America Near A Great Depression. (loans, real estate, credit, debt)
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Is America near a great depression?
The Last depression was created by Credit problems.
Look at this article...BBC NEWS | Business | Northern Rock shares plunge 32%
Look at the people in lines trying to take there money out of the bank. It looks like it is out of the history books.I know it is not a company in the US but we are more a global market than ever before. Also Japan Gdp is currently negative.They are the 2nd largest country for gdp.
Britian's model -- LOTS of bad consumer debt, a housing bubble and starting runs on banks (the US has already had one run with a housing lender bank), is more closely to the US than the Japan model.
Japan already had its main bubble a few years ago and it centered on commercial real estate. In Japan's case they lived in surplus, so all the big bank did was take the primary interest rate to zero and let things slowly heal.
The Brits seem to running a few months to at most a year ahead of US. In both the UK and the US heavy debt loads are the norm, so we will encounter a much harder hit than Japan had to deal with, as much of the US in "under water" financially before the economic hurricane hits.
The last Depression was created by a LOT more than just credit problems. The most elemental cause of the Great Depression was WWI and the toll it took on the European economy, which we then got sucked into when we tried to prop up Britain's economy. We also know a lot more about managing credit markets (managing monetary policy) and the role of fiscal policy in economies than we did 75 years ago. To say we're entering into another Great Depression is paranoid ChickenLittleism.
The last Depression was created by a LOT more than just credit problems. The most elemental cause of the Great Depression was WWI and the toll it took on the European economy, which we then got sucked into when we tried to prop up Britain's economy. We also know a lot more about managing credit markets (managing monetary policy) and the role of fiscal policy in economies than we did 75 years ago. To say we're entering into another Great Depression is paranoid ChickenLittleism.
Yeah WWI was an economic drain but how about Iraq. We have spent almost a trillion dollars of borrowed money. Also after most wars in America we see a slow down in the economy. Business week said that the uk average consumer is in about 166% of debt and the U.S. is 124%. They also state the average home cost 11 times earned income.
The U.S. debt Is 7 to 45 trillion dollars. Last years Gdp was 13 trillion. Our Trade balance is -$862.3 billion which is about 6% of gdp which economist say when it’s over 5% you will see a slow down.
Why do you think it is Chicken Little when we have borrowed more money than ever before? We save nothing, spend on credit and more foreign countries buying our dollar to keep us a float. Also 75% of our economy is based on consumers spending. So if they stop spend the market slows. Our dollar is very weak so the Stock market looks good on paper. Earned income is declining verse production. Food and consumer staples in the past 3 years have inflated about 30%. Housing prices were not appreciation that was inflation and that is why the fed does not put that in the inflation data. I am sorry Chicken Little is not screaming wolf. The writing is on the wall. You may have too much faith in the government data.
I believe that we can turn it around but I am 100% certain we will see another recession in the next year. That would be 2 in 6 years. Talk about a great economy.
He did a very detailed study in advance of what now in history has been dubbed "The S & L Crisis" after all the Savings and Loans that went down in it. Batra mapped out which banks would fail and why, well in advance. While he was absolutely correct, the outcome he called wrong.
The thing Batra (and most other failure predictions) tend to miss the amazing capacity for debt. (not the bs about the amazing resilence of the US economy -- truth is the US economy myths are mostly bs and all debt). The Feds just took the whole bank failure mess and rolled it into the debt. Same as will be done with the Iraqicide and housing bubble mess.
It seems most analysis expects there to be some elastic limit for debt. In the end that will probably be the case and we will collapse into the Amero (or whatever the North American unified currency will be called). But that day is not yet today, so we just keep printing more and more debt -- afterall, that is what the "note" portion of the dollar bills mean.
Problem with the Depression is the Fed didn't step in. The fed has learned their lesson and seems to have a decent amount of control over inflation and the economy. Saying America is near a great depression is laughable
Problem with the Depression is the Fed didn't step in. The fed has learned their lesson and seems to have a decent amount of control over inflation and the economy. Saying America is near a great depression is laughable
I don't think you will be laughing this time next year. Even Greenspan paints a ugly picture of whats ahead. In a recent interview he has raised his chance of recession to 50%, a year ago he was saying there was no chance. He is also saying he expects interest rates to raise in the 8% to 9% range. The only reason for this to happen is the Fed would have to prop up the dollar due to a freefall. Worldwide confidence in the Dollar is declining due to astronomical and rising US debt, public and private. The Dollar has declined 40% against world currencies in the past three years, and its decline is accelerating. Iran and Venesuela, are moving to change their petro-dollars to Euros.The US now imports most of what we consume, as the Dollar begins to freefall, the cost of what we consume rises. Even the chearleaders of the U.S economy admit that the only thing holding up this house of cards is the strong world economy. As consumers begin to consume less due to the falling dollar the world economy will begin to loose its biggest customer. You do the math. Recessions and depressions are a normal function of a capitolist system, they are a correcting factor which are needed to keep the system healthy when debt is out of control.
Come on the economy is strong that is why it has take 5 years to get back to 1998-2000 boom. Problem is our current conditions of economy growth is base on credit. Look the fed just drop the rates to save this crappy economy. Now the economy will increase inflation and the dollar will weaken even more.The second the news hit of a rate cut the yield curve went inverted.
Location: Stuck on the East Coast, hoping to head West
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Another issue during the Great Depression is that the Fed had a hands-off policy in regards to giving banks access to cash and the banks didn't have a large enough reserve to meet the demands. The fiscal policy was plain wrong.
Also, interestingly enough, the mortgages during the depression era were written in a way so that the bank could call in the mortgage in its entirety whenever it wanted--a "due on demand" clause. Back then people didn't foresee this clause actually affecting them b/c they figured the banks wouldn't call in loans that obviously couldn't be paid. Anyway, the banks didn't have choice but to call in those large (relatively speaking) loans when people started withdrawing money. Of course this also explains my grandparents absolute refusal to take out a loan for a home. They literally built their house brick by brick.
We don't have those types of mortgages today (at least I don't think so, but who really knows??) so while I sure don't rule out the possibility of a depression, I don't think it will be similar to the Great Depression in regards to the housing market. Although now that I think about it, isn't the fact that some of the mortgages change so drastically in terms of monthly payment eerily similar to a sort of pay on demand clause?
Another issue during the Great Depression is that the Fed had a hands-off policy in regards to giving banks access to cash and the banks didn't have a large enough reserve to meet the demands. The fiscal policy was plain wrong.
Also, interestingly enough, the mortgages during the depression era were written in a way so that the bank could call in the mortgage in its entirety whenever it wanted--a "due on demand" clause. Back then people didn't foresee this clause actually affecting them b/c they figured the banks wouldn't call in loans that obviously couldn't be paid. Anyway, the banks didn't have choice but to call in those large (relatively speaking) loans when people started withdrawing money. Of course this also explains my grandparents absolute refusal to take out a loan for a home. They literally built their house brick by brick.
We don't have those types of mortgages today (at least I don't think so, but who really knows??) so while I sure don't rule out the possibility of a depression, I don't think it will be similar to the Great Depression in regards to the housing market. Although now that I think about it, isn't the fact that some of the mortgages change so drastically in terms of monthly payment eerily similar to a sort of pay on demand clause?
The situation is very similar today to what it was in 1929. Then and now the Fed did not have enough cash to bail out the banks. Derevitives, (hybrid debt mostly U.S. mortgages)worldwide today amount to more than 75 trillion dollars. The GDP of every country in the world combined is about 45 trillion. And then as now the banks did not want to forclose on people. My father took over his parents loan in 1930 when they could not pay it and from his account, the banks would bend over backwards to accomidate anyone who would try to make payments. They did not want the property, there was no market for it, and they would only recoup pennies on the dollar at auction. Depressions all have certin common traits, their cause is too much debt caused by over confidence in the "strong economy" and peoples belief that they will be able to make the payments on the huge debts. Sound familiar?
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