The Making of Another Great Depression

BACK to the IP

http://www.miketodd.net/encyc/dollhist.htm

Interesting graph, history of dollars/pound. Does anyone know how the US did compared to Europe? Wasn't our depression the worst? What difference did it make that the pound was the world reserve currency?

Are we actually in a weird sort of inflation where prices are about the same but wages are falling? During the '29 depression wasn't the "paper profit" new rich" people effected more than the blue collar and farming people? In this present situation???

 

It's good to repent of your sins.

 

Just telling you what you want to hear since you are not interested in truth.

 

I would recommend true repentance.

 

http://online.wsj.com/article/SB125581121032292239.html

For and against arguments in today's WSJ. The against guy writes:

"During the Great Depression, more than 10,000 banks failed. Bank runs were so commonplace that moviegoers understood viscerally what was happening during the pivotal bank-run scene in the Christmas classic "It's a Wonderful Life."

"Since 2008? A mere 125 banks have failed."

WAMU had 2,239 branches. Each one was a separate bank with a separate set of books.

 

Food for thought. Home foreclosures are now becoming more prevalent at the high end of the market among people with prime rate rather than sub-prime loans. This article sees a further 30% drop in housing prices and a week economy for years to come. A major stock market correction is very likely. We've come up faster than ever before in history and the market is very overpriced based on the fundamentals.

Personally, I think it starts tomorrow with the failure last week to hold above 10,000,
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October 12, 2009
Mortgage defaults growing in housing's top tier
Rick Moran
The real estate meltdown is far from over.
http://www.americanthinker.com/blog/2009/10/mortgage_defaults_growing_in_h.html

What started as a correction in the overheated, overinflated housing market is affecting all sectors of the real estate industry now. Many banks are in a state of near collapse as a result of the commercial real estate depression. And in the traditional loan market, defaults have nearly doubled.

Now, even homeowners in expensive neighborhoods are going under, as this Wall Street Journal article by Nick Timiraos explains:
About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.

The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. "The slope of that curve in recent months is much sharper than it was recently," said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.

The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value. Zillow then looked at the share of monthly foreclosures in each tier over the past decade.
Foreclosures are rising in more expensive markets as home values in those areas fall, leaving more homeowners with mortgages that exceed the value of their properties. Prime loans accounted for 58% of foreclosure starts in the second quarter, up from 44% last year, according to the Mortgage Bankers Association. Subprime mortgages accounted for one-third of foreclosure starts, down from one-half last year.

There really is no end in sight. The administration is trying desperately to artificially prop up the value of homes by forcing banks to renegotiate terms and softening up loan guarantees by Fannie Mae. But housing prices continue to fall. And as they do, more Americans wake up one morning to find the value of their house is less than the loan they took out to pay for it. At that point, it becomes an economic albatross and drags the homeowner into default.

Some analysts believe home values must further plummet as much as 30% before we see a turnaround nationwide. That will probably take years - in which case, any recovery from the recession will be weak and probably short lived.

 

Now how could that possibly be with your hero in the White House, and the other geniuses running Congress.

 

Let me save alatide the effort...

It's Bush's fault.

 

Shhhhhhhhhhh!!!!!!!

You'll start another 10-paragraph rant!

We've already jumped topic a half-dozen times in this thread already.

 

> Home foreclosures are now becoming more prevalent at the high end of the market among people with prime rate rather than sub-prime loans.

The high end guy is smart enough to know that he is beating a dead horse and sending good money after bad. The sub prime guy never learned to handle money and plan ahead, which is why he is a sub prime guy.

A house is not a GOOD investment (all things considered) for most people but it might be the only possible investment for one who can't plan ahead and defer consumption.

The Wife and I have never considered a house as an investment but only a place to live. For me, having a paid off place to live is a great psychological comfort even if it isn't in a fancy part of town. An alarm system is lots cheaper than the taxes on a fancy house.

 

I saw an economist on TV a few months back, he said it was very unlikely that we would suffer a depression as severe as the 20's and 30's because our economy is much more diversified now. We were primarily a manufacturer then, now there are other types of businesses.

But I saw another who said there would be many foreclosures in commercial real estate in 2010 and he said it was unavoidable. In fact, he said they have known this for some time.

Here is an article about it.

http://news.ibj.com/ibjemg/ibjemail...esc=IBJ+REAL+ESTATE+WEEKLY&EmailType=Standard

 

Actually, I'm saying the opposite. Home foreclosures are now largely not the result of a lack of oversight over loans to marginal buyers but now the problem has spread to people with prime rate loans and expensive homes.

 

You're right to the extent that a large number of current foreclosures are what is galled strategic. The owner could afford to stay in the house but chooses to default because his house is worth (much) less than what he owes on it. This is similar to declaring personal bankruptcy because your credit isn't very good for quite a while after doing this.

 

In the first place, the primary purpose of a house is a place to live and raise a family, not an investment tool. Whether it is the high end borrower or the sub prime borrower that has gotten themselves into trouble by irresponsible money management, really makes no difference. They both have the same problem. They created the problem for themselves, so they can get out of it. It is not up to the taxpayers or the bankruptcy court to get them out of the hole they dug.

Foreclosures are primarily (almost 100%) caused by people taking out loans they never had any business taking out. It is not my fault nor my problem that they created this mess for themselves.

Its very simple. Anyone with an elementary education can do simple addition and subtraction. It does not take a genius to manage money.

 

The price of a house changes just like anything else. Houses in the San Francisco area have dropped in value by 50% in the last few years. Suppose you had a house which you had a $500,000 mortgage on which suddenly was worth $250.000. Would you continue to pay off the $500.000? That's what I'm saying is happening now. People are choosing to walk away from houses which are now worth much less than the balance on the mortgage loan. These are people that could afford the $500,000 loan and still can but make a decision that paying it off no longer makes sense. Some of them of course have lost their jobs and now can't afford the mortgage payments.

The market is saturated with houses for sale and they can't sell it, period. They just walk away.

 

It doesn't take a genius to spend other people's money, either, as we see daily from Washington, D.C.

Sorry. I just couldn't resist.:smilewinkgrin:

 

The question remains. If you owed $500K on a house that is worth $250K with some saying prices could go down another 30% what would you do?

 

Continue to honor the contract which I entered into as any Christian should.

On what moral basis may someone pass the responsibility for one's own decisions onto someone else?