[FormerOwner]

I’ve heard from a couple of friends that people are starting to “get smart” about this whole loan debacle. They put their house on the market for what it would take to pay off the loan(s) and if it doesn’t sell after a few months, they stop making payments and live rent free until they are forced to move out – at least 6 or 7 months. They are able to save $$ on living expenses during those months – I’m assuming they shut off their sprinker systems in addition to not paying their mortgage. From what I understand, “purchase” loans are non-recourse; the only thing that will happen to these people by walking away is bad credit. However, with refinance loans banks have recourse to get a judgement against the borrower to compensate the bank for their loss. For people that didn’t refinance and are underwater, Cramer is probably right that they should just walk away.

For those that refinanced, things are much worse in my opinion and those people probably should look into filing for bankruptcy. It would be up to the lenders to decide whether it’s worth going after them to get the $$ back.

[FormerOwner]

I’ve heard from a couple of friends that people are starting to “get smart” about this whole loan debacle. They put their house on the market for what it would take to pay off the loan(s) and if it doesn’t sell after a few months, they stop making payments and live rent free until they are forced to move out – at least 6 or 7 months. They are able to save $$ on living expenses during those months – I’m assuming they shut off their sprinker systems in addition to not paying their mortgage. From what I understand, “purchase” loans are non-recourse; the only thing that will happen to these people by walking away is bad credit. However, with refinance loans banks have recourse to get a judgement against the borrower to compensate the bank for their loss. For people that didn’t refinance and are underwater, Cramer is probably right that they should just walk away.

For those that refinanced, things are much worse in my opinion and those people probably should look into filing for bankruptcy. It would be up to the lenders to decide whether it’s worth going after them to get the $$ back.

[FormerOwner]

Stagflation does seem (to me) like the most likely outcome this time around but some people make some arguments for deflation or even a severe depression as well. I guess that’s why it’s smart to hedge your bets and try and diversify into things that will work in either scenario (to the extent that’s possible!).

[FormerOwner]

Stagflation does seem (to me) like the most likely outcome this time around but some people make some arguments for deflation or even a severe depression as well. I guess that’s why it’s smart to hedge your bets and try and diversify into things that will work in either scenario (to the extent that’s possible!).

[FormerOwner]

Stagflation does seem (to me) like the most likely outcome this time around but some people make some arguments for deflation or even a severe depression as well. I guess that’s why it’s smart to hedge your bets and try and diversify into things that will work in either scenario (to the extent that’s possible!).

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[FormerOwner]

Another depression is inevitable – it’s just a severe form of what happens in the down phase of the business cycle. We just don’t know WHEN.

I’m a big believer in cycles. Everything in nature operates within repeating cycles and there are short cycles within longer cycles. The economy is created by people so we cause the cycles to occur by our nature. A really long economic cycle would be the rise and fall of an entire civilization. Within that, there are shorter cycles that represent major shifts in methods of production/use of energy/etc. Within those, there are business cycles where the economy first overshoots then undershoots asset values, employment, etc. This again is an oversimplification. These cycles have been “manipulated” by the Federal Reserve for the last few decades in an effort to prevent a meltdown. The meldown has not been prevented though, just postponed and the potential for problems multiplied.

[FormerOwner]

bsrsharma,

I agree with what you stated in your last post. My explanation really only applies since the early 70’s. I totally agree that the Vietnam War was a turning point for our country and we’ve been headed for a cliff ever since. I just don’t know exactly how far away the edge is and what will push us over.

Another thing I didn’t mention is that our expanding economy at it’s core is extremely natural resource dependent and this is even more scary than the fractional reserve banking system as operated by the Federal Reserve. If the world can’t keep producing/shipping mass quantities of stuff, no one would have a reason to borrow, and we would again be faced with a depression. As you said, the US is in a much more precarious position than many other developed countries due to the fact that we consume more than we produce.

[FormerOwner]

bsrsharma,

I agree with what you stated in your last post. My explanation really only applies since the early 70’s. I totally agree that the Vietnam War was a turning point for our country and we’ve been headed for a cliff ever since. I just don’t know exactly how far away the edge is and what will push us over.

Another thing I didn’t mention is that our expanding economy at it’s core is extremely natural resource dependent and this is even more scary than the fractional reserve banking system as operated by the Federal Reserve. If the world can’t keep producing/shipping mass quantities of stuff, no one would have a reason to borrow, and we would again be faced with a depression. As you said, the US is in a much more precarious position than many other developed countries due to the fact that we consume more than we produce.

[FormerOwner]

bsrsharma,

I agree with what you stated in your last post. My explanation really only applies since the early 70’s. I totally agree that the Vietnam War was a turning point for our country and we’ve been headed for a cliff ever since. I just don’t know exactly how far away the edge is and what will push us over.

Another thing I didn’t mention is that our expanding economy at it’s core is extremely natural resource dependent and this is even more scary than the fractional reserve banking system as operated by the Federal Reserve. If the world can’t keep producing/shipping mass quantities of stuff, no one would have a reason to borrow, and we would again be faced with a depression. As you said, the US is in a much more precarious position than many other developed countries due to the fact that we consume more than we produce.

[FormerOwner]

The reasons go much deeper. The economy has to keep expanding because our entire economy is based on debt. Have you ever asked yourself “what is money” or “why is it worth anything” or what determines how much of something a dollar will buy? The answers to these questions will lead you to the answer to why our economy must keep expanding to avoid deflation (recession or depression). Once you understand it, you will be shocked and even more worried about our future than you are now.

I highly recommend reading “The Creature from Jekyll Island – A Second Look at the Federal Reserve”. In a nutshell, one of the major foundations of our entire economy is the fractional reserve banking system. The need for banks to keep on deposit only 10% of customers deposits results in a multiplication effect every time someone borrows money from a bank. This literally creates dollars out of nothing and is the cause of inflation. In order for people to make the loan payments on that debt more and more loans need to be made to keep putting money into circulation. If all of the loans are paid back, money goes out of circulation unless there are new borrowers to borrow it. Bottom line is, that people need to keep borrowing money from banks or the whole system collapses in a depresssion (severe deflation). If we ever get to a point where banks won’t loan or borrowers won’t borrow, the economy is toast – second great depression begins. The powers that be will do anthing (and have) to avoid this.

This is a very over-simplified explanation but it’s a start.

[FormerOwner]

The reasons go much deeper. The economy has to keep expanding because our entire economy is based on debt. Have you ever asked yourself “what is money” or “why is it worth anything” or what determines how much of something a dollar will buy? The answers to these questions will lead you to the answer to why our economy must keep expanding to avoid deflation (recession or depression). Once you understand it, you will be shocked and even more worried about our future than you are now.

I highly recommend reading “The Creature from Jekyll Island – A Second Look at the Federal Reserve”. In a nutshell, one of the major foundations of our entire economy is the fractional reserve banking system. The need for banks to keep on deposit only 10% of customers deposits results in a multiplication effect every time someone borrows money from a bank. This literally creates dollars out of nothing and is the cause of inflation. In order for people to make the loan payments on that debt more and more loans need to be made to keep putting money into circulation. If all of the loans are paid back, money goes out of circulation unless there are new borrowers to borrow it. Bottom line is, that people need to keep borrowing money from banks or the whole system collapses in a depresssion (severe deflation). If we ever get to a point where banks won’t loan or borrowers won’t borrow, the economy is toast – second great depression begins. The powers that be will do anthing (and have) to avoid this.

This is a very over-simplified explanation but it’s a start.

[FormerOwner]

The reasons go much deeper. The economy has to keep expanding because our entire economy is based on debt. Have you ever asked yourself “what is money” or “why is it worth anything” or what determines how much of something a dollar will buy? The answers to these questions will lead you to the answer to why our economy must keep expanding to avoid deflation (recession or depression). Once you understand it, you will be shocked and even more worried about our future than you are now.

I highly recommend reading “The Creature from Jekyll Island – A Second Look at the Federal Reserve”. In a nutshell, one of the major foundations of our entire economy is the fractional reserve banking system. The need for banks to keep on deposit only 10% of customers deposits results in a multiplication effect every time someone borrows money from a bank. This literally creates dollars out of nothing and is the cause of inflation. In order for people to make the loan payments on that debt more and more loans need to be made to keep putting money into circulation. If all of the loans are paid back, money goes out of circulation unless there are new borrowers to borrow it. Bottom line is, that people need to keep borrowing money from banks or the whole system collapses in a depresssion (severe deflation). If we ever get to a point where banks won’t loan or borrowers won’t borrow, the economy is toast – second great depression begins. The powers that be will do anthing (and have) to avoid this.

This is a very over-simplified explanation but it’s a start.

[FormerOwner]

What I did was list my house at the full 6% commission – the selling agent’s office always gets half – so that would be the normal 3% incentive for them to show my house. My realtor (listing agent) wrote up a little agreement for me, agreeing to credit me back .5% out of his half.

This means that, while I paid a 5.5% commission, the SELLING agent got 3% and the listing agent got 2.5%. You want the selling agent to have an incentive to sell so I would NEVER have anything less than 3% going to them. I don’t think there’s anything wrong with having more than 3% go to the selling agent either. This is how it was explained to me by my realtor and it seemed to work – the place sold and I paid 5.5%.

[Author]

Posts