Are we on the verge of an economic collapse?

[garybeck]

Just a few days ago I read that the forclosure rate has doubled. Today I'm reading about the stock market crashing for the 5th day in a row. Is this just another blip or is something big happening?

[nadinbrzezinski]

1. Something MAJOR is happening

either a correction or worst.

I will gladly eat humble pie if this is just a correction, but I fear it is more than just a correction

[catmandu57]

7. I keep hearing correction

but, I think the people saying it are whistling past the graveyard. Something on this order has been in the works for a long time, the credit market is chewing people up and spitting them out.

[CoffeeCat]

15. I'm no expert...but this isn't a "correction"...

For a long time, our economy has been propped, in part, by people who were
a.) purchasing expensive homes; b.) buying vacations, furniture, other large-ticket
items with home-equity loans (in effect, turning their homes into ATM machines); and
c.) using credit-cards to spend, spend spend.

Now, many can't afford those expensive homes--because they were purchased with
"creative financing"--such as interest-only loans. Banks suckered consumers
into buying more home than they could afford. Now, the "interest only" period
of these loans is ending, and people must pay on the principal too. They can't
afford it. Banks aren't re-financing anymore and people who were paying $500 monthly
on a $500,000 house, are now looking at $2,0000 payments that they can't make.

Furthermore, people have tapped out their equity. They've borrowed against their
own homes to go to Disneyland and buy more bedroom sets from Pottery Barn. This
cash is no longer flowing. To make matters worse, if these people lose a job or
have other financial challenges, and they need to sell their home--they're often
"upside down". They owe more than the house is worth. They're screwed.

And you can spend like rabid weasels with credit cards, for a limited time. The cards
get maxed out; and people who can't pay their bills on time--don't get additional
credit. Credit-card default and bankruptcies are on the rise.

That "healthy economy" we all experienced during the past several years, was
all done with mirrors and wires.

Welcome to the BushCo magic funhouse of economics!

[Selatius]

35. No economy was ever sustained on credit like that. Of course it's going to end.

People have been taking out home equity loans on their property as a major feature of this economy since the 1990s in order to pay for expensive new cars, big-screen televisions, etc. If we look at the growth of the 1990s, most of it was concentrated at the very top. Little went to the middle class, and nothing went to the working poor.

...Yet people spent money trying to keep up with the Joneses, the ones who really made out in the boom of the 1990s. When you're second best, you don't spend like you're the best without paying a dear price for your mistake.

[screembloodymurder]

2. It's no blip.

If the government wasn't fixing the inflation numbers, we'd already be in a recession. The only question is how deep and how long.

[nadinbrzezinski]

3. Technically we have been in a recesion for a while

but now they are finally recognizing it

And guess who is going to take the blame for it?

You and me, the consumer

Oh no, it could not be the right wing economic policies comming home to roost

The only BRIGHT side to this is this is happening with the pukes in charge

[phantom power]

4. Big trends are playing out.

The unwinding of an over-extended credit industry. Overvalued stock market. A 9 trillion dollar national debt. Moving onto the downslope of peak oil.

I'm not sure how bad things will ultimately get. But it aint no blip.

[dbt]

5. Yup.

Too bad we won't see it on the TV "news" until a few weeks after it happens. "In other words," who could have predicted...

:freak:

[CoffeeCat]

6. Yes, so what do we do???????

I'm talking with my husband about what to do with our money.

Do we buy gold? Invest in international stocks and bonds?

What should investors be doing?

[watrwefitinfor]

8. And what should WE do -

Not just investors, but also people with nothing but a little savings account.

Will the banks be safe? I know they are federally insured.
(By a bankrupt government. Hmmmmm.)

What about Cd's?

Do we need to have cash on hand?

Wat

[Individualist]

10. I'm wondering about the same thing

With BushCo in charge of government, can we really depend on FDIC?

[pitohui]

20. cds and fdic insured bank accounts will be fine

cash on hand is kind of stupid, check your homeowner's policy, if it's lost or stolen, it ain't covered, or in my case, w. a "deluxe" policy, only $200 is covered after a much higher deductible is met

also people who are known to have cash are targeted for violent robbery, at least in my area they are

[Danieljay]

11. 30% Gold. 30% Oil and Foriegn currency is what I heard. n/t

[Ikonoklast]

12. Commodities are getting beaten down

Gold is down as redemptions by the hedge funds to raise cash continue. U.S. dollar is going to take a huge beating as the Fed adds liquidity in the form of fiat money to prop up the losers, all to the detriment of the economy.

U.S. market tanking will bring down the rest of the world; China and India can't carry the consumer part of the world economy yet.

Real estate will tank for the forseeable future.


I'm pondering that very same question.....and I can't see any safe haven to preserve capital.

[halobeam]

13. imo, don't buy gold...

all we need is one fed. emergency declared and the govt has rights to your gold. I can't find link but if you can't find it, I'll do my damndest to do so.

[garybeck]

17. but one nice thing about gold is

they don't know if you have it. if you buy gold coins it's just a cash purchase, like buying a gallon of milk. they can't take what they don't know you have. and if it continues to shoot up in value as it has been doing, currency might be like a hot potato - the longer you keep it the less it's worth.

[pitohui]

19. they do know if you have it

these days you are supposed to show ID to sell gold, and it obviously has zero value to you, unless you are a jeweler if you can never sell it

this has been law for quite a few years now so people need to stop listening to lies spread by men who profit from selling "gold bug" nonsense literature

[Odin2005]

23. I agree. The "buy gold" stuff is being spewed by Libertarian cranks and conmen.

[garybeck]

27. I disagree

I have heard all those radio ads and bought a small number of gold coins a few years ago. You know what? they were right. It was clearly the best investment I ever made. I bought the coins at around $275/oz and now the price is close to $700. I only wish I had bought more back then! My brother in law who is a financial whiz always concedes to me, I was right on that one.

[pitohui]

31. to sell the coins legally you needed to show id

and if you didn't sell the coins, you have not seen any profit

a poster above claimed that gold could be sold privately, without showing ID, not if you want to "keep it legal" you can't

and if you don't care about the law, there is more money to be made faster in crack

[garybeck]

26. I have bought gold coins and never been asked for ID

Showing ID wouldn't bother me I guess, to make a sale. If they want to take it from me, now that would be a problem.

[pitohui]

33. to sell them you must show ID, this person above claimed you didn't have to

wrong, wrong, wrong

[halobeam]

29. Right, but if the govt takes your neighbors gold

and you show up w/ your gold coin to buy food for your kids, better hope the guy behind the register didn't just have his taken too and your neighbor isn't standing behind you. I don't think you could just go around buying things w/ gold when everyone else can't.. you won't be popular and you ought to be taking shifts at night w/ your partner and your gun. Someone needs to eat.

I think we'd be searching for underground Deli's. Gold would be worth something, you are right, but I would use it to get the f out of here, not for anything else.

[Danieljay]

9. yes, and just a coincidence that Dick Cheney transferred at least 30% of his assets to foriegn

currency. Isn't it interesting that the vice president DICK has no faith in our own economy?

[Ossaeane]

22. source? and ironically, our real danger isnt the housing market

I'd like a source regarding Cheney's financial investments into foreign currency, please.

That's huge, even if he's not in direct control of his finances.

I believe the REAL global crisis and New-Cold War is that over the hegemony of the Petrodollar.

I believe the economy has been held up the past couple years by the housing financial bubble along with China buying massively into US Treasuries. Now, we're seeing this record breaking bubble deflate... maybe even pop now that all these firms are going bankrupt. China has indicated interest in moving away from Treasury investment and emphasis on the Dollar.

The entire global economy is based on the US Dollar and its being pinned on oil markets.

Even a collapse of the housing market wont destroy the global markets, so we'll recover fairly well as long as the basic infrastructure of debt and currency is maintained. What would be more scary is if Iran suddenly announces their Oil Bourse will be opening at the same time we face a massive housing market crisis... and i'll just leave it at that for folks to chew on and research.


The good news is that we may have less need for all these illegal immigrant workers! =(

[leftchick]

25. Cheney....

http://www.counterpunch.org/whitney07052006.html

The Veep's Curious Investment Portfolio
Is Cheney Betting On Economic Collapse?

By MIKE WHITNEY

Wouldn't you like to know where Dick Cheney puts his money? Then you'd know whether his "deficits don't matter" claim is just baloney or not.

Well, as it turns out, Kiplinger Magazine ran an article based on Cheney's financial disclosure statement and, sure enough, found out that the VP is lying to the American people for the umpteenth time. Deficits do matter and Cheney has invested his money accordingly.

The article is called "Cheney's betting on bad news" and provides an account of where Cheney has socked away more than $25 million. While the figures may be estimates, the investments are not. According to Tom Blackburn of the Palm Beach Post, Cheney has invested heavily in "a fund that specializes in short-term municipal bonds, a tax-exempt money market fund and an inflation protected securities fund. The first two hold up if interest rates rise with inflation. The third is protected against inflation."

Cheney has dumped another (estimated) $10 to $25 million in a European bond fund which tells us that he is counting on a steadily weakening dollar. So, while working class Americans are loosing ground to inflation and rising energy costs, Darth Cheney will be enhancing his wealth in "Old Europe". As Blackburn sagely notes, "Not all bad news' is bad for everybody."

[WorseBeforeBetter]

14. I vote for "something big."

Dow Drops 340 but Gains Most of It Back

http://biz.yahoo.com/ap/070816/wall_street.html?.v=16

Countrywide fell $2.35, or 11 percent, at $18.94 after the mortgage lender borrowed $11.5 billion from a group of 40 banks to fund loans, in a move that shows just how deep the lending crisis has become.

At one point today the Dow hit "official" 10% correction, which doesn't faze me too much, but the juggernaut that I think lies ahead is what fazes me.

I read somewhere that 1.4 million Americans will lose their homes within the next 5 years. Have retail figures been released this week? I don't think they're going to be pretty, in spite of back-to-school -- the average American consumer is tapped out. And if the economy is 2/3rds kept afloat by consumer spending -- what happens?

[IndianaJones]

16. no.nt.

[madrchsod]

18. no ----

a slow descent into reality

[ThomWV]

21. Not at all ....

[DemocratSinceBirth]

24. No

We will muddle through though some folks who are least able to afford it will get hurt as the mortgage market unwinds...

[blues90]

28. Certainly does'nt look good

I don't know a thing about stocks but with money pumped in the billions and still it falls does not look good unless you are the hopeful type which I'm not . those who feel safe must have enough money to feel so .

[GliderGuider]

30. A scary graph and some good background

We are probably looking at the very beginning of a deep, long-term slide in the global stock market. Here's a very good analysis of what's happened in the credit industry to cause all this:

The Resurgence of Risk – A Primer on the Developing Credit Crunch

We have been living in inflationary times, for as long as most of us can remember. The money supply keeps expanding and prices increase over time as a result. Central bankers have many tools at their disposal which they can use to tweak the economy – they can raise or lower interest rates, can control reserve requirements for fractional reserve banking and can inject liquidity into the banking system, among other things – and we have become used to thinking that they can prevent the kind of 'economic accidents' that previous episodes of excess have led to in the past. Especially in recent years – since the apparently successful containment of the dot com aftermath - we have acted as if risk were a thing of the past. Sliced, diced and spread around Wall Street and the rest of the global financial system, risk has seemed tamed, contained and controlled, until last week that is.

For years, industry insiders and so-called experts have proclaimed the virtues of slicing, dicing, and repackaging risk. They waxed on about how borrowers and savers, and society as a whole, could only benefit from such machinations. They suggested any sort of exposure could be disbursed and dissipated to the point where it essentially disappeared. Some even claimed that the crises of the past would no longer exist.

Yet amid the hype and assurances, few supporters spoke of the dark side of wanton and widespread risk-shifting. They didn’t seem — or want — to acknowledge that by combining complicated risks in unfamiliar and unnatural ways, the end result could be an uncontrollable monstrosity—one that eventually turned on its masters.

Nor did they heed the notion that by scattering risk into every nook and cranny of the global financial system, the vast web of overlapping linkages virtually guaranteed that serious problems in one sector, market, or country would trigger far-reaching shockwaves.

All of a sudden, markets are reeling around the world, deals are unraveling, the mainstream press is talking about a credit crunch and the world’s central bankers are injecting unprecedented amounts of liquidity to calm the markets. Risk has made a comeback, and in that environment the evident concern of the central bankers does not seem very reassuring.

[DU GrovelBot]

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[tammywammy]

32. No, not even close

[porphyrian]

34. How many people saying "no" to this are protecting their own investments? -n/t