high inflation.

 

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[bsrsharma]

I think this bubble implosion may be just the right lesson the country needed before things become irreversible. 2+ million people losing their homes involuntarily is going to change social, political and economic culture of the country. This is going to be much larger than Savings & Loan Crisis. After the dust settles, there will be a lot of fear about debt and everyone will be more careful.

[bsrsharma]

EVERYONE there was Asian

 I thought this may happen After the devaluation of $. May be they are banking on the fact that $ will become funny money after Helicopter Ben is done with his droppings. A fistful of Yen/Won/Yuan may be all that will be needed to buy those homes. Kinda like we think about stuff priced in Pesos across the border.

[bsrsharma]

EVERYONE there was Asian

 I thought this may happen After the devaluation of $. May be they are banking on the fact that $ will become funny money after Helicopter Ben is done with his droppings. A fistful of Yen/Won/Yuan may be all that will be needed to buy those homes. Kinda like we think about stuff priced in Pesos across the border.

[bsrsharma]

EVERYONE there was Asian

 I thought this may happen After the devaluation of $. May be they are banking on the fact that $ will become funny money after Helicopter Ben is done with his droppings. A fistful of Yen/Won/Yuan may be all that will be needed to buy those homes. Kinda like we think about stuff priced in Pesos across the border.

[bsrsharma]

FormerOwner,

My explanation is why a healthy economy should expand to provide increased standard of living for a generally increasing population. Your explanation describes, sadly, what has been happening in the last 30+ years in US. However, if you look at US economy, say, from 1800 to 1900, there were none of the pathologies you have described. There was no fiat money (money was mostly specie (Gold) based), debt was limited and handled with much fear and care, almost like dynamite but still the economy expanded probably a few dozen times in that period. Both due to population increase and a rise in standard of living. Same thing between 1900 to about 1970. The economic ills of modern times started around 1973/74 due to a combination of Vietnam war costs and energy crisis. Then we decided to borrow our way out of problems in the ’80s. ’90s was a bubble expansion due to tech and dot-com. This decade has been primarily a housing bubble. So , it was not always like what you describe. Even now, many of our creditor economies in Asia and Europe have a much healthier debt situation.

[bsrsharma]

FormerOwner,

My explanation is why a healthy economy should expand to provide increased standard of living for a generally increasing population. Your explanation describes, sadly, what has been happening in the last 30+ years in US. However, if you look at US economy, say, from 1800 to 1900, there were none of the pathologies you have described. There was no fiat money (money was mostly specie (Gold) based), debt was limited and handled with much fear and care, almost like dynamite but still the economy expanded probably a few dozen times in that period. Both due to population increase and a rise in standard of living. Same thing between 1900 to about 1970. The economic ills of modern times started around 1973/74 due to a combination of Vietnam war costs and energy crisis. Then we decided to borrow our way out of problems in the ’80s. ’90s was a bubble expansion due to tech and dot-com. This decade has been primarily a housing bubble. So , it was not always like what you describe. Even now, many of our creditor economies in Asia and Europe have a much healthier debt situation.

[bsrsharma]

FormerOwner,

My explanation is why a healthy economy should expand to provide increased standard of living for a generally increasing population. Your explanation describes, sadly, what has been happening in the last 30+ years in US. However, if you look at US economy, say, from 1800 to 1900, there were none of the pathologies you have described. There was no fiat money (money was mostly specie (Gold) based), debt was limited and handled with much fear and care, almost like dynamite but still the economy expanded probably a few dozen times in that period. Both due to population increase and a rise in standard of living. Same thing between 1900 to about 1970. The economic ills of modern times started around 1973/74 due to a combination of Vietnam war costs and energy crisis. Then we decided to borrow our way out of problems in the ’80s. ’90s was a bubble expansion due to tech and dot-com. This decade has been primarily a housing bubble. So , it was not always like what you describe. Even now, many of our creditor economies in Asia and Europe have a much healthier debt situation.

[bsrsharma]

1. If you assume the population increases (either naturally due to increase in births over deaths or through immigration exceeding emigration), economy has to expand to provide same standard of living. It is like if you have an extra child in the family, you need to earn more to keep up your standard of living.

2. There is a general expectation that as time progresses, everyone should live a little better. This is supposed to be “progress”. Some of this expectation is based on improvements in science & technology. But the notion that next generation should live better than us is an ancient human desire. This requires that economy expand to provide more resources for same number of people, even if population remains constant.

Now if you multiply 1 and 2, you can see how an expanding economy is perpetually needed if you don’t want to feel like you are running in place (or even falling behind).

[bsrsharma]

1. If you assume the population increases (either naturally due to increase in births over deaths or through immigration exceeding emigration), economy has to expand to provide same standard of living. It is like if you have an extra child in the family, you need to earn more to keep up your standard of living.

2. There is a general expectation that as time progresses, everyone should live a little better. This is supposed to be “progress”. Some of this expectation is based on improvements in science & technology. But the notion that next generation should live better than us is an ancient human desire. This requires that economy expand to provide more resources for same number of people, even if population remains constant.

Now if you multiply 1 and 2, you can see how an expanding economy is perpetually needed if you don’t want to feel like you are running in place (or even falling behind).

[bsrsharma]

1. If you assume the population increases (either naturally due to increase in births over deaths or through immigration exceeding emigration), economy has to expand to provide same standard of living. It is like if you have an extra child in the family, you need to earn more to keep up your standard of living.

2. There is a general expectation that as time progresses, everyone should live a little better. This is supposed to be “progress”. Some of this expectation is based on improvements in science & technology. But the notion that next generation should live better than us is an ancient human desire. This requires that economy expand to provide more resources for same number of people, even if population remains constant.

Now if you multiply 1 and 2, you can see how an expanding economy is perpetually needed if you don’t want to feel like you are running in place (or even falling behind).

[bsrsharma]

8% to 13% will tip a lot of people!

———————————————————-

In Credit Crisis, Large Mortgages Grow Costly
By FLOYD NORRIS and ERIC DASH
Published: August 12, 2007

When an investment banker set out to buy a $1.5 million home on Long Island last month, his mortgage broker quoted an interest rate of 8 percent. Three days later, when the buyer said he would take the loan, the mortgage banker had bad news: the new rate was 13 percent.

“I have been in the business 20 years and I have never seen” such a big swing in interest rates, said the broker, Bob Moulton, president of the Americana Mortgage Group in Manhasset, N.Y.

“There is a lot of fear in the markets,” he added. “When there is fear, people have a tendency to overreact.”

The investment banker’s problem was that he was taking out a so-called jumbo mortgage – a loan greater than the $417,000 mortgage that can be sold to the federally chartered enterprises, Freddie Mac and Fannie Mae. The market for large mortgages has suddenly dried up…..

[Author]

Posts