[JimKing]

Originally Posted by kort677

is that so? please elaborate on the similarities between 1929 and 2007 and what economic principles are your referring to that will fix what you call a mess?

The Big Picture | Nasdaq versus 1929 bubble

The second Great Depression

There are many similarities between the pre-Depression era and our own. Paul Alexander Gusmorino says: “The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. . . . The excessive speculation in the late 1920s kept the stock market artificially high, but eventually led to large market crashes. These market crashes, combined with the misdistribution of wealth, caused the American economy to capsize.”

“[The income disparity] between the rich and the middle class grew throughout the 1920s. While the disposable income per capita rose 9 percent from 1920 to 1929, those with income within the top 1 percent enjoyed a stupendous 75 percent increase in per capita disposable income . . . A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32 percent in manufacturing. During that same period, average wages for manufacturing jobs increased only 8 percent (This ultimately causes a decrease in demand and leads to growth in credit spending)

“The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge’s (pro business) administration passed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically . . . (At the same time) the Supreme Court ruled minimum-wage legislation unconstitutional.

“The bottom three quarters of the population had an aggregate income of less than 45 percent of the combined national income; while the top 25 percent of the population took in more than 55 percent of the national income . . . Between 1925 and 1929 the total credit more than doubled from $1.38 billion to around $3 billion.”

Just like now, the growing wage gap has spawned massive speculative bubbles as well as a steady up-tick in credit spending. Wage stagnation forces workers to seek other opportunities for getting ahead. When wages fail to keep pace with productivity then demand naturally decreases and business begins to flag. The only way to spur more buying is by easing interest rates or expanding personal credit, and that is when equity bubbles begin to appear. That’s what happened to the stock market before 1929 as well as to the real estate market in 2007. The availability of credit has kept the housing market afloat but, ultimately, the result will be the same.

On Monday October 21, 1929, the over-valued stock market began its downward plunge. It managed a brief mid-week comeback, but seven days later, on Black Tuesday, it plummeted again; 16 million shares were dumped and there were no buyers.

The game was over.

Confidence evaporated overnight. People stopped buying on credit, the bubble-economy collapsed, and the mighty locomotive for growth, the American consumer, hobbled into the Great Depression. Tariffs were thrown up, foreigners stopped buying American goods; banks closed, business went bust, and unemployment skyrocketed. Ten years later the country was still reeling from the implosion.

Now, 77 years later, Greenspan has led us sheep-like to the same precipice. The economic dilemma we’re facing could have been avoided if the expansion of personal credit had been curtailed by prudent monetary policy at the Federal Reserve and if wealth were more evenly distributed as it was in the ’60s and ’70s. But that’s not the case; so we’re headed for hard times.

[JimKing]

Originally Posted by rstate

Mike, all of your responses made perfect sense.

SKB - you said you can buy a house anwhere from $200k-$600k and decided you only want to spend $200k. That's your decision. A seller has the same option to determine the price they'll sell their home for. If you don't like their price... don't buy it. But there's no reason to disrespect them because you don't like their selling price.

This is great....real estate agents all agreeing with each other and telling each other their posts "make perfect sense". You people have no shame.

But this is all just for poops and giggles. Florida real estate's fall is slowly picking up momentum. Hang in a few years SKB....people will be begging you to give them $200,000 for their ridiculously overpriced $500,000 houses.

The fun has not even remotely started yet, despite the nonsense the agents on this board spew out. I originally thought prices would fall 30-50% across Florida.

The more you step back and look at what is coming...prices will fall 50% minimum in the less bubbly areas and 75% in the frothiest areas.

[firemed]

Originally Posted by kort677

is that so? please elaborate on the similarities between 1929 and 2007 and what economic principles are your referring to that will fix what you call a mess?

First of all in 1929 margin calls were unable to be met by stockholders who were literally wealthy on nothing but paper. Very similar to homeowners today, very wealthy on equity that only exists on paper. You can't base wealth on nonexistant money until it materializes. A medium income has to match a medium home in lending standards. We should have learned our lesson from history but instead we came up with creative financing for people who had no means of paying it back. Look at the foreclosure rate we're dealing with today. Hedge funds can't hold the weight of the loss. Our US dollar is now based on nothing but trust. We can't continue putting our people into massive debt to make a profit today only to make the situation worse tomorrow. This is the mindset that began the great depression in the 1920's. Unfortunately we no longer have the industrial capabilities to bail us out this time around.

[lostbuyer]

I think time will prove you right skb,why should you have to put other things on hold just to buy the house??I have stepped up to the plate kort,I own several properties,all bought pre bubble,next property will be bought after this bubble completely loses air,im not gonna pay a high 30 year loan just so someone can retire of my purchase...

[tallrick]

Thank you very much for verifying the sad state of the economy. I have been worried about Great Depression II ever since the late 90's stock tech bubble. It has to happen, that's why I refused to take on any debt.

[firemed]

Originally Posted by JimKing

This is great....real estate agents all agreeing with each other and telling each other their posts "make perfect sense". You people have no shame.

But this is all just for poops and giggles. Florida real estate's fall is slowly picking up momentum. Hang in a few years SKB....people will be begging you to give them $200,000 for their ridiculously overpriced $500,000 houses.

The fun has not even remotely started yet, despite the nonsense the agents on this board spew out. I originally thought prices would fall 30-50% across Florida.

The more you step back and look at what is coming...prices will fall 50% minimum in the less bubbly areas and 75% in the frothiest areas.

Wow this is a great post !!!!!

[rstate]

[quote=JimKing;1081894]This is great....real estate agents all agreeing with each other and telling each other their posts "make perfect sense". You people have no shame.


QUOTE]

Sorry to burst your bubble, but I'm not a real estate agent. But anyone with any knowledge of real estate would understand what Mike was talking about. I can explain it to you, if you'd like.

[firemed]

Originally Posted by JimKing

The Big Picture | Nasdaq versus 1929 bubble

The second Great Depression

There are many similarities between the pre-Depression era and our own. Paul Alexander Gusmorino says: “The Great Depression was the worst economic slump ever in U.S. history, and one which spread to virtually all of the industrialized world. The depression began in late 1929 and lasted for about a decade. . . . The excessive speculation in the late 1920s kept the stock market artificially high, but eventually led to large market crashes. These market crashes, combined with the misdistribution of wealth, caused the American economy to capsize.”

“[The income disparity] between the rich and the middle class grew throughout the 1920s. While the disposable income per capita rose 9 percent from 1920 to 1929, those with income within the top 1 percent enjoyed a stupendous 75 percent increase in per capita disposable income . . . A major reason for this large and growing gap between the rich and the working-class people was the increased manufacturing output throughout this period. From 1923-1929 the average output per worker increased 32 percent in manufacturing. During that same period, average wages for manufacturing jobs increased only 8 percent (This ultimately causes a decrease in demand and leads to growth in credit spending)

“The federal government also contributed to the growing gap between the rich and middle-class. Calvin Coolidge’s (pro business) administration passed the Revenue Act of 1926, which reduced federal income and inheritance taxes dramatically . . . (At the same time) the Supreme Court ruled minimum-wage legislation unconstitutional.

“The bottom three quarters of the population had an aggregate income of less than 45 percent of the combined national income; while the top 25 percent of the population took in more than 55 percent of the national income . . . Between 1925 and 1929 the total credit more than doubled from $1.38 billion to around $3 billion.”

Just like now, the growing wage gap has spawned massive speculative bubbles as well as a steady up-tick in credit spending. Wage stagnation forces workers to seek other opportunities for getting ahead. When wages fail to keep pace with productivity then demand naturally decreases and business begins to flag. The only way to spur more buying is by easing interest rates or expanding personal credit, and that is when equity bubbles begin to appear. That’s what happened to the stock market before 1929 as well as to the real estate market in 2007. The availability of credit has kept the housing market afloat but, ultimately, the result will be the same.

On Monday October 21, 1929, the over-valued stock market began its downward plunge. It managed a brief mid-week comeback, but seven days later, on Black Tuesday, it plummeted again; 16 million shares were dumped and there were no buyers.

The game was over.

Confidence evaporated overnight. People stopped buying on credit, the bubble-economy collapsed, and the mighty locomotive for growth, the American consumer, hobbled into the Great Depression. Tariffs were thrown up, foreigners stopped buying American goods; banks closed, business went bust, and unemployment skyrocketed. Ten years later the country was still reeling from the implosion.

Now, 77 years later, Greenspan has led us sheep-like to the same precipice. The economic dilemma we’re facing could have been avoided if the expansion of personal credit had been curtailed by prudent monetary policy at the Federal Reserve and if wealth were more evenly distributed as it was in the ’60s and ’70s. But that’s not the case; so we’re headed for hard times.

this is why I don't need a TV !

[Mike Peterson]

[quote=rstate;1081973]

Originally Posted by JimKing

This is great....real estate agents all agreeing with each other and telling each other their posts "make perfect sense". You people have no shame.


QUOTE]

Sorry to burst your bubble, but I'm not a real estate agent. But anyone with any knowledge of real estate would understand what Mike was talking about. I can explain it to you, if you'd like.

If you are not in agreement with their doomsday real estate theory you are one of two things.

A Real Estate agent or someone who bought at what they perceive to be the top of the market.

In their eyes there is no way that anyone could have a valid arguement for anything if it does not include prices coming down over 50%

[lostbuyer]

The News-Press, news-press.com, Denny Grimes, Successful sellers know how to attract potential buyers