How is this for a blunt statement: If you are one of those who believes this subprime real estate debacle is going to turn around anytime soon, you are wrong! I’m not saying you are probably wrong. I’m not saying you may be wrong. I’m not even saying that more than likely you are wrong. I am saying…you are wrong! This is NOT going to get better soon and here is why:
What we are witnessesing is so far beyond a real estate/mortgage issue that it isn’t funny…and no one is laughing anyway.
This is about a lack of confidence in our financial institutions that have let us down; in our regulators who failed to regulate; in our politicial system that failed to act; in our collective greed which apparently knows no limit; in ourselves for being stupid enough to actually believe there is such a thing as a free lunch when, in reality, there isn’t even such a thing as a free cookie.
And now, we are all paying for it and will be for some time to come.
Look at the evidence and stop being dumb
I know I am sounding harsh. But, let’s face it folks, we’ve been pretty much living with our heads in the sand and the sand’s value is declining each year.
When one compares pending home sales to February of 2007, according to a real estate trade group, sales are down 21.4 percent. Let me repeat this number so it sinks in–21.4 percent–written out that would look something like this: twenty one point four percent.
One measure of the public’s economic optimism—generated by Investor’s Business Daily and TechnoMetrica Market Intelligence–shows a drop from 42.4 percent in March to 39.2 percent this month.
Retail Sales Weak
Because Easter came early this year, or at least that is the excuse, retail sales are hurting.
J.C. Penney Co says earnings for its first quarter could miss forecasts by as much as 38 percent, reports Reuters.
Wall Street is bracing for Thursday when other major stores are expected to report their Easter non-sales figures.
WaMu To Ax 3,000 jobs!
Seatle based Washington Mutual is (was??) the largest savings and loans bank in the United States. This week, it had to go begging for a $7 billion capital injection from a private equity firm and others because the mortgage crisis is expected to amount to a $1.1 billion quarterly loss for the thrift which will eliminate 3,000 jobs and shut down its 186 home loan offices.
Just since January, more than a dozen commercial and investment banks had to get cash bailouts after write downs of more than $200 billion mostly because of the housing and credit crisis.
Not since the Great Depression
What happened with Bear Stearns was the closest we have come to a run on the bank since the Great Depression…The 1929 market crash, contrary to what many believe, did not cause the depression–a run on banks over a protracted period of time did.
As we find ourselves in the middle of what has to be the world’s longest political campaign, there are those who foolishly believe that John McCain or Hillary Clinton or Barack Obama or Mickey Mouse will turn the world’s economy around.
Grow up people. Better still, take a course in American history. Or, economics. Or, both.
F.D.R did NOT get the U.S. out of the Great Depression–World War Two did. Wars force government to spend and print and spend and print money to keep them going. This causes inflation, to be sure, but, in the short run, wars actually help the economy. World War Two did, the Korean War did, the Vietnam War did and the Iraq war is doing!
I know, you’re saying, wait a minute! The Iraq war! Helping the economy?? It is sucking billions of dollars away from other causes.
Well, the problem with that thinking is, it is not the way the real world–or the Obama world–works. In fact, there has never been any evidence..not one ounce..that wars actually drain money from social programs or anything else for that matter. In other words, if we didn’t have the Iraq war, all that money being spent on it would not all of a sudden be freed up for education and housing and health care and whatever. It just wouldn’t exist!
The biggest dirty little secret
There are many reasons why the Iraq war is now in its fifth year…and one of them is, it is producing plenty of jobs in the so-called military-industrial-complex and enriching companies that are basically in the business of war and war support. Without the Iraq war, our economy would not be better, it would be worse! And, that is the dirty little secret that Washington understands and most people do not.
When will the economy turn around?
All this brings me back to where we began. The current subprime, mortgage, housing, credit, banking crisis is not going to end anytime soon. Some experts say maybe a year or two, some say maybe longer.
Will some people benefit from this? Of course. Some people will have the money to buy up those foreclosed houses at cheap prices and they will make the nightly news and we will read stories about how this is proof that people can take the bull by the horns. But, you know what? That is just bull. The reason why these people make the news in the first place is because their stories are unusual…they are not the norm.
If you don’t realize that, then you are probably one of those people who actually think a “Tall” at Starbucks is large, when it really is what used to be called—–small.Why People Who Think Real Estate Mess Will Soon Improve Are Wrong by Charles Feldman