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TechnoratiWhen Will the Housing Crash End?
People have been trying to call a bottom to the current housing and mortgage crisis for some time. Chartists, technical analysts, real estate gurus, even soothsayers and tea leaf readers have all seen false bottoms and have predicted upturns in the market in the very near future.
Unfortunately, the worst is yet to come. We are not even halfway into this housing price decline. In books published in 2003 and 2006, respectively, my predictions of 25% home price declines nationwide and 50% price declines in many cities on the coasts are rapidly coming true. You can see that we have a long way to go because most ARMS are just now resetting, most foreclosures to date have been 2006 and 2007 mortgages and the banks are not going to lend 10 times your combined income in the future, but rather something more like 5 times. Unless you are willing to put up 50% down payments, homes have to come down further in price.
The country and the global financial system came closer to a complete collapse this year than any time in our history with the possible exception of 1929. While we will all pay for it in much greater inflation, Bernanke and the world's central bankers have to be congratulated for printing and distributing to the world's banks and investment banks approximately $1.5 trillion. It was our hard-earned taxpayer money, but it was well spent as we would have faced a global bank run and depression without his intervention. The fact that it happened without many Americans even realizing it only assures that we have not learned our lesson and are doomed to repeat our mistakes until we understand their underlying cause.
They had no choice. We no longer live in a capitalist financial market in which banks compete and inefficient and poorly run institutions go bankrupt and exit the playing field. In the modern world, thanks to the $400 trillion derivatives market, no major bank or investment bank can be allowed to fail. They each in themselves are important nodes in an extremely complex web of derivative contracts such that the removal of any single major firm would cause a collapse of the entire system. The best analogy is to look what happens to our entire network of nationally scheduled air flights when a single major hub like Chicago is closed temporarily due to weather. Just as airplanes fly between any two cities, so derivative contracts are made between two counterparties, but the resulting interlocking and interdependent relationships are so complicated that no financial system could survive if a major hub dropped out.
Banks know that they are too big for the government to allow them to fail. The moral hazard that is created will be reflected in their continuing to take on high degrees of debt and financial leverage and invest in risky assets with no concern for the consequences. And much of the activity in the derivatives market is nothing more than mere speculation. When Bear Stearns was saved from bankruptcy it had $120 billion of debt outstanding, but for some crazy reason there were $2.8 trillion of credit derivative contracts written guaranteeing that comparatively small amount of Bear Stearns debt. If Bear had gone bankrupt and these counterparties had to actually pay, it would have caused massive bankruptcies of hedge funds and other financial institutions, not to mention the fact that Bear itself was also a counterparty to tens of trillions of derivative contracts and their prime brokerage business financed trillions more of derivative positions at their hedge fund clients.
When I wrote my books on housing I hinted at what I thought the real cause of the problem was. Yes, I said that the banks were acting crazy by extending such large amounts of money to homebuyers, but I also hinted at why we allowed this to occur. The reason is that the banks, the investment banks, the hedge funds, the mortgage companies and the private equity firms are some of the biggest political lobbyists in America and give more money to your President and Congressmen than any other industry. And what do they expect in return? Deregulation. They spent $400 million on lobbying to have Glass-Steagle overturned to allow commercial banks to get into the investment banking business. This opened the door for banks to arrange mortgages, but suffer little to no consequence as these mortgages were quickly packaged and sold to investors upstream.
Banks and corporations argued that regulation got in the way of free markets. Until the housing and mortgage collapse, few people understood that regulations and rules are the basis of any free market system. You cannot buy and sell anything unless you have a strong rule of law that enforces property rights and assures contracts will be honored and fraud exposed. The greatest injustice I see in America today is the ability of banks and corporations to bribe-yes, that's the right word-our elected officials in return for trillions of dollars of value creation to their shareholders in sleazy mortgage regulation, phony ethanol programs, high energy prices, costly pharmaceuticals and healthcare, and wars that only seem to profit the defense industry. I believe the housing crisis is just a symptom of a much bigger problem of trying to constrain lobbying, which will continue to fester until the American people conclude they have had enough and just won't take it anymore. Let's all do something positive to make sure this hijacking of our system of government is never allowed to occur in this country again.
John R. Talbott called the causes of the current housing and mortgage crisis spot-on in his 2003 book, The Coming Crash of the Housing Market and even nailed the peak of the market with his January 2006 book, Sell Now! The End of the Housing Bubble. His new book, Obamanomics: How Bottom-Up Economic Prosperity Will Replace Trickle Down Economics, will be published on August 1st.
22 Comments so far
Show AllNot to allow corporate greed/ interest off the hook. But- it seems blame is being placed everywhere but on the individuals involved.. meaning the people who want the biggest house.. the most credit on their credit cards ( and the more cards, the better)etc. We as a culture are conditioned to live way beyond our means. And as a culture, we need to start accepting responsibility and being accountable. Remember, the politicians and financial people ( machine) of our country are still products of and reflections of our culture. They cannot " enact ( poor word here) what we, as a culture do not embody. this probably isn't well worded- sorry. But we as a whole, need to assume responsibility on the personal level. Get out of credit card debt, stop going for bigger better faster and start thinking about feasibility/ sustainability at the personal level. From there it is a small/ next step to taking action at a local level. Get involved at the community level. be informed. Read diverse opinions. Learn how to contact your elected officials. Etc. THINK, question, decide if we/you believe it, and then.. decide if we/ you really agree with it ( noting the two are not the same).
What was the quote, many years ago.. no country/ people can be repressed against their will"(?).
additionally- Aldous Huxley- 1931! " the question of the next generation will not be one of how to liberate the masses, but rather how to make them love their servitude."
A very wise Peruvian said 2 things- if you want to save the world, heal yourself. 2- if you want to help us ( indigenous people), the best thing you can do is clean up your own yard ( metaphoric yard ie country.. I think.. :)
I used to think this was hyperbole.. but have seen that when we talk about peace.. ask.. who have we as individuals not forgive, made peace with? Are you at peace/ on good terms with everyone, or are you harbouring personal grievances? when we learn how to make those hard changes.. we can teach our leaders that there is a better model, hold them accountable, or they will be replaced/ supplanted by a paradigm that has evolved beyond them. in that way they become a darwinian dead end.
The housing crash will end when the rich-filth own all the foreclosed property, puchased at pennies on the dollar, with taxpayer funds, given to them free by the FED after their taxpayer-funded FED bail-out. You guys should know this stuff by now.
A N N E B R I T,
Great summary, but I propose OPTION __ D __( 1.) which includes your solution C
_and_
( 2.) adds the more detailed accounting of where all the profits ended up and re-capture of them.
This is of course further complicated by the criminal enterprise of the FED, and long term extortion of the American Publics equity and cost of living -- through market ( food, oil, … ) manipulations, price fixing inflation,
(3.) On 9-10-01 Rummy reported ~ 2.3 trillion$ "misplaced" by DoD ( find out where that went, get it back ),
(4.) Pass a new Law establishing a
__ Dept of PEACE & WELL BEING,__
whose job will be to immediately translate our WAR economy to a peaceful one, supporting alternate energy, re-building of the physical basis of American industry ( in America, for Americans ), as well as investing in worthwhile infrastructure, minimum wage increases, expanded education opportunities, outreach & empowerment, and elimination of poverty … { do what gov'ts are supposed to do for the people },
and _ M O S T __ I M P O R T A N T L Y …
(5.) Nationalization of the FED BANK criminal banking cartel, and VOIDING of ALL ACCRUED INTEREST on national debt and deficit
If we do less, the crooks will just come back again and again …
(6.) ELIMINATION of electoral COLLEGE, and institution of error free direct elections of multiple party PARLIAMENTARY and representative republic -- where elections can be CALLED through a "vote of confidence" at any time ( given say a 25% vote ).
(7.) Nationalizations of Jacka$$ main stream Media into PBS type non-profit entities, that can compete for market share based of accuracy of reporting and community support …
(8.) - ( 999.) Add your own dreams or revisions …
W E __ M U S T __ D R E A M __ B I G
Namaste « Presence »
« We must be the change we wish to see in the world » — Gandhi
« There is a sufficiency in the world for man's need but not for man's greed » — Gandhi
« We adopt the means of nonviolence because our end is a community at peace with itself » — ML King
Dr. Housing Bubble names your options:
"A - Let the lenders, banks, and Wall Street swallow the very bitter pill that they have created. Housing will still fall. The economy will still hurt. And things will still correct.
B - Let this bailout ensue. Relieve a few of these lenders, banks, and Wall Street from their financial mismanagement. Housing will still fall. The economy will still hurt. And things will still correct but at least you made a few corporate executives richer and provided them a golden parachute.
C - Why not go after these firms and individuals financially? Why not hold people individually accountable? Why not setup trusts that'll take from the biggest firms that flat out committed fraud and use that money to fund a bailout if we are to fund a bailout. That would be a fantastic idea. Setup an independent judicial commission to go after the assets of the biggest perpetrators of the housing bubble and any of those funds will be the money that will be used for any sort of housing bailout. After all, the money was ill gotten so why not go after them? It isn't like we allow bank robbers to keep their loot after they go to prison. Why not here? Have you seen the checks of some of these CEOs? All you'll need is a couple of those and you can bailout the entire world!
"
http://www.doctorhousingbubble.com/
Also check out his "Lessions of the Great Depression Series"
fkn retards already took 50% of our house values when they crashed the dollar. repeat: the evil retards crashed the dollar: if your house was worth 1,000,000 dollars, and it then becomes worth 1,000,000 rupees, does this mean it retains the same value? repeat: why does the housing market need to crash further when our houses are already worth only 50% of what they were before the dollar crashed. currency is international. repeat: look no further than what is in front of you on this one: add the housingvalue fall on top of the dollar devaluation and you have up to 75% value crashes already. fukards fkd us on this one, leveling of economies internationally and all..its a process people.. HAHHAHA this is a fkn joke. on us.
luckylefty,
A contemporary of Adam Smith, the Scottish philosopher Adam Ferguson (who was several orders of magnitude more sophisticated than Mr. Smith), already in the 18th Century was describing the stages that virtually every human society goes through, and how elite wealthy parasites develop inevitably to devour the positive value that others create, and the societies inevitably decline and fall.
If one studies Chinese history, through all the many dynasties, one sees this pattern repeated many times on a grand scale.
What worries me is that in today's interconnected global economy the decadent US may be able to take the rest of the world with it.
weird that the author doesn't include in his list of crazy investing, the current activity of speculators in the commodities markets. could it be that he is among those who are terrified that ordinary people will become more curious about financial speculation each time they go to a food market or gas station?
Oligarchies are parasites. Parasites suck the blood of the host until the host dies. In America's case, the citizenry all wish to grow up and become parasites. Such is the nature of ambition. Fattest parasites on the planet, for the moment. How's that for macro economic theory? I just had an idea.
Since our oligarchy lusts for gold, why not give it to them? The top 1/4 of 1% comprise very few families. Why not load racks full of gold bullion suspend them from helicopters and drop the bullion shipment from say 500 feet (to allow acceleration to terminal velocity) on their homes. Bury them in it. We can invite the people from the nearby towns to do the clean up. Any survivors should be congratulated and feasted. At the feast they should be given a cup of molten gold to drink. Bon apetite.
Oligarchy, whatever their external trappings, haven't changed in 5000 years. Subhuman, predatory, parasites. Why do we keep making them, over, and over, and over again?
Maybe when we answer that, maybe we won't make anymore oligarchies.
Maybe.
Padraig .... we just celebrated the anniversary of the answer to your question. Try these historic words to see if they fit.
"We hold these truths to be self-evident,
that all men are created equal,
that they are endowed by their Creator with certain unalienable rights,
that among these are life, liberty and the pursuit of happiness.
That to secure these rights,
governments are instituted among men,
deriving their just powers from the consent of the governed.
That whenever any form of government becomes destructive to these ends,
it is the right of the people to alter or to abolish it,
and to institute new government,
laying its foundation on such principles and organizing its powers in such form,
as to them shall seem most likely to effect their safety and happiness.
Prudence, indeed,
will dictate that governments long established should not be changed for light and transient causes;
and accordingly all experience hath shown that mankind are more disposed to suffer,
while evils are sufferable,
than to right themselves by abolishing the forms to which they are accustomed.
But when a long train of abuses and usurpations,
pursuing invariably the same object evinces a design to reduce them under absolute despotism,
it is their right,
it is their duty,
to throw off such government,
and to provide new guards for their future security."
exactly right Padraig. and I'd go a step further...we've never really HAD a representative democracy. How could we have when the land was stolen, the original inhabitants nearly wiped out , then forced to live in rotten conditions (to this day) .... and the economy was built on kidnapped, slave labor? (and we won't even HEAR of reparations)!
When every single group that weren't white male land owners had to fight and claw for their rights?
And when to this day there is only a hierarchical and tiered system of justice depending on sex, class and skin color?
and then, when without ever admitting to those wrongs and attempting to right them, we allowed corporations to take on the privaledges of person-hood? (with none of the responsibilities)!
and further entrenched the undemocratic system buy allowing politicians to make WAY more money than school teachers?
now we are totally bought and sold down the river!
with the most effective propaganda the world has ever seen being foisted upon us!
HOW are we going to wake the rest of us up?
"The greatest injustice I see in America today is the ability of banks and corporations to bribe-yes, that's the right word-our elected officials...the housing crisis is just a symptom of a much bigger problem of trying to constrain lobbying, which will continue to fester until the American people conclude they have had enough and just won't take it anymore. Let's all do something positive to make sure this hijacking of our system of government is never allowed to occur in this country again."
Precisely what, pray tell, do you suggest that we do? Write a letter to our co-opted, corrupted, and impotent Congressman? Vote for corporate whore Tweedle-Dee instead of corporate prostitute Tweedle-Dum? Write a letter to the editor of our corporate-controlled press?
The problem is that representative democracy in America is dead and moldering in a shallow unmarked grave somewhere, and has been for years. Our Republic has degenerated and metastasized into a Fascist oligarchy where our only role is as corporate serfs, indentured servants to the banks, and cannon fodder, and nothing short of armed insurrection will ever change that.
America is a s**thole ruled by a cabal of thieves, a kleptocracy. People who have access to free money from the Federal Reserve get snippy about us poor serfs wanting honest work and honest rules when we go to the bank.
Right now you have no idea, even if you are a lawyer, what the implications of your bank and credit card contracts are. They can write checks on your account when you don't have the money in the bank and then demand that you make good on those payments. Credit card companies are actual thieves.
The housing bust will stop when average people can afford to buy houses when paid average wages without resorting to mystery mortgages. That will require restructuring of our entire economy.
To MG - my advice is -
1. To regain control over your country you must abolish the Federal Reserve.
" I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." -Woodrow Wilson
If you want to know why this is so important:
http://www.freedocumentaries.org/film.php?id=214
and who really control your country:
http://www.financialsense.com/Market/daily/monday.htm
kayaker - don't wait for someone to come and tell you what to do - go and find out for your self - do it now!
"let's all do something positive..." Great, that must be the subject of Mr. Talbott's next article. So, until then, remain in suspense about WHAT it is that we can do. Is it vote for Democrats? Nope, already tried that and it didn't work.
We're still calling that "free market" right?? Major corporations and banks are not allowed to fail? And tax payers are obligated to continue to bail them out?
As the bumper sticker says: Freedom Isn't Free. (;>)
I think you will find that those who bleat loudest about the wonders of the "free market" are precisely those who least WANT a truly free market. Unless failure follows folly, there IS no market in the conventional sense.
What is odd is that We The People theoretically OWN the country. THAT is the premise of the Declaration and the Constitution. And yet, We The People have allowed others to take control of OUR country.
Are we ever gonna get control of our country back? Perhaps, after it has been raped and pillage and everything of value stripped from it and moved offshore just prior to going bankrupt.
That trillion and half of "new money" mentioned in the article is a liability that will be passed on to American taxpayers for the next 100 years or more. Kinda makes you proud, don't it? We have an entire country now based on what in the Popeye cartoons is known as the Wimpy Principle, to wit: "I will gladly pay you Tuesday for a cheeseburger to day."
I thought this all had to do with hedge funds, and such I know nothing. I say, fixed rate, 15 years, less than 5.8. That was 5 years ago. 5 years before that same rate, though. I always knew enough and warned all, never, ever get a balloon mortgage or another name they may use, if ithey didn't come back to me this is your Fixed Rate of.. I said, NO.
I move like a gypsy, need to get away from this burb, acre in back, 7 dogs but I yearn for tall buildings, concrete and anything I need at any hour.
The only problem is if they come back to normal prices is I'll never escape for 3 years.
The housing crash is a good thing!!!! Prices have remained way too high for ordinary people to afford housing without ARMS, or other fancy financing. Prices need to come back down to reality. Many many people have sat on the sidelines waiting for that to happen and have been fiscally responsible. Prosecute the housing bubble cheerleaders, the flippers, wall street, the Real Estate industrial complex leaders, the banks and the mortgage lenders but do not above all bail them out! A bailout will only keep prices unaffordable. May I suggest www.patrick.net an excellent and informative site.
I know zilch about macroeconomics, so given that, I'm trying to understand what Talbott is saying. It seems banks and corporations didn't like being regulated, it "got in the way of free markets" so managed to "bribe" politicians into over turning Glass-Steagle which allowed them free reign to get creative and have a ball in the joys of the "free market".
But oops, something went a little haywire, and some (if not all) of the big time players got in over their heads and holy shit! might collapse, bringing down the whole house of cards! Not to worry though pappa's got a big ole printing press out behind the shed. "What do you guys need? A billion? What? almost a couple of trillion? Here ya go".
So that's what free market means, act like a greedy bastard, steal if you have to, mismanage the stolen loot, hell, go ahead and throw it down a desert sink hole, the money's FREE!
But what I don't get is that Talbott thinks that "Bernanke and the worlds central bankers have to be congratulated for printing and distributing to the worlds banks and investment banks approximately $1.5 trillion. It was hard earned taxpayer money, but it was well spent as we would have faced a global bank run and depression without his intervention."
We're still calling that "free market" right?? Major corporations and banks are not allowed to fail? And tax payers are obligated to continue to bail them out?
I think they call that the "Road to Serfdom" leading straight to the gates of tyranny.
I wish anyone would take this behemoth off my hands. I hate everyone here. I want to leave.............
¿ Who wants TRIPLE damage _R I C O_ payments ?
"In the 1980's, however, civil lawyers noticed section 1964(c) of the RICO Act, which allows civil claims to be brought by any person injured in their business or property by reason of a RICO violation. Any person who succeeded in establishing a civil RICO claim would automatically receive judgment in the amount of three times their actual damages and would be awarded their costs and attorneys' fees.
The financial windfall available under RICO inspired the creativity of lawyers across the nation, and by the late 1980's, RICO was a (if not the most) commonly asserted claim in federal court. Everyone was trying to depict civil claims, such as common law fraud, product defect, and breach of contract as criminal wrongdoing, which would in turn enable the filing of a civil RICO action."
The ___ R I C O ___ E F F E C T ___
I believe that our current form of gov't as instituted, is 100% criminally complicit, with so much money exchanging hands, it makes the Stock Market look like a lemonade stand.
"The Racketeer Influenced and Corrupt Organizations Act (commonly referred to as RICO Act or RICO)
is a United States federal law that provides for extended penalties for criminal acts performed as part of an ongoing criminal organization. … It was intended to make it easier to prosecute organized crime figures, but has been applied in several other cases as well.
It has been speculated that the name and acronym were selected in a sly reference to the movie Little Caesar, which featured a notorious gangster named Rico"
We must PERSEVERE and slay this beast of avariciously nefarious motives, which cares less and less about the
__ P U B L I C __
… especially as the beast's birth was midwifed and created in order to _ S E R V E _ that very same PUBLIC that it so seriously and egregiously abuses.
The suffering of hundreds of millions to thieving and hideously beastly atrocities and economic "interventions" is equivalent to the
__ C O R P O . R . A . P . E __
of American liberties, freedoms, and wealth -- PERPETRATED with the extreme greed of global globbler elitist corrupt politicians, bankers, corporate boards and officers.
That there 'ought to be a law' like RICO is undeniable, as true for thousands of other 'de-regulations' even in weakened form, that are ignored and left unenforced, like the:
The very members of the SCOTUS received massive familial BRIBES, following the illegal { s }election of prez in 2000
Are there not some uncompromisable lawyers willing to stand for America's morality and to rise to the challenge to fight this BEAST ?
Namaste « Presence »
« We must be the change we wish to see in the world » — Gandhi
« There is a sufficiency in the world for man's need but not for man's greed » — Gandhi
« We adopt the means of nonviolence because our end is a community at peace with itself » — ML King
You cannot buy and sell anything unless you have a strong rule of law that enforces property rights and assures contracts will be honored and fraud exposed.
Actually you can. Or haven't you heard of the multi trillion dollar illegal drug market. That's totally unregulated bucko, and as such it causes much suffering, for both the user - who buys shit he/she can't really trust - and the dealer - whom the buyer turns over to the cops when he/she didn't get what they paid for.