All this talk about a "market bottom" and predictions on when the housing market will recover. First thing, the market means nothing. Anyone who has even the most elementary understanding of the stock market will tell you that the market is being manipulated by both our government and corporate elites. The government has agencies such as the Commodity Futures Trading Commission and the President's Working Group on Financial Markets (aka Plunge Protection Team) are basically given free reign to interfere with markets. Why else would these Federal agencies exist? Are they working in "good faith?" If you trust any government agency at this point, you are the definition of naive.
The corporate elite have been allowed to use short-selling tactics to swing the market up and down wildly day-to-day, while mark-to-market accounting tactics have allowed the largest banks in the country to hide liabilities from their balance sheets. The government has allowed ridiculous financial instruments such as credit default swaps, which are nothing more than insurance on investments that have no real capital behind them. They simply had to change the wording to "swap" instead of "insurance", and apparently that was enough for the SEC to turn a blind eye. Once the investments insured by these CDS's started defaulting, the issuers of the CDS's had no means of making the insurer whole, because there was nothing backing the CDS in the first place!
The housing market still has a long way to go before it can recover. Alt-A and option ARM mortgages will be resetting at the beginning of the year, ushering in a tidal wave of new foreclosures probably mid-2009 and beyond. Take a look at the chart below to see what's headed our way.
This will ultimately lead to more government intervention, sold to the public as a way to "stem the losses" within the market. In reality, it will only prolong the problem, as you can use taxpayer dollars to prop up phony housing prices all you want, but it will only create another bubble that will burst down the line. The market needs to adjust, bring prices down to where they should have been in the first place, and only then will the market be allowed to recover. This will not be an easy process; it will involve many foreclosures, leaving folks out on the street. However, it needs to happen, so we might as well take our medicine and get it over with now.
You can thank your government for creating the housing bubble. In the 90s, president Clinton accelerated the Community Reinvestment Act, which was originally put in place by the Carter administration. This Act, in effect, forced lenders to lend to minorities and other groups of people who should not have qualified for a mortgage and has no means in which to pay it. Some of these mortgages involved no money down and no employment in some cases. The mortgages were backed by the government, however, so these lenders had a huge incentive to take on excess risk associated with these mortgages, considering they were backed by the "full faith and credit" of the United States.
Why would lenders take on these risky mortgages, even if they were backed by the government, if the borrowers would default anyway? Compensation is tied to mortgages given out, and in some cases the lenders were penalized if they didn't lend to protected groups.
Financial Health of the United States
We have already witnessed the Federal government pump trillions of dollars, dollars essentially printed out of thin air by way of the Federal Reserve, into our economy. It is sold to the public as a way to "stop the bleeding." Somebody please inform Washington that the patient is dead. The taxpayer of the United States is tapped out...there is no more money to go around. The hasty approval of the 700 billion dollar bailout has opened Pandora's Box, something that was warned about all along but largely ignored by Congress. One only needs to look at who is financing their campaigns to see why:
Now we see the automakers being bailout out. Several states are on the brink of bankruptcy and are asking for a bailout. In my home state, representatives are asking for a bailout for the RV industry, of all things, citing that it is critical to Indiana's economy. Where does it end?
The answer is, it doesn't end. Once the government spigot is turned on, it will take a wrench of epic proportions to turn it off. You may have heard of the phrase "there's nothing more permanent than a temporary government program." There has never been a situation where that phrase fits more perfectly.
Most Americans are against any type of bailout, yet Congress does it anyway. Are people outraged? Not really. The ones who are really upset may go as far as to write an op-ed in their local newspaper. That's about the extent of the resistance. Where is the passion? Where are the riots? They don't exist, because as long as American Idol is on every Thursday and 9 p.m., people are happy.
Most Americans don't realize that every Fed interest rate cut, every TARP program, every bailout, every decision that Dictator Henry Paulson makes effects EVERY SINGLE ONE OF US in a huge way, and it goes beyond simply squandering of our tax dollars. It is about debasing and destroying our currency. Our dollar is as good as dead.
The Mona Lisa is valuable because there is only one in the entire world. Art collectors would be willing to pay unlimited amounts of money for that painting. So what would happen if, somehow, anyone could go down to Wal-Mart and buy an authentic Mona Lisa painting?
The answer is obvious, it would be worth next to nothing. The same can be said about our dollar. When you pump trillions of excess dollars, dollars created out of thin air, into our economy, each dollar will become worth less and less as that money creeps its way through our economy. That means rapid inflation, or worse, hyperinflation. If you want to see what kind of devastating effects inflation has on people, one needs to look no further than Zimbabwe, a country that has seen a 231,000,000% increase in inflation, and has bank notes denominated in the billions.
Of course, the bailout of the banking industry has created an interesting problem for Congress. The Federal Reserve won't tell who the recipients of the money were, and the banks won't tell what they spent the money on, and Congress is essentially powerless to do anything about it. Who gave the Federal Reserve and the Treasury so much power? Congress did, with the passing of the 700 billion dollar bailout. Not only that, but they essentially granted Henry Paulson with more power than the President. He is an appointed figure and answers to no one, except for the President himself.
Freedom
We will see taxes increase. There is no way around it. The Governor of New York recently annouced a whole slew of egregious taxes, including an "iPod tax" and a "obesity tax", which taxes sugary sodas. The Federal government will now regulate what you eat.
Ridiculous taxes will crop up all over the country as states and local governments struggle to balance budgets and make up huge shortfalls. Depending on how bad it gets, it could very well lead to tax revolts. The taxpayer is tapped out; his savings is gone, his credit cards are maxed, his house is in foreclosure, and he very well might be out of work. What open credit lines he possesses will be cut, and the interest rates will be doubled. People will go to new extremes when they are pushed to the limit.
Since 9/11, the Federal government has gone to soaring heights in order to keep us "safe" from terrorists. Actually, all they did was use the event to take away more of our freedoms. The Federal government now as the power to listen in on your phone conversations and search your home without a warrant, thanks to the PATRIOT Act. If somebody gets in their way, they will simply dig some dirt on you, label you an enemy combatant, and do it anyway. The PATRIOT Act was written before 9/11, but that tragic event allowed a rather convenient way for the Bush administration to push the bill through Congress with relatively no resistence.
If we encounter another attack, I fear what freedoms and liberties they will take next. Troops are being mobilzed all across the country, doing crowd control exercises in the event of civil unrest, as well as homeland security prevention tactics. The Marines are doing DUI checkpoints in California. There are several witnesses in Arizona that the military is becoming increasingly involved in police tactics. Why are they doing this? You tell me.
---
I'd really like to believe that when the clock strikes midnight and 2009 is officially here that everything will be rosey again and we can all go out and buy flat screen TVs with someone else's money, but that's just not the reality. Barack Obama is not our savior. He can run the budget deficit as high as he wants, he can pave over every road 7 times and rebuild every bridge in the country, but that will not be our saving grace. Big government is not, and will never be the answer. Central planning does not work, it's been proven time and time again. Keynsian economics is not sustainable. Until we figure that out, the outlook will continue to be bleek.
You can thank your government for creating the housing bubble. In the 90s, president Clinton accelerated the Community Reinvestment Act, which was originally put in place by the Carter administration. This Act, in effect, forced lenders to lend to minorities and other groups of people who should not have qualified for a mortgage and has no means in which to pay it. Some of these mortgages involved no money down and no employment in some cases. The mortgages were backed by the government, however, so these lenders had a huge incentive to take on excess risk associated with these mortgages, considering they were backed by the "full faith and credit" of the United States.
Why would lenders take on these risky mortgages, even if they were backed by the government, if the borrowers would default anyway? Compensation is tied to mortgages given out, and in some cases the lenders were penalized if they didn't lend to protected groups.
Financial Health of the United States
We have already witnessed the Federal government pump trillions of dollars, dollars essentially printed out of thin air by way of the Federal Reserve, into our economy. It is sold to the public as a way to "stop the bleeding." Somebody please inform Washington that the patient is dead. The taxpayer of the United States is tapped out...there is no more money to go around. The hasty approval of the 700 billion dollar bailout has opened Pandora's Box, something that was warned about all along but largely ignored by Congress. One only needs to look at who is financing their campaigns to see why:
Now we see the automakers being bailout out. Several states are on the brink of bankruptcy and are asking for a bailout. In my home state, representatives are asking for a bailout for the RV industry, of all things, citing that it is critical to Indiana's economy. Where does it end?
The answer is, it doesn't end. Once the government spigot is turned on, it will take a wrench of epic proportions to turn it off. You may have heard of the phrase "there's nothing more permanent than a temporary government program." There has never been a situation where that phrase fits more perfectly.
Most Americans are against any type of bailout, yet Congress does it anyway. Are people outraged? Not really. The ones who are really upset may go as far as to write an op-ed in their local newspaper. That's about the extent of the resistance. Where is the passion? Where are the riots? They don't exist, because as long as American Idol is on every Thursday and 9 p.m., people are happy.
Most Americans don't realize that every Fed interest rate cut, every TARP program, every bailout, every decision that Dictator Henry Paulson makes effects EVERY SINGLE ONE OF US in a huge way, and it goes beyond simply squandering of our tax dollars. It is about debasing and destroying our currency. Our dollar is as good as dead.
The Mona Lisa is valuable because there is only one in the entire world. Art collectors would be willing to pay unlimited amounts of money for that painting. So what would happen if, somehow, anyone could go down to Wal-Mart and buy an authentic Mona Lisa painting?
The answer is obvious, it would be worth next to nothing. The same can be said about our dollar. When you pump trillions of excess dollars, dollars created out of thin air, into our economy, each dollar will become worth less and less as that money creeps its way through our economy. That means rapid inflation, or worse, hyperinflation. If you want to see what kind of devastating effects inflation has on people, one needs to look no further than Zimbabwe, a country that has seen a 231,000,000% increase in inflation, and has bank notes denominated in the billions.
Of course, the bailout of the banking industry has created an interesting problem for Congress. The Federal Reserve won't tell who the recipients of the money were, and the banks won't tell what they spent the money on, and Congress is essentially powerless to do anything about it. Who gave the Federal Reserve and the Treasury so much power? Congress did, with the passing of the 700 billion dollar bailout. Not only that, but they essentially granted Henry Paulson with more power than the President. He is an appointed figure and answers to no one, except for the President himself.
Freedom
We will see taxes increase. There is no way around it. The Governor of New York recently annouced a whole slew of egregious taxes, including an "iPod tax" and a "obesity tax", which taxes sugary sodas. The Federal government will now regulate what you eat.
Ridiculous taxes will crop up all over the country as states and local governments struggle to balance budgets and make up huge shortfalls. Depending on how bad it gets, it could very well lead to tax revolts. The taxpayer is tapped out; his savings is gone, his credit cards are maxed, his house is in foreclosure, and he very well might be out of work. What open credit lines he possesses will be cut, and the interest rates will be doubled. People will go to new extremes when they are pushed to the limit.
Since 9/11, the Federal government has gone to soaring heights in order to keep us "safe" from terrorists. Actually, all they did was use the event to take away more of our freedoms. The Federal government now as the power to listen in on your phone conversations and search your home without a warrant, thanks to the PATRIOT Act. If somebody gets in their way, they will simply dig some dirt on you, label you an enemy combatant, and do it anyway. The PATRIOT Act was written before 9/11, but that tragic event allowed a rather convenient way for the Bush administration to push the bill through Congress with relatively no resistence.
If we encounter another attack, I fear what freedoms and liberties they will take next. Troops are being mobilzed all across the country, doing crowd control exercises in the event of civil unrest, as well as homeland security prevention tactics. The Marines are doing DUI checkpoints in California. There are several witnesses in Arizona that the military is becoming increasingly involved in police tactics. Why are they doing this? You tell me.
---
I'd really like to believe that when the clock strikes midnight and 2009 is officially here that everything will be rosey again and we can all go out and buy flat screen TVs with someone else's money, but that's just not the reality. Barack Obama is not our savior. He can run the budget deficit as high as he wants, he can pave over every road 7 times and rebuild every bridge in the country, but that will not be our saving grace. Big government is not, and will never be the answer. Central planning does not work, it's been proven time and time again. Keynsian economics is not sustainable. Until we figure that out, the outlook will continue to be bleek.
Posts
No comments:
Post a Comment