The Government of the United States is in Denial Regarding Housing!
66Update: Foreclosures are Rising As Unemployment Increases
Unemployment is going up. Foreclosures are rising. The government is in denial thinking that the banks will be ok and will start the big lending engine all over again. But psychology is important, and Americans have been burned by their government and their banks before. Even China is putting the breaks on a potential real estate bubble, requiring a stiff downpayment. But from that criminal Greenspan on, we supposedly can't even identify bubbles. That is because you are bought and paid for Mr Greenspan!!
Anyway, I digress. The point is that our government doesn't care about the people, but they only care about Goldman Sachs, JP Morgan, Citibank or its carcass, Bank of America and Wells Fargo. Our government could care less about the consumer which is why unlike China, they didn't bother to help the consumer. It isn't that I love Chinese politics, but since when does the US government forget about her people? Apparently ever since Clinton, Bush 2 and Obama hit the scene the government has been in the pockets of the international banker class
So, while I hope you bookmark this site I have another little polite rant here about Goldman Sachs.
State of the Housing Market (Coalinga Earthquake 1983)
The Government Must Let House Prices Drop
Clearly, the government of the United States is in denial and is seeking advice from individuals from the Ivy League schools who are giving bad advice. The bad advice is that government should stabilize house prices in the United States. This advice is extremely flawed, because house prices are too expensive. Any efforts to stabilize house prices runs the risk of freezing up the market even further. If a house is only worth pre 2001 prices, say 200 thousand dollars for Los Angeles, and the government wishes to freeze the price at today's level, which is around 350 thousand dollars, buyers will not accept this. We have seen the average price in California fall from over 500 thousand dollars down to 350k.
We are only half way through the correction. I repeat, we are only half way through the correction. Yet the government wants to stop this correction. If a buyer is an investor the buyer will no longer want to get ripped off by possible futher declines. And the down payment requirements for a 350k house is far greater than for a 200k house. It is in the interest of the real estate industry that house prices fall to their real, and sustainable levels. It does not matter what the interest rate is if the house price is too expensive and if the down payment requirement is too steep.
This is my advice to potential home owners: Do not buy, do not buy. I am all for the government helping the business sector, but I am not for an artificial propping up of housing prices, which became the reason why the house of cards crashed down in the first place. While banks may continue to suffer the United States cannot spend money propping up housing prices when it would be better just to give money to banks and individuals to offset the losses. How the government chooses to do this is certainly open to debate. My final warning, unless prices are pre bubble my opinion is that you don't buy. And if you think that mortgages will be hard to come by for years, don't buy either. Finding a buyer when you want to sell may become very challenging in the near term, maybe for years and years.
Ponzi Housing Scheme 21st Century
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I knew about housing bubble in 2005
I knew about the housing bubble that existed in Nevada in 2005. Inventories were rising, sales were slowing. Then in early 2006, Wachovia bought Golden West Savings and Loan, a company that had primarily no money down loans. I thought it was odd. As it turned out Wachovia has had to relenquish her independence because of capital problems. It is my opinion that a lot of solid banks were told by the federal reserve to gobble up the toxic banks, and they didn't care about what happened to the shareholders, who have suffered greatly. Of course the housing crash has hurt many people who are reading this, and these people had far less cash to weather the storm than any government guru could imagine. Indeed, people were being given houses with toxic loans when they some could not even pay the first and last on rent!
It is my view that this house bubble and the crash that resulted were planned by the central bank in an effort to finance the Bush presidency and the Iraq War. How am I so sure of this? Well, we need to go back to before the Iraq invasion, where Alan Greenspan admonished Bush to secure the oil. Then in 2004 that very same Greenspan pushed publically the adjustable loan as a way to maximize wealth. Of course this was a lie, but the ponzi scheme that resulted financed the Bush presidency. So, we know who the culprits were.
The fed looked the other way when underwriting rules were violated, and looked the other way when false AAA ratings were placed upon the bonds made up of these toxic mortgages. We know that with the direct intervention of the investment banks on turf that used to belong to Fannie and Freddit, these loans were peddled to the world (which now is waging an investor strike against all United States assets except treasury bonds). Economic weakness was the motivation for this very bad behavior and now we are facing perhaps years of decline. After all, other countries make things and we sell each other real estate and insurance. That is not the basis of a sound economy! We have lost trillions of dollars in the stock and housing markets, and there is no guarantee that we are at the bottom at all.
Credit Crisis Links
- Proof That Basel 2 Caused Ponzi Housing and Foreclosuregate
I get railed on now and then as I post at Seeking Alpha that off balance sheet banking allowed at Basel 2 in 1998 resulted in the ponzi housing bubble. One fellow who posts comments, Pier 0188, said while... - Foreclosuregate: Sue Judges Who Allow Fake Foreclosures
In the light of Foreclosuregate, not so named by CNBC and the bankster crowd, there are many bad judges. In fact, the definition of a bad judge is one who fails to protect the unrepresented. Many people are... - Why the Federal Reserve Is A Threat to Little Old Ladies
Why would the federal reserve be a threat to little old ladies? Because they have decided to purchase treasury bonds out of money created from nothing. The ultimate immediate impact of these purchases is to... - How Safe Is My FDIC Bank Account
Did you know that there was a run on the banks in September 2008 that threatened the American banking system? Oh, the mainstream useless media didn't tell you? 500 billion dollars were withdrawn in a little... - The Abuse of the Middle Class by the World Elite
Clearly, the economy of the world appears to be fettered to the spending habits of Americans. But the abuse of that very middle class by the Bush administration for eight years and by the banks during that... - Say No To Recourse Loans
I had written about this subject just a few days ago. But now on Valentine's day, Diane Swonk has come out on that paid shill for the banks, CNN, stating that what is needed is recourse loans to accompany the... - Investing Recession Depression
Investing in a recession is quite different than investing in a depression. To be honest, we do not know which way it will be going. Investing in a recession requires an eye toward future recovery. Indeed... - California IOU Tax Refunds
Update: Judge says state of the state of California is a mess and allows the governator to furlough state employees two Fridays per month. Of course the 1.4 billion dollars saved through June will only be... - Foreclosures Are The Solution
Coalinga, Ca. 1983 earthquake While I agonize over people losing their homes, what needs to be understood is that the federal government of the United States created a vast, easy money, loose lending ponzi...
So Where Do We Go From Here?
Copyright Gary Anderson use with link to this site only.
The 700 Billion Dollar TARP plan is basically a moving target. First it focused on securities that were bad, useless bonds created from many mortgages that had many non performing loans. But then Paulson came to his senses and followed the British plan which was a purchase of prefered stock, an investment if you will, into the actual favored banks that the government was determined to save. This plan brought the LIBOR rate, the rate banks charge each other, down to more normal interest rate levels. But now the banks are unable or unwilling to lend the money they have received. I am quite sure that they fear further price declines in the nearly comatose housing market. The problem is this: banks really need to jumpstart businesses without interfering too much into the decline in house values. If the values do not correct then it is possible that people will simply boycott the housing market and refuse to buy. But further declines put in jeopardy the credit markets and major businesses who see defaults on all sorts of loans because homeowners holding those loans are underwater. In my view, the TARP 700 billion bailout will not help the housing market that much. Any interference by government that significantly delays the adjustment of prices will have the effect of freezing the market. It makes no sense to unfreeze the credit market and turn around and freeze the housing market. I fear that the new administration may, out of desparation, attempt to do this very thing. In that case, I would say that the TARP program if used to bail out homeowners who bought too much house, could significantly hurt the housing market. It is a tough call to guage the benefit of bailing anybody out. Bailing the banks out has stabilized the credit mess at least temporarily. But failure to bail out the auto makers could result in other credit problems, as they have commercial credit paper everywhere. As people default on their auto loans that paper loses value, just like a house bond does. So then, while most people oppose bailing out the auto makers it is clear that many do not see them for what they really are, very large "bank like" entities, capable of wrecking havoc in the financial markets if they go bankrupt. Not only would many jobs be lost, but credit could contract again, and certainly the government would lose a bucketful of taxes from laid off workers. My real problem is with the Bush administration, which went off to a war for oil and paid dearly for it, rather than shoring up the big businesses like the airlines and auto makers before this crisis hit. The oil companies were not in as deep trouble as the auto giants. Bush thought all businesses and the middle class could just muddle through while he made the oil barrons rich. But it hasn't turned out that way. The TARP plan is an admission by the arrogant current president that free enterprise messed up big time. Ultimately, the magntude of the decline of the price of housing is just unknown. Houses in California have lost over 100 THOUSAND dollars in value from the peak, and they stand to lose another large amount, especially if unemployment significantly rises. Just as the bubble fed off itself so is the bust feeding of itself. The government is faced with two unpleasant choices. Either they can let house prices fall to a level where they are affordable, or the government can interfere with TARP money and/or other money to slow the rate of decline. Again that risks the freezing of the market for housing in my view. My biggest concern, then, is that there are just too many unintended consequences in whatever action is prescribed by the new administration. We can only wait cautiously to see how it all works out.What Are Your Views About the Housing Crisis?Loading...
I just wish they would take over the banks and clean them up. They are doing that with GM. But the banks have bondholders who are hedge funds that are leveraged to those senior bonds up to their eyeballs. And they seem to be controlling the US government rather than the other way around.
Bang on. The correction is no where near over and as far as I am concerned will not be over until such times as average house prices are three times average yearly salaries. I do not think the government Inc is going to be able to keep the bubble inflated in any case.
And it looks like the inflation vigilantes are pushing up the yield in the 10 year bond. That raises mortgage rates. We either recover in other areas and interest rates go through the roof, or we don't recover and it won't matter. There are massive amounts of treasury bonds that will be for sale and the world may not be able to sop them up.
Just my two cents---The news media will propagates lots of things. They say the houseing market is going down and yet the houses they show on the TV are those who go for 500,000+
Now I don't know about you but this is rediculous becasue they are not the only houses there are. The much lower and more common houses are selling. It's crazy. You just need to sit and watch thge news with a grain of salt. It's all Illuminati nd they are controlling the masses through news and other things. Watch the commercials too that way and see the contradiction in what they show and what they are saying.
Interest rates cannot possibly remain this low for any length of time. Any one who commits to an adjustablke rate mortgage now will just be in trouble in a few years time. The whole situation is that same all over the world. Just Today the Times in London reported "recovery hopes" in the housing market
http://www.timesonline.co.uk/tol/business/industry
And on the very same page has an articlea bout the car sales drop:
http://www.timesonline.co.uk/tol/business/industry
What a joke. Of course, what they are doing is bringing in dozens of new laws and regulations to the property market and you still cannot get more than a 75% mortgage - so where else can prices go but down?
Good articles Mark. And yes, Lady, the lower end houses and foreclosures ignite a bidding war. But as higher end houses go down in price further, the lower end houses will look unattractive at the current prices that investors are willing to pay. When the foreclosure sharks start to bleed red ink then there may be a further downward trend in prices. Prices are still way too high.
Just too much greed! How much of a house does anyone really need! I believe that some choose to foster this market, just becacause that is they way they learned it. Our house was in much disrepair and we got ripped off greatly by a shady contractor. In this the lesson that I learned is to pay down the dbt and not borrow anymore money if we didn't really have too. Our house was valued way more than it is really valued, but we took that to the bank and finally got it finished. Now my husband wants to re-finance again to do some small jobs. I cannot get him to understand that we pay down the loan for at least another 2 years. He loves using credit cards and borrowing and I think he learned that somewhere. I have learned that the less you owe the better. I have even gone so far as to take all credit cards out of his wallet and hide them so he can't use them. What I keep lookng at is if he dies or can'twork--where the H** is that going to leave me!! That is scary! He doesn't get it! Just how many others are out there that do the same things as he is doing?
Tell him that the banks are borrowing at 1/2 percent and lending at 15-30 percent. Tell him that is usury and point him to my site on the subject to learn about the history of the problem: http://www.bank-abuse.com
Great hub...I wouldn't borrow money on a chicken house at this point. We can't trust a banking system that contantly proves incompetency and is blatant about it's greed.
Thanks and wil do!!
For me Tom, the problem is that the manipulation of the monetary system is so great. No one knows what anything is worth or will be worth.
You hit the nail on the head with this one. The problem is now though, that before the government will do anything to correct the situation they will have to first admit the truth. To do that would lose them support of the bankers and "invisible few" that really run the country and that will never happen. Still, why should they care, it is only the poorer classes that suffer, the politicians will still get paid hundreds of thousands of dollars on the lecture circuit whether they speak of how they saved or ruined the country.
As long as there is order, they will do what they want. However, some who are concerned are pulling their money out of JPM and others. That won't help the banks. Shaming the banks with watchdogs will help if there is another housing bubble.
Hxprof Level 3 Commenter 2 years ago
This is the second article of yours that I"ve read, and I've enjoyed them both. Though I don't agree with all you've stated here, I do agree that the US economy is in deep trouble. My preference is that the US government allow the economy to take the fall so that we can bounce back. The longer the government attempts to delay the inevitable by proping up the economy with worthless dollars, the further the US economy will eventually fall. Already countries are preparing themselves for a post-dollar world economy. We've not seen the worst of things yet, and when we finally do I believe it will be much worst than most are anticipating.