RECESSION, THE SECOND WAVE. IS IT COMING?

[skip68]

Wow HANDM.  That's crazy.   Don't kill me guys but I've been saying for months I secretly hope real estate takes a huge dive.   I don't want anything bad to happen but because we're looking to buy a large property, a bad real estate market is what I'm hoping for.  Sorry if I sound selfish.     

[HANDM]

Wow HANDM.  That's crazy.   Don't kill me guys but I've been saying for months I secretly hope real estate takes a huge dive.   I don't want anything bad to happen but because we're looking to buy a large property, a bad real estate market is what I'm hoping for.  Sorry if I sound selfish.     

Right?

If you go to zillow and claim your house (register) it gives you the historical data on your homes value for the past ten years.....

I'm actually hoping for a high tech crash around here as all of the techies around here have apparently forgot the previous crash and are buying homes that are completely overpriced. Imagine if I had sold my house at the peak and then imagine the moran that would have bought it. Not a pretty picture and it's happening right now....again!

Thank goodness I owe just under 350 so I'll never go underwater, most others around here, not so much

[skip68]

That's what happened in Vegas.   Prices were stupid high and people were buying them up.   Others were robbing all the equity out of their homes like a piggy bank.   Lots of people ended up with homes worth 1/3 of what they purchased them for.   

[stripedelete]

I thought you were probably getting those figures from Zillow.  A couple of odd sales, or lack there of, can skew thier formula.   Imo it doesn't pass the smell test.

[HANDM]

I thought you were probably getting those figures from Zillow.  A couple of odd sales, or lack there of, can skew thier formula.   Imo it doesn't pass the smell test.

Oh I'm well aware of zillow and how they operate, however around here their prices and estimates are really close to actual sale prices.....

[skip68]

I always use zillow as a conservative ballpark for figures.  In a steady rising market zillow is usually conservative.   

[stripedelete]

I will certainly defer to local expertise.   If you can stand in your yard and hit those comps with a rock - then that's the number.   25% in three months?  The time period is too short or the sample is too small or the radius is too large.

[HANDM]

I will certainly defer to local expertise.   If you can stand in your yard and hit those comps with a rock - then that's the number.   25% in three months?  The time period is too short or the sample is too small or the radius is too large.

In your opinion....

Or maybe my house is seriously custom, overbuit and completely unique for the entire area. But I'm sure you know that too....

[stripedelete]

That would certainly  skew zillows number.

[Patronus]

Have you ever wonderered what the recovery from the Great Depression would have been like without WWII?
We're living it.

True dat!!
Well, when everything crashes - just buy whichever drops the most. Rich people don't like loosing so just ride along. I hope it crashes, I'll do everything possible to invest in my mutual fund. Buy low baby, bring it!!

[cooldude]

In my humble opinion, there has got to be an economic upheaval, or reset. The reason is that money itself isnt what it used to be (literally).

The definition of what is money is that it must meet the following criteria...

It must be universally accepted (at least among the trading partners).

It must be a permanent store of cash (Rules out meat or other perishables as money).

It must be transportable (rules out land).

It must be fungible (A medium of exchange)

It must be divisible (to make change in a transaction)

100 years ago, money was backed by gold and silver, which meet all of the criteria of what is money. But todays global economy is not based on gold or silver, but on debt.

Debt (credit) is money. Think how insidious that is for a moment?

Debt can be used as a currency (not real money, but currency) but only for a time. Why is this?

Simple. Eventually, a creditor will accumulate more debt than they can pay interest on (service on the debt). When this happens, the creditor cant get repaid. And we live in a world today where all the major world economies are up to the service limits on their debts. What can they do about it?

Just print more money, right?

All the major Central Banks are doing it now. Debt based Money is being printed so fast that all the worlds printing presses cannot keep up, so they print it electronically. A trillion bucks can be amazingly credited out of thin air.

Whamm0 presto!

Every time somebody goes and get a loan for a mortgage or a car, or runs up a charge on a credit card, debt based money is invented. In other words...

Every dollar that enters the economy is borrowed into existence!

Gold and silver had to be mined from the earth and refined. So this placed limitations on irresponsible governments on just how much money and debt they could spend. This is not a political statement, as every regime and political party in the last 40 years has been doing it.

But....... with the elimination of the precious metals stands, the roof was off. Now the irresponsible governments of the world could just borrow as much money into existence as they wanted. The sky was the limit.

So now we have a situation where the worlds leading governments have somuch debt that they have to artificially keep the interest rates down in order to service the debt of the nations. If interest rates were to normalize (around 6 %), the governments couldnt service the debt and would default.

And the currencies (debt based) would all collapse.

And its not just governments that are in trouble. Its most of the large corporations of the world as well.

Most of the companies listed on Wall Street are not making profits from business operations. They are borrowing free money from the banks at zero or near interest rates. They then buy their own stocks, or other companies stocks, and resell it to investors, such as 401k investors and so on. Payroll investments days are predicatable.

Also, merger and acquisitions activity is at an all time high as that is makng companies the money that they used to earn from normal opperatons. So whats the problem?

Debt is the problem.

More and more companies and nations are so heavily in debt that they cannot service the debt, even with money borrowed at near zero rates. Banks cannot make money from lending, as the rates are too low. And so many of our jobs have gone overseas that the government dont have the tax base to balance the national debt.

So...

So we are fast approaching the point where the governments are going to have to choose who lives and who dies, financially speaking. Either the banks and the currency will collapse...or the stock market and the corporate economy will collapse.

Which one will they choose to save?

If they dont raise rates and reduce spending, the banks and the currency will collapse.

If they do raise rates, the governments will default on the debt, and the currency, the stock market will collapse.

The ole debt based Merry Go Round is about to come to a stop, and not everybody will have a seat.

So yes, unless some radical and fast changes are made (including a precious metals standard) then an economic collapse is inevitable. Sooner or later, the mathematics of debt will catch up to us in a big way. It always does.

That is my humble opinion on things.

[draftingmonkey]

I lost my job in the last crash and haven't worked since. My industry has never fully recovered (civil engineering) here in SoCal. The companies office is still less than half of what it was before the crash because construction has never fully recovered. With real unemployment, not the government reported number, actually hovering around 20% since '07 we have never seen a real recovery.

[draftingmonkey]

Oh, and let us nor forget the Hanjin Shipping bankruptcy. They invested in larger ships because they thought that the recession was over and shipping would increase. Wrong. Shipping actually went down.  If worldwide shipping has been on the decrease how can anybody say things are getting better.  Hmmm..

[Mike DC]

 
Old thread.  



As for the topic - borrowing more money is not a recovery.  

The recession is the product of forces that took decades to build up.  It never gets fixed because we are only interested in "fixes" where nobody loses anything.  

[Laowho]

Paul Krugman doesn't play the market and Dr. Burry invests in undeveloped real estate with ample water.

[cooldude]

And to make things even better, there seems to be quite a bubble in the new car business.

This one is only about 1 trillion $$$ worth, and it involves sub-prime auto loans (sounds familiar).

A lot of people were given auto loans, who probably shouldnt have. And now a lot of folks are getting behind in payments on a car that is depreciating fast.

So a lot of people are just walking away from the loan and letting the car go to repo, while others just max out the old credit card to make the payments for just one more month. I guess they figure next month will just have to take care of itself.

And we wonder...if auto loans are in this shape, what about loans on other things, like appliances, and furniture, and on and on. The debt bubble that the whole world is in just cant go on forever.

Too much debt, at government level, at corporate level, at family and individual levels, how long can it all go on until these bubbles start popping?

I like what Shakespeare said in Hamlet...Neither a borrower nor a lender be.

[funknut]

And to make things even better, there seems to be quite a bubble in the new car business.

This one is only about 1 trillion $$$ worth, and it involves sub-prime auto loans (sounds familiar).

Funny (and true) piece on the sub-prime auto loans:

https://www.youtube.com/watch?v=4U2eDJnwz_s

[stripedelete]

The post WWII boom ended in the 80's.   Since then our economy has been based on consumer credit.
The boom from the mid 90's thru 08 was the result of free money.   

Nothing has changed.  Were repeating everything that got us in the mess.  I believe we are doomed to the same boom bad bust cycles from here on out.   Except they will be closer together.

[Mike DC]

Naa, the post-WWII boom ended in the early 1970s.  In the 1980s "Reagan proved deficits don't matter."

[Dodge Don]

The world ends tomorrow in case you were not paying attention 

https://www.youtube.com/watch?v=oegVti9jy50

[cooldude]

I think that what made the 90s so great had very little to do with government economic policy. I think it was just a case of the baby boomers inheriting from their parents (the WWII generation).   

And the baby boomers, being the irresponsible people that they are, they spent it, invested it in  things on Wall Street, and real estate, and generally stimulated the economy to a boiling point. But even the wealth that their parents left them wasnt enough, and they went into debt like crazy.   

The easy money policy of the Fed just added to it. Alan Greenspan was the culprit there.

So the 90s were set to become a boom time, regardless of what government policy was. Demographics is far more important than policy anyway.

But all bubbles pop eventually.

Everybody knows about our out of control debt based economy. Wealth isnt money these days, debt is money.

But how many people know about the 600 lb gorilla in the room, which is the derivatives market? 

I heard that there is (including bonds) a derivatives debt bubble at least 10 times bigger than the entire global stock market,and its about to pop any second.

And the news from Deutche Bank today is bad.....

http://www.zerohedge.com/news/2016-09-26/it-all-has-very-2008-feel-it-deutsche-bank-news-just-keeps-getting-worse



So, I think there will be a recession soon that will make 2008 look like a picnick.

[Kern Dog]

Do you have any interest in these cars or are you just here to post in non automotive topics?

[Laowho]

Deutsche Bank ordered to pay $14 billion for its role in the 2008 financial crisis. Maybe more telling is its derivatives book--estimated at $70 trillion...

https://www.youtube.com/watch?v=5KZm_VS6WS4

...or 20x the GDP of Germany.

[cooldude]

Yes, that is the scope of the problem. Deutche banks liabilities exposure is so large, that if DB was allowed to fail, then it would set off a domino effect. All the large banks are in similar bubbles to DB, and many of them have far larger bubbles. DB is just the weakest bubble, and in immediate danger of popping first.

The global economic situation is the central bankers are like a man on stage, trying to keep many plates spinning on sticks. Once the first one falls, the rest go in chain succession.

The only solution to the mess is to have currency based on real wealth, not debt.

Some say that there is not enough gold and silver on the planet to cover all the money (debt) in circulation. That may be true if we look at the currently manipulated and artificially low spot prices for gold and silver. But...

If we got rid of the artificial manipulation of the metals, and allowed them to just assume the true price in mathematical ratio to the debt, then it works out just fine, as it always has.

With gold around $60,000 an ounce, and silver at about 1 /15th of that, then there is enough precious metals to back the money.

That is where it will ultimately wind up going anyway. It isnt a case of gold and silver getting more expensive. They are just metals, they dont do anything.

It will be a case of the value of the dollar going down to its true value as compared to gold and silver. Thats what happens when we price things in gold and silver, as opposed to pricing them in US dollars.

But this wont happen until the phony and rigged, debt based money system collapses. Deutche bank is just the first bubble popping. They need a bail out, and the only thing the European Central Bank can do is to print more money to try to re-inflate the bubble just a little while longer.

Which is exactly what has put us where we are to start with.

[Laowho]

Gold is problematic (as an "investment") no matter how you look at it, but the fiction that currencies were ever proportionately backed by gold is easily enough calculated otherwise and reiterated by even such "contrarians" as Stiglitz and Varoufakis. Sure, great pains were taken to move gold reserves during WWII but only b/c of the (then) value and "perceived backing" it provided at the time, but perception being reality, debt really is the modern currency. Just look at the origination of any home loan--the actual lender-money is never really there. Finance 101.