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Discussion in 'Politics & Current Events' started by Matt in the Hat, Jan 31, 2007.
Okay, how does this suck?
It sucks because I shifted some investments based on Deutsche Bank's and Roubini's prediction of 0% growth in Q4. I keep telling myself I won't try to time the market...yeah, right.
So credit card spending, the war, weak dollar helping exports and big decline in price of oil lowering imports. All those factors offset the popping housing bubble. But it's a long way to the bottom and we're still at the peak. Roubini might get his recession yet.
It sucks because I was hoping we'd have a Great Depression which would send Bush's approval ratings into the single digits.
On a serious note, GDP growth is very important, but we need to look at other economic statistics.
True dat. Let me guess, one of your favorites is the Gini coefficient?
I like to know what industries contributed to the growth. We know it's not the Housing which would have meant growth in middle class, so this growth may be coming from the financial markets from the hedge fund managers cashing in on the oil company Futures.
It doesn't. For now. The "surprise" was mostly caused by warmer than normal weather (I can't wait for wingtips to come in here boasting that global warming is part of Bush's genius economic strategy) and increased government spending. The part played by Mother Nature is all good. The part played by the increase in government spending probably just adds to our deifcit as Bush pisses our children's and grandchildren's money away building useless swimming pools for Iraqi government ministers.
If you really want some bad if predictable news, though, here's something you won't see trumpeted by the mainstream news media (from today's WSJ):
"As the number of borrowers falling behind on their mortgage payments climbs to the highest level in five years, the mortgage industry is trying new strategies to help bail them out.
Much of the attention is on homeowners who in recent years took out adjustable-rate mortgages, a popular way to finance a home when interest rates were low. Now, with rates having moved up, many of these borrowers have recently seen, or soon will see, their mortgage rates adjust higher for the first time.
To head off problems, mortgage companies are reaching out to borrowers earlier. Bank of America Corp. is allowing some borrowers with ARMs to refinance into a different loan at no cost. Citigroup Inc.'s CitiMortgage unit is focusing extra attention on parts of California, Florida and New York where home prices have moved up sharply. It is also contacting delinquent borrowers within days after a missed payment, if it doesn't fit their normal bill-paying habits.
The rise in bad loans also is leading to a pick up in so-called short sales, in which a lender allows the property to be sold for less than the total amount due and often forgives the remaining debt. For the lender, the process can be shorter and less costly than foreclosing, especially in a declining market. For borrowers, it is a way to avoid having a foreclosure on their credit report.
For some borrowers, efforts to work out bad loans can be complicated by the fact that many mortgages no longer are held by the banks that made the loans. Instead, roughly two-thirds of mortgages are packaged into mortgage-backed securities and sold to investors. How much leeway a borrower is given can vary, depending in part on the rules spelled out at the time the securities are created. Some agreements, for instance, don't permit loan modifications or limit the circumstances under which a loan can be modified. Others put a cap on how many loans can be restructured.
Some 2.51% of mortgages were delinquent in the fourth quarter, according to new data from Equifax Inc. and Moody's Economy.com Inc. That is up from 2.33% in the third quarter and the highest level since a recent peak of 2.53% in the first quarter of 2002.
The increase in bad loans is broad based, with delinquencies rising in the past year in roughly 80% of the 250 local areas analyzed by Moody's Economy.com. Some of the biggest increases have come in California, where high prices have made it hard to afford a home, and in other once-hot markets such as Las Vegas and Port St. Lucie, Fla. Among the handful of major metropolitan areas where delinquencies have fallen: Salt Lake City, San Antonio and Albuquerque, N.M.
The rise in delinquencies is unusual because it comes at a time when the economy is relatively strong. Even though job growth remains healthy, "the total mortgage delinquency rate is the highest that it's been since the depths of the  recession," says Mark Zandi, chief economist at Moody's Economy.com. He attributes the increase in part to the weaker housing market and the widespread use of adjustable-rate mortgages, many of which now are resetting at higher rates.
What is more, as demand for loans softened, mortgage lenders loosened their standards and made riskier loans, Mr. Zandi says. He expects that nationwide delinquency rates could rise by as much as a full percentage point from current levels in the next year, but he doesn't expect the trend will have a significant impact on the overall economy.
Until recently, mortgage delinquencies were low by historical standards, which Mr. Zandi pegs at about 2%, based on the dollar value of loans that are at least 30 days past due. One reason: Rising home prices made it easy for borrowers who missed payments to refinance or sell their home. That changed as home prices flattened or fell in many areas.
Adding to the pain are higher short-term interest rates, which mean bigger monthly payments for borrowers with adjustable-rate mortgages or home-equity lines of credit. In addition, many mortgages were taken out in the past few years and now are approaching the point in their life when delinquencies typically pick up."
Wolud it be considered cruel for me to say that I'm actually looking forward to that scenario?
I don't know.
I do know that it would be kinda dumb to try to crow about how Bush's tax cuts have been such a stimulus to the economy and a boon to the majority of Americans while at the same time basing your investment strategy on the economic damage to the majority of the American people caused by an economic slowdown after Bush's tax cuts.
Put the Iraq war on-budget and watch what happens.
where is a link showing gov't spending was up in Q4?
didn't Congress delay on the budgets, thereby effectively freezing any spending increases?
but the Q4 number is a good one.
we're about to see another good job # tomorrow (if the monster and ADP surveys are to be any indicators). we saw the fed show less hawkishness on inflation.
the economy is churning along quite well.
so it is Bush' fault that a lot of people took out ARM's and are now not able to pay the piper?
how did the Bush tax cuts cause this?
IIRC, the DoD budget was one of the few to pass. Also the supplementals that are paying for the war passed.
You must have not read ratdog's post. The economy is actually a total disaster and is teetering on the brink of irrecoverable!!
The economy continues to do well, numbers-wise. According to the title, this should be "bad." Well, I don't think it's "bad," that the economy is doing well.
What I think is "bad" is that the economy took off "surprisingly," based almost entirely on consumer spending.
For those of you who get the Matts confused, I am of the position that an economy based entirely on borrowing money from a rapidly expanding pool of easy money is operating on borrowed time. At no other time in human history has a country had so much government, private, and personal debt. Really.
At some point, the American consumer will have to start saving money for retirement, or the government will have to start bailing them out. Personally, I think it will happen this summer when the spring housing "bounce" everyone is hoping for may be illusory.
I could be wrong. It is possible that Americans, and the lax banking industry, will continue to borrow themselves into prosperity. It is possible that we can continue borrowing 10, 20 times our net worth in order to buy stuff we don't need.
At some point, however, the weakening dollar will make the US no longer a primary recipient of investment. And then, we're done.
Not exactly, but Greenspan and Barneke's continuing reluctance to pop the credit bubble, restrict predatory and subprime loans, and generally politicize the Fed to support republican positions (The Federal Deficit is an economic problem, so let's eliminate these Social Security Entitlements for Boomers) may have some role in our current problem.
if we are not 'saving', how does our personal growth keep growing?
our personal income keeps climbing.
the PCE registered in at only .1 today.
and in other good news:
ExxonMobil Posts Largest Profit in Corporate History!!
I'm glad someone's having warmer than normal weather.
HOUSING BUBBLE. If your home "appreciates" 150% in 5 years, your net worth will "increase." Until you try to sell the house, that is.
along with stocks finally closing in on their 'real' values.
hey, in Q4 I probably spent as much as I made due to xmas and party and travel costs. but did I lose $$? no. I still came out ahead due to portfolio growth (and I rent, not own my place). is that a bad thing? no, this doesn't mean the economy is going to end.
Old Man Winter has been jabbing us for the past two weeks. The knock-out blow comes next week when we're supposed to have a high of 2 F. You heard me. That's the kind of cold that hurts.
don't see how rising real estate and equity values are a bad thing.
are we supposed to hold the majority of our net worths in money markets and mattresses?
So 80% of a families net worth is in their house -- a non-liquid asset.
Heard of diversification?
I was watching the "Cost of Freedom" business block on Fox Noise Channel a couple of weeks ago, and one of the "experts" they had on there was actually claiming that global warming would be great for the economy, because more people would buy Christmas presents if it was warm out. No one even questioned that statement.
I grew up in Montana. I know.
Just moved to southwest Missouri. Thought it would be warmer than north Missouri. Until I experience the "Great Ice Storm of '07"
1. Do you ever read peoples' posts before responding? It was right in the quote in sebakoole's post.
"The third component that contributed to growth was government spending that grew at a 3.7% (mostly driven by the whopping 11.9% increase in defense spending) and that contributed 0.7% to Q4 growth."
2. Are you too lazy to go read the news for yourself or did Newsmax just not mention it?
Nope. It is Bush's fault, however, that he has ignored the welfare of the American people in his blind pursuit of servicing the mega-wealthy and avenging his pappy in Iraq. If he'd actually done something about healthcare, stagnant real wages, investing in America rather than telling big fat lies to dupe people into letting him flush our tax dollars down the toilet of Iraq, etc., etc.
In other words, he'd have spent the last 6 years taking care of things that affect Americans like this:
If you want to assess blame for the housing bubble and it's subsequent burst, Greenspan should take some indirect blame for lowering interest rates to historic levels and igniting the second perfectly predictable asset bubble of his tenure.
Not only that, but if people hadn't done stupid stuff like using ARMs to try to buy houses or spend more than they make ( http://www.msnbc.msn.com/id/16922582/from/RS.1/ ) then the economy during Bush's presidency would have ended up looking even worse than it does now. I know that Reeps don't believe that actions have consequences, but neither a household nor a nation can keep spending more than it takes in forever.
Cause what? Cause people to get ARMs? I've gone back and re-read myposts and I can't find where I said that Bush's tax cuts caused people to go get ARMs? All Bush's tax cuts did was lower the amount the government would otherwise have received during the LBO-fueled stock market rally if he hadn't cut taxes.
"Personal growth"? Life coaches and meditation, probably.
Or are you talking about something else?
"The nation's median household income rose last year for the first time since 1999, the Census Bureau reported Tuesday.
Median household income climbed 1.1% to $46,326 in 2005. That means half of U.S. households earned more and half earned less. Per capita income rose 1.5% to $25,036, the Census Bureau said.
The income jump hid some somber news. Earnings actually fell for people working full-time. Household income rose because more people worked in the households, albeit at lower paying jobs. Median earnings of men declined 1.8% last year. For women, the decline was 1.3%.
"It tells us the economy is still not generating the higher-paying jobs we'd like to see," says Douglas Besharov of the American Enterprise Institute, a conservative think tank in Washington."
Also, take a look at these:
Annual houshold net worth growth rate (annual averages):
1970-1979 = 9.8%
1980-1989 = 9.2%
1990-1999 = 7.9%
2000-2005 = 3.7%
Debt Service Ratio (%)
1980-1989 = 11.32
1990-1999 = 11.67
2000-2005 = 13.38
As of 3Q06 = 14.51
Source: Board of Governors, Federal Reserve System, Flow of Funds Accounts of the U.S. and Household Debt Service and Financial Obligations Ratios (3Q06)
They are when they are artifically pumped up into a bubble that then bursts, causing lots of damage to the majority of the people within that economy.