BiggerPockets

Did anyone see the sub prime meltdown coming?,did anyone see the housing market crash coming?,did anyone see our top financial institutes go belly up coming? and did anyone see this coming when Wall Street crashed into a brick wall?

I find it hard to believe we let this happen. Someone should have saw this brewing from the start. Why did we let this happen?

Have we become a nation of blind ignorant fools that we let a problem go from being a small flame to a burning wildfire?

I would like to get everyone's thoughts on this.

There is a group of economists that saw it coming - the Austrian economists. However, they believe in free markets fixing things so nobody listens to them. Everyone wants a government solution. You can check out their website at http://www.mises.org. Check out 'The Bailout Reader' in the top right corner of their home page. They have articles going back to 2002 talking about this crisis.
The most famous person who talked about Austrian economics (and was yelling as loud as he could) was Representative Ron Paul. Rep. Paul ran as a Republican in the 2008 Presidential campaign, but all the press ignored him. He was saying in the debates that we were headed for a disaster.

It seems like many people felt that if everyone believed the real estate market boom would never end, that belief would keep it going forever.
So while there were some warnings were made of this coming bust, those warnings were either ignored, or silenced.
Similar to what happened before the Great D. Hopefully the consequences will not be similar

I along with most other people in the industry saw it coming. How could it not I was watching people working at Wal Mart get loans wondering how the heck they got could loans for 400-500K. I would then be out there again for the refinance 6 months later. (I had no idea how they were doing it.)

This could not go on forever, just like these guys writing these blank checks cannot go on forever.

One other thing, The biggest problem was not the scams that were goign on, that has always happened, it was the Zero interest loans that created a lower payment and created the idea they could afford more house, When in actuality they could not.

Right on, Hal -
Go Ludvig Von Mises!

My thoughts on how we let the whole thing happen goes back the conception of the federal reserve system by a group of competing bankers in secrecy (all public data now). Then letting it get passed during the holidays back in the day.

It's easy to find Benjamin Franklin quotes stating that the similar central banking system in Europe back then, which was being forced on the colonists, was one of the main reasons for the revolution. Though I don't remember that one stated in school textbooks too much, hmmm.

This is bound to happen when a central cartel of bankers control the money supply and when the books cannot even be audited by congress.

I am a conspiracy theorist! They want to keep us in fear and watching TV! Global currency here we come...

But I am also a fan of the 50% rule and here to invest in real estate, and anything else that still holds intrinsic value when fiat currencies are manipulated and then collapse (as they always have).

I was quite bearish in 2005, I told someone in 2006 that we were going to 2003 values. we are at 2000 now

Yes, many of us have been talking about the impending real estate bust since 2005 and even earlier. As Josh said, anyone with common sense knew that the average blue collar worker can't afford to live in a $500,000 house! The housing bubble was absolutely no different than the dot-com bubble.

That is history. The real estate bust and all the problems we have now are miniscule compared to what's coming in the next few years, which is a total collapse of our government and bankruptcy of our country. If you just look at the warning signs, you'll see that there can be no other ending.

Look at the signs:

1. Nearly a quarter of our population is too lazy to work and are living on government handouts. The exact number is difficult to ascertain because the government does a good job hiding it.

2. We have an aging bubble of peak earners in the United States. If you plot a graph of the number of peak earners vs. the stock market, you'll see that the two are almost identical. It's common sense that people in their peak earning years are buying the most stock and dramatically fewer peak earners will mean lower stock prices. That happened in Japan and it will happen to the United States starting - NOW! (hack your watch)

3. Everyone is entitled to succeed in the United States. Banks who acted recklessly can't fail; auto companies can't fail; airlines can't fail; and people can't fail. When even our lowest income citizens have cell phones and big screen tv's (they do), you know we have a government spending bubble of unimaginable proportions.

4. We have promised social security to millions of people, and yet the government has spent the social security money on other spending. With an aging population, we can't possibly meet our social security obligations.

5. Ditto Medicare and Medicaid

6. Ditto socialized healthcare

7. Fiat banking systems always fail and ours is just about at that point. It's just a ponzi scheme.

Etc, etc, etc. I could go on and on and on. The point is that we're talking about history and we should be talking about the coming complete collapse of our country that will happen in the VERY NEAR future.

In 2005, I (and everyone else that was predicting that the real estate bubble would burst) was constantly criticized as a doom and gloomer. The same is true now. It's not popular to say that the fantasy we're living in is going to burst. Can you see the writing on the wall? It very clearly says COLLAPSE!

Mike

NcMark,

I agree that the exact sequence of events is hard to predict. I am currently trying to read everything I can about the Great Depression and the other financial collapses we've had in the past.

Are we in for inflation? Deflation? Stagflation? How 'bout riots in the street? Food shortages?

Deflation? Yes, that's happening right now in a small way.

Inflation? History shows that when the government prints vast quantities of money literally based on nothing, that runaway inflation will be the result. This is the next bubble that is now being created by the government. Will this be the final bubble resulting in a collapse? That's the big question.

Riots in the streets and food shortages? I'm betting on it and have been stockpiling non-perishable food for about 2 years. I'm also slowly buying ammo.

If unemployment reaches the 25% rate it did in the great D, will I still have tenants?

As Taz correctly said, real unemployment is already at 17 - 18%. So, we really don't have a long way to go to reach the levels of the great depression. However, our unemployment rate NOW is much worse than in the great depression, because the majority of the unemployed are simply lazy deadbeats that have no intention of ever getting a job. With our current entitlement society, the taxpayer is required to pay for these deadbeats, putting a much larger burden on society than in the great depression. So, yes, you'll still have tenants as the majority of people will still be working even at 25% unemployment.

Lastly, and sadly, and terrifyingly, the wild card here is our government. How can we protect ourselves from socialism? Or communism? Or redistribution of wealth under some other name?

I believe that this will self-correct. After the collapse, there will be a revolution by the public which will dictate a return to sanity.

Mike

Western Montana has been in a boom for a while. I started telling people 3 years ago it was coming to an end. You can't make 100%, no income verification mortgages to people with 550 Beacon scores and expect it to turn out well.

Warren Buffett called Credit Default Swaps a disaster waiting to happen 5-6 years ago. An analyst at Fortis called the meltdown in April. Where was our government? Not that there is anything they could do.

Their answer is to get us in more debt. They know the economy isn't going anywhere but down for a decade if we don't keep digging our hole deeper.

I have a friend who built their house for $85K, years ago. They lost it to foreclosure owing $650K. Where did all that money go? For stuff they couldn't afford but had to have to make them look successful.

This will eventually correct but we aren't close to the bottom in many areas yet. The carnage will continue. Still opportunities though.