Is the U.S. economy about to collapse?

jeffbr

LikeAnOcean wrote:

If everyone thinks its just a bump, why is Jim Cramer from Mad Money having seizures?

Ratings.


Jlew already used the proper term for what is happening - Correction

In bull markets, a 10% correction generally spurs on continued growth. If you're not in the market, it is time to get in RIGHT NOW. If you're in the market, sit tight.

Anyone freaking out right now has ADHD and zero long-term perspective.

RolandTD20Kdrummer

LikeAnOcean wrote:

If everyone thinks its just a bump, why is Jim Cramer from Mad Money having seizures?

That's exactly what I'm wondering...

I believe this is the beginning of a squeeze on the middle class.

mammasan

Our economy is not about to collapse. Like jeff said, what is occuring now is just the way of the market correcting itself. It happened in the late 1990s after the internet bubble burst and now it is happening after the real eastate bubble burst. What I will admit is that we are no longer the economic juggernaut we once where. The dollar continues to fall in the face of the Euro and if we do not right the ship it will start to slip to the Yen as well. America used to be the front runner in manufactoring, technology, etc... We have neglected this and allowed other countries to surpass us in these areas and it is hurting us. What was the last great boundry that we crossed. It was space exploration and that was over 40 years ago. Since then we have grown stagnent and believed that just because we where the strongest nation that we would remain on that pedal stool without having to work to stay there.

jeffbr

mammasan wrote:

Our economy is not about to collapse. Like jeff said, what is occuring now is just the way of the market correcting itself. It happened in the late 1990s after the internet bubble burst and now it is happening after the real eastate bubble burst. What I will admit is that we are no longer the economic juggernaut we once where. The dollar continues to fall in the face of the Euro and if we do not right the ship it will start to slip to the Yen as well. America used to be the front runner in manufactoring, technology, etc... We have neglected this and allowed other countries to surpass us in these areas and it is hurting us. What was the last great boundry that we crossed. It was space exploration and that was over 40 years ago. Since then we have grown stagnent and believed that just because we where the strongest nation that we would remain on that pedal stool without having to work to stay there.

Great post. My post was specifically focused on the correction happening now. You've given a great global perspective, highlighting areas we better start worrying about. We have spent way too long resting on our past successes.

Boston MA

jeffbr wrote:

Great post. My post was specifically focused on the correction happening now. You've given a great global perspective, highlighting areas we better start worrying about. We have spent way too long resting on our past successes.

It's more than a real estate bubble. It's also a dollar bubble. The greatest currency bubble burst of all time. And we are completely unprepared. It lasted a long time backed by the US market as well as military stength. It couldn't last forever. No fiat currency ever has. This will be the worst of all time, with people starving in cities with no access to food and water if something isn't done. It's not a matter of it, only when.

Vote Ron Paul 2008!

DriftingByTheStorm

Kat wrote:

I don't think so. This chart goes back to the depression. A few banks might go under though...not the big ones.

http://finance.yahoo.com/q/bc?s=%5EDJI&t=my&l=on&z=m&q=l&c=

#1 Leading Indicator that something is VERY VERY WRONG ...

Kat makes MULTIPLE POSTS IN ONE DAY.

Seriously.
WTF.
Sign of the apocalypse i tell you!!!

Scubascott

Ahnimus wrote:

Buy Gold Boullion from Canada

Or maybe buy stocks in Australian uranium mining companies. Unless labor wins the upcoming election. Then don't.

StupidHumanBeings

Why are we in this mess: A lot of people made some really bad choices and the government did nothing to stop it. Why? Because the administration would not put an end to the activities of God fearing Republicans in South Orange County, CA.

The current mortgage situation was caused by house flippers who's "day job" was to sit on a property for a few months and profit from selling in a surging market. These flippers got into a property for nearly zero out of pocket and theoretically got some money out. In order to accomplish this you need exotic mortgages (low doc, sub prime, adjustable rate) or otherwise as close to ZERO down and INTEREST ONLY as possible.

Starting at about 2000 everyone and their brother was opening up boutique lending operations in South Orange County to meet the demand for this kind of loan. Each new lending operation in competing with others for "bottom feeders" AKA (low doc, sub prime, zero down, interest only) was more outragious than the next. There were even 125% loans.

The only way flippers can make money is to sell the house for significantly higher than they bought it (take into account agent commissions). There are limits to everything and the start of the crash was in late 2005 when property prices and sales leveled off. Homes were no longer turning over at the expanding rate necessary to support flipping.

Flippers have therefore had to sit on houses longer than expected. The interest only loans that they were holding had an adjustment period of anywhere between 1 and 5 years when principal and a higher rate was due. The high rate of default is due to these interest only loans adjusting and payments surging up to 400% or more.

We started hearing about defaults a few months ago as the "1 year" people came due. There are still interest only loans in the pipeline most probably coming due in the next 2 years or so. They can't just refinance to a standard loan because two median incomes no longer qualify for loans covering their old loan balance.

Credit is not a bottomless pit. People must pay their mortgages in order for credit to be available (creditor's fixed income). Since people have defaulted loans are not being paid and the ability to issue credit is drying up.

Credit however is not just "mortgages" but consumer credit also in the form of credit cards, car loans, etc. It goes without saying that an increasing number of people have: no savings, living paycheck to paycheck, and have revolving credit. If consumers are unable to revolve their credit then we are going to witness personal bankruptcy increase, followed by higher interest rates, and minimum payment. This will cause consumers to reduce their spending and therefore a reduction in consumption.

Consumers are what drives the market and we are on a slow moving train wreck to true collapse if the credit situation continues. Don't beleive the Fed, CNBC or anyone else who is prolcaming "a recovery." They are using Orwellian tactics to prevent the loss of their status-quo. Sadly I don't think their campaign of disbeleif will do much good as people's bank accounts get cleaned out and their precious companies fall apart. They will loose too.

StupidHumanBeings

BTW: I do blame the Bush administration for not anticipating this problem as it was happening. A red flag should have gone up somewhere when NEGATIVE amortization and interest only loans had proliferated. Because of the administration's stupidity of playing war in the Iraq desert they're responsible for domestic gross neglegence.

At this point the problem has grown beyond the ability of the US government to do anything about it. The total dollar losses to date (and those yet to come) are in the hundreds of billions if not a trillion. As you can see the problem is not just contained in the US but every worldwide financial insitution that aggregated credit to US consumers is exposed.

The REALITY of the situation is that the MARKET must sort the situation and the US GOVERNMENT CANNOT AFFORD to do anything about it. Because of the Bretton Woods agreement we can't just print more money (and also look how well that worked for Weimar Germany).

We're just going to have to ride out the situation until the market finds a bottom.

JamMastaE

the market is going to crash,the fed is keeping it afloat with money they print out of thin air with no gold backing making it worthless,that causes the inflation to soar and with America's manufacturing gone over seas we have no way to over come the inflation bubble that will eventually burst.period.

oh yeah most of you probably don't know the federal reserve is a private bank and was set up to rob this country a long time ago.

http://www.bigeye.com/griffin.htm

FinsburyParkCarrots

I don't care, as long as Gordon Brown doesn't use it as another excuse to put the price of a pint up by twenty pence.

gue_barium

LikeAnOcean wrote:

I've been watching the news allot today and word is Americans are borrowing more money than they can afford and the U.S. dollar is about to collapse and be worth as much as 50% less in the next few years.. and America's homes are really worth 30 to 40% less than American's think..

I've been taking sacrifices to get ahead and save as much money as I can over the last few years. Word is to spend the money on foreign assets before it drops. What types of foreign things can you trade the U.S. dollar for?

In Tijuana? Or elsewhere?

mammasan

Boston, MA wrote:

It's more than a real estate bubble. It's also a dollar bubble. The greatest currency bubble burst of all time. And we are completely unprepared. It lasted a long time backed by the US market as well as military stength. It couldn't last forever. No fiat currency ever has. This will be the worst of all time, with people starving in cities with no access to food and water if something isn't done. It's not a matter of it, only when.

Vote Ron Paul 2008!

The stock market dropping is because of the real estate and mortgage industry. With thousands of people not being able to pay off all those sub-prime loans investors are getting a bit worried and lenders are being a bit more tight fisted now. The slip on the US dollar is something completely unrelated to the stock market. We do need to do something to rectify the dollars slide because if it does continue to slide we face oil producting nations switching the petro currency from the dollar to the Euro. That would really screw us big time and we would see oil prices double in this country over night. More the reason why we need to invest in creating a sustainable easily mass produced alternative fuel source. Can you imagine the impact if we developed a corn based ethenol. It would break our dependency on foreign fuel, it would aid our farmers, and it would bring a much needed boost in foreign investments into our country. The dollar would climb back up to the top of the currency ladder.

mammasan

JamMastaE wrote:

the fed is keeping it afloat with money they print out of thin air with no gold backing making it worthless

That is why we need to return to the Gold Reserve.

JamMastaE

mammasan wrote:

That is why we need to return to the Gold Reserve.

yes sir!
vote Ron Paul,he will get rid of the fed!!

mammasan

JamMastaE wrote:

yes sir!
vote Ron Paul,he will get rid of the fed!!

I already plan to vote for him. Even registered Republican so I can vote in the primaries.

blackredyellow

mammasan wrote:

...America used to be the front runner in manufactoring, technology, etc... We have neglected this and allowed other countries to surpass us in these areas and it is hurting us. What was the last great boundry that we crossed. It was space exploration and that was over 40 years ago. Since then we have grown stagnent and believed that just because we where the strongest nation that we would remain on that pedal stool without having to work to stay there.

I agree on principal, but the problem is that there probably won't be another boundary that "America" crosses. We aren't the front runner in manufacturing or technology anymore not because we are bad at it, but because it costs too much to do those things on a large scale here.

Small companies here are creating and have created things like cars that run on renewable energy, the very thing that could be considered the next huge breakthrough... the problem is for them to grow and become huge in the marketplace, a lot of it would be outsourced to the global community.

Pacomc79

no, the reports of our demise are premature.

If a few bad banks who make stupid lending decisions go under that's fantastic.

Yes I know the economy slows because housing is not so inflated, but this is a good thing. People paying 700 bucks a month on a 300K mortgage because the structure is screwed is not. That bill eventually comes due.

If you live within your means.. you're going to be ok. Just don't keep all your eggs in one basket.

mammasan

blackredyellow wrote:

I agree on principal, but the problem is that there probably won't be another boundary that "America" crosses. We aren't the front runner in manufacturing or technology anymore not because we are bad at it, but because it costs too much to do those things on a large scale here.

Small companies here are creating and have created things like cars that run on renewable energy, the very thing that could be considered the next huge breakthrough... the problem is for them to grow and become huge in the marketplace, a lot of it would be outsourced to the global community.

That could be changed as well. By eliminating our current tax system and installing something along the line of the Fair Tax we could create and environment in this country suitable for manufactoring jobs to return.

jlew24asu

mammasan wrote:

That could be changed as well. By eliminating our current tax system and installing something along the line of the Fair Tax we could create and environment in this country suitable for manufactoring jobs to return.

mammassan for president!