I never said that. Iceland is apparently in trouble due to entanglements with the American economy. And so the question. Does Australia have the same entanglements?

I have no idea why you concluded otherwise.

I think a company leveraged at 30:1 might have had something to do with it too - just maybe.

All economies are intertwined or entagled to use your words tw. It's only the degree that differs. As I mentioned before, so far, our major banks have weathered the storm very well, and they've gobbled up the couple of smaller ones who've become slightly unstable.

We may be more isolated here and as I also mentioned before, our banks invest very heavily in resources and exploration. This is a market which is performing well here in Australia so things are not so bleak. Also our ability to export natural resources gives us a leg up which many other countries don't have. Our dollar being weaker is good for our export market also, and with the cost of imported products then becoming more expensive, people are encouraged to buy Australian, which in turn boost our economy and keeps it stable, at least in house.

Australia was listed in The Economist article - a falling brick labeled housing prices. ARMs - described as easy money - were blamed for higher housing prices. Either the buyer could afford a home with a fixed mortgage, or he could use a money game - ARMS, sub-prime loans, variable rate, etc - to get an even larger home. So what happened? Housing prices rose 20% and 40% too high for no reason? Excessively higher house prices: also a symptom of money games. Since prices are even higher, more people wanted a bigger house and also resorted to ARMs. And so the money game is also self inflating as it sucks more homeowners in.

ARMs are a classic example of a money game. If the homeowner cannot afford a fixed mortgage, then the homeowner is not productive enough to earn that house.

Now, are you saying the massive economic implosion where ARMs, et al were more common - is that a coincidence? Hardly.

ARMs are a classic money game. Your mortgage should be structured to never becomes a burden when times get tough. That means no ARMs.

Let's see. Where ARMs were more common, then housing prices skyrocketed. Where ARMs are most common, then homeowners got homes they otherwise could not afford. Where ARMs were more common is where the worst mortgage crisises are now found (ie Stockton). But you say ARMs are not a money game? Then how do you explain the contradiction in those examples? How do explain economics taking the most revenge where ARMs were routine?

Meanwhile, still not answered are the questions about Australia's commodity export market.

That reasoning works to a certain extent. Buy Australian does not make a stronger economy. The strongest economies buy the best - believe in the free market - regardless of where it is made.

Furthermore, an economy heavily dependent on commodity exports is then very dependent on other imports to maintain that economy. That part gets forgotten. The productivity of higher tech industries then gets stifled as the necessary import costs are higher.

Example - a lower dollar means gasoline prices go higher.

Lower dollar is a double edge sword - with good and bad points. But the bottom line: a lower dollar means a lower standard of living. If an economy does not fix its problems, one way that economics takes revenge is to lower the dollar's value and therefore lower the country's standard of living. As a result, the people either work more productively or work more hours.

Another example of 'no free money'.

But again, how have the commodity markets affected the Australian economy?

What were they leveraged with? Mortgage backed securities that looked so good on paper because these securities were regarded similar to fix rate mortgages. Its not the fix rate mortgages that went into massive default. It is the irresponsible ARMS, et al mortgages that created problems.

Where did this house of cards stumble fastest? Where finance companies were holding so much ARMs in the form of mortgage backed securities.

VP of Merrill Lynch warned about this almost two years ago. So they fired him. Goldman Sachs is one of the few who (are said to) predicted the problem and hedged six months earlier.

So why did all that debt come crashing down at once creating the largest economic calamity since 1929 - the Great Depression? Most of it was created in money games such as ARMs.

Which institutions suffered most? Not all banks with a 30 to 1 ratio collapsed. But those mostly invested in ARMs and other classic money game equities required corporate welfare or no longer exist.

The banks were forced to make more loans thru the Community Reinvestment Act.
This was the beginning of the end.
[1] Excellent idea in theory - Very noble.
[2] Who are these and why aren't the being held accountable?
[3] Hmm, The lenders who play the game and offer the most are allowed to expand and acquire,merge and gain power. NOT A GOOD IDEA! Therein lies the opportunity for corruption and bribery.

There were other major problems primarily the mark to market ( The rules of how their assets were valued changed.) which others here disagree with me on. My admittedly limited research has led me to believe, and I am not alone in this opinion, that these are two of the major causes.

ARM's when used properly are not the problem - they have a greater opportunity for abuse, yes, but when used/issued properly should be no issue whatsoever.

ARM = Adjustable Rate Mortgage
LEG = Leveraging Equitable Gain ? ;)

So why did this cause the collapse of so many investment banks that had nothing to do with CRA? Just the first in a long list of embarrassing questions.

Rather amazing how two silly little regulation changes - the Community Redevelopment Act (CRA) and an accounting rule change - explains the disappearance of $2trillion. That reasoning is extremely naive. And yet there it is in classicman's research.

For example, his post completely ignores the 20% to 40% excessively overvalued housing prices for everyone - especially the wealthiest homeowners. It ignores that the CRA was passed in 1977, last modified in 1995, but somehow started creating ARMs in mass numbers and a housing bubble sometime after 2002. It ignores that the CRA is only for low and medium income earners - not for the $200,000+ homeowners. It ignores the slashing and burning of financial regulations that occurred after 2000 either by regulatory rules changes or by simply discontinuing all enforcement. It ignores that Enron style accounting (which has nothing to do with 'mark to market') meant that spread sheets would become unreadable. It ignores that losing ventures and other debts could simply be hidden in off-balance entities. It ignores that after 2000, large numbers of equities were carefully created so to not be insurance (regulated by the states) and instead would be equities (regulated by the SEC which was ignoring regulations so as to 'free the markets').

ARMs were not created by the CRA as classicman would have us believe. ARMs were created by post 2000 deregulation that meant mortgages could now be approved without any due dilligence of whether the applicant was even eligible. And then those mortgages, carefully structured to avoid state regulations, could be sold as mortgage backed securities. Sold as if these were fixed mortgages without any consideration for their actual value and risk.

All this somehow gets ignored by classicman who says he did all the research.

CRA only targets low and medium income housing. So how did it create massive numbers of ARMs for $million+ homes? It did not. CRA did not create the ARM. A market suddenly liberated from regulations replaced fixed income mortgages with ARMs. CRA had nothing to do with that. Whereas but a few (single digit percent) of loans were ARMs, then suddenly after 2000, over 25% of all loans were ARMs. This sudden and massive increase in ARMs then resulted in a post 2000 housing bubble so large that The Economist warned of the resulting meltdown in June 2005. How did the 1995 CRA cause this? It did not. How did one accounting change create this? It did not.

Why were so many high income applicants, who could have easily qualified for fix mortgage loans, suddenly moved into ARMs? Did the CRA cause this? Of course not. Did one accounting change create this? Of course not.

When a research source is an extremist propaganda machine trying to divert blame, then suddenly an accounting change and 1995 CRA change (to blame Clinton) caused $2trillion to vaporize? Market changes that created a housing bubble, the sudden use of ARMs, numerous deregulations of financial markets, etc all occurred mostly after 2000. Clearly Clinton and the Democrats who did not control Congress or the White were to blame. Blame 1995 Clinton and one accounting change? A commentary on how that research is identical to right wing propaganda spin.

Congress literally tried to double the Security and Exchange Commission budget in 2002. Harvey Pitts refused to accept a budget increase. After 2000, George Jr objectives were to free finance markets of regulations. What resulted? NINJA. Did the CRA create NINJA? Of course not. Did 'mark to market' accounting changes create NINJA? Of course not. Why does classicman only blame what right wing extremists blame? Why did CRA and accounting changes cause $trillion defaults? Political spin without numbers can blame anyone that must be blamed rather than where failure really exists.

Why were those mortgage backed securities so carefully written to not be insurance? Because elimination of regulation only existed in the Federal Government - the George Jr administration. If a mortgage backed securities was not carefully written, then it became insurance; regulated by the states. State regulation would have never permitted those equities to exist without due dilligence. The entire mess was made possible because the George Jr administration was slashing and burning market regulations. To be free of any regulation, the various SIVs, CDOs, etc all had to be carefully written so that the ponzi scheme could continue without oversight.

I asked one of my bankers some years ago about Glass-Stegall. Yes, it still existed. Then he noted how existing laws were no longer enforced - all but did not exist. Glass-Stegall created finance market firewalls. Due to a political agenda of deregulating markets, even Glass-Stegall was gutted. So how was this created by Clinton, the CRA, and an accounting change?

Why did classicman ignore all this when he did his research? Why did a 1995 law change and an accounting change suddenly cause the greatest financial market meltdown since 1929? Because a political agenda demands someone else be blamed.

Why did the commercial credit market (that maybe does $55trillion of business) completely seize up? Classicman tells us that this was due to a 'mark to market' accounting change. Meanwhile, the entire commercial credit market completely seized since Enron style accounting (that included SIVs, CDOs, etc) made it impossible to determine who was safe to do business with. Transparency that is so necessary in unstable markets no longer exists.

Enron was a wakeup call. The accounting industry was completely devoid of accountability. Completely obvious in 2002 was a finance industry desperately in need of across the board review and regulatory standards. Enron accounting standards had all but destroyed transparency so necessary in today's uncertain times. So what did George Jr's administration do? All but refused to even prosecute Enron. Did nothing to address accounting reasons that made corruption acceptable. A company could simply spin excessive debt into an off-balance entity where nobody knew it existed. What was AIG doing? If was creating a spin off company to unload debt; but failed to do that fast enough.

Classicman tells us this too is due to the CRA and 'mark to market' accounting? Hardly. But again, he curiously blames the same things that wacko George Jr extremists also blame. Coincidence? After all, a moderate would not parrot the George Jr administration - would he?

Clearly, the greatest financial disaster since 1929 was directly traceable to a Clinton 1995 CRA law modification for low and medium income home loans (actually created by a Republican Congress) and a ‘mark to market’ accounting change. Amazing how two little changes completely seized the entire American financial system. It must be true. classicman did the research.

Signed Sarbanes-Oxley, the biggest set of new accounting regulations in our lifetimes.

Can you point to the specific deregulation that made that possible.

Sorry I went quiet there, after stirring things up like that. I was moving house. Graphs do catch the imagination, don't they?

So, Australia's economy. There are two main reasons why the AU$ has fallen so steeply, especially against the yen.


Reason number one is an indirect link with the USA's problems.

We are NOT very badly exposed to the bad mortgage market in the US. Most of our banks have written off a billion or so, but nothing they can't handle. The "Big Four" banks are cashed up and looking to buy other banks.

However, we are indirectly feeling the pinch of the current problems.

The main export earner for Australia is commodities, especially minerals. However, we sell most of those resources to China (etc), where the Chinese manufacture them into consumer goods and sell them to the USA. Now that demand in the USA has gone frigid, China is slowing, and that means both lower volumes of sales for us, and lower prices, thus significantly lower total earnings. This of course means less demand for AU$, and so the price falls.
So, one factor in the steep decline of the AU$ definitely IS the US problems, only indirectly.

The second factor driving the fall of the AU$ is interest rates. Note that the AU$ has fallen much more against the Yen than any other currency. This is because of the unwinding of the "carry trade".

The carry trade is made possible by different interest rates in different countries. The Japanese central bank, in an attempt to stimulate their economy, has kept interest rates at either 0 (yes, ZERO) or 0.5% for more than a decade. Many people realised they could borrow money in Japan, and invest it in a bank overseas where it would earn a nice interest rate, and rake in the interest. Until a year ago, you could get 7.5% or more capital guaranteed in Australia. New Zealand was offering a few points more.

(Digression: this shows the folly of extreme interest rates - in this case, they caused money to flood out of Japan, thus sedating, not stimulating, the economy. The same works the other way: high interest rates can suck in capital from overseas, thus stimulating, not slowing, an economy. It only works if the difference with other markets is small enough that the risk of currency fluctuations (see below) is enough to deter carry trading. End digression.)

The risk with the carry trade is if the currency exchange rate changes - if the Yen goes up, the Japanese carry-traders might not have enough foreign denominated holdings to pay back their initial loan in Yen. They can get burned pretty badly.

As a result, carry-traders are skittish and prone to panic. If the Yen starts to rise, it sometimes spikes dramatically, as carry-traders try to rush their money back and minimise their losses. This of course is an extra spike in demand which just drives the Yen even higher.

That is what has happened recently. The end of the resources boom caused the Australian dollar to fall moderately. More of a slide than a fall. But as it slid, it crossed some thresholds that caused *some* carry-traders to panic and get out, which started a feedback loop and led to something more like a stampede, and the result was a big, swift rise in the Yen.

I am less sure but I think there is a third factor: with the Japanese stock market sliding, some heavily leveraged Japanese investors got margin calls from their brokers and had to shift capital back to Japan to cover themselves. This has been little discussed in the sources I read.

I will say that I have been expecting this for well over a year, maybe two. It has been widely discussed by economics writers in both Australian and Japanese media. But even so, I have been stunned by the size and speed of the recent shifts.

And yes, as Ali said, we did have a real estate bubble, driven by three factors: the mining boom, the gradual running out of land close to our urban centres, and the too-low interest rates of a few years back.

We have had variable mortages (ARMs) for ages, and as always, some people lock into a 30 year loan they can only afford while rates remain low. Then rates go up, as they do. And the people suffer. So it goes.




Now if you will excuse me, I want to go and cuddle that big pile of Yen I brought back from Japan.

[Burns] Eeexxxcellent!!!!!! [/Burns]

They wanted to get in the game too - MAKE MONEY!
You should be embarrassed to ask some of your questions.

I didn't ignore the housing prices I CLEARLY STATED what I believe are two of the initial causal factors of the current issue. There were others. ARMs don't make people buy houses they cannot afford - corrupt and/or greedy people do. I'll again ask the question which tw, as usual, conveniently ignored because it doesn't fit into his cute little theory - Who was in charge of regulation?

100% FALSE - I never said nor implied anything of the sort.

READ MY POST - I even highlighted it for you. I'll paste it here again
It was INTENDED for the lower income households. I even mentioned that in a prior post and commended it for being a noble gesture with good intentions. What I said was, and perhaps you could actually read it this time, was that it created a situation whereby the greedy and corrupt could ABUSE it, and they did.

GREED & Corruption. A situation was, in some cases, inadvertently created and determined to be exploitable and therefore it was. Which part of that are you not grasping?

And you are doing a wonderful job of it. I fully recognize that I am not in the majority of people on the cellar with my views, but the biggest failure here is your post.


tw seems to continually ignore basic facts and avoids answering the simple question of ... Who was in charge of regulating these companies? For the third time.

Again and again I have to repeat my prior post because you do not read - you simply get on your soapbox and attack posters with any opinion that differs from yours and selectively choose information that fits your theory while ignoring or dismissing anything that does not.

If they were correct, yes. If not, no. More classic diversionary tactics to attack the poster and not the post - all this from one who routinely complains and whines about it when done to him. I'll ask this - Would a wacko left wing liberal nutjob only chant mental midget, 85% of all... mission accomplished... and a host of other crap even when it is completely inappropriate and immaterial to the subject matter at hand? Would this person be saying virtually the same thing in every single one of their posts of theirs no matter what the topic? Would this person have an agenda a political axe to grind? perhaps? I guess so.

Well at least you came to your senses in the end after all your spin. :P (I'm sorta kidding)

ARMs are simply a tool. A quite effective one for specific purposes that was used by far too many for very incorrect reasons. The loan isn't to blame - the people who approved it and the people who took it are. The housing bubble didn't happen because a bunch of republicans figured out they could scam the system, it was a result of human nature colliding with market forces.

1) Home ownership changed from being the American Dream to the American Expectation.

2) Tech Bubble burst, money flooded out of equities. Money has to go somewhere real estate was attractive at the time.

3) Greenspan dropped rates to lowest in well over 40 years. Real estate became very attractive due to low cost money.

4) This made mortgages more affordable for everyone. New lenders and loan officers flooded the market and competition increased.

5) "highest percentage of home ownership in history" started creeping into the news and political speeches. People who never considered buying a home were now told they should, so they did.

6) Low Rates + Large amounts of cash + human nature (ego/greed) resulted in bigger houses, bigger prices, and competition between consumers/builders/lenders.

7) People started using ARMs to buy more house than they could afford rather than the intended purpose for the product.

8) Housing supply begins to outstrip demand with more development continuing.

9) Rates increase causing people to rethink the next new house compared to their current cost.

10) Supply starts to surge.

11) Builders offer incentives, causing resales to become less attractive, thus causing prospective buyers problems in selling current home or to keep it as "an investment property".

12) Smart money left real estate. ARMs start to reset. Everyone starts talking about the elephant in the room.

13) The snowball now has enough momentum to take out pretty much anything in it's path.

lookout123's analysis far more accurately describes how the avalanch started.

ARMs always existed and were useful for the few (single digit percent) applicants that needed it. ARMs would never have been approved for so many when rules and standards existed. Few qualified for an ARM until recently with deregulation. Suddenly almost anyone qualified for an ARMs when we were fixing the economy by throwing money at it - tax cuts, Greenspans low interest rates, etc. Loan officers could offer such dangerous mortgages to most anyone. Those mortgages would then be sold to markets that no longer bothered to review what they were investing in - mortgage backed securities carefully written so as to not be insurance and therefore devoid of any serious regulatory oversight. NINJA became the new standard for mortgages.

Perot was quite blunt about this. An economy is never fixed by throwing money at it like a grenade. And yet that is exactly what we did rather than let a recession fix the economy. Unfortunately and as a result, we are now doing it with literally the entire value of both the Federal Reserve and US Treasury. Yes, even those institutions have run into monetary shortages by issuing so much corporate welfare.

Money games were so widespread especially since 2000 that even the Treasury and Federal Reserve are scrambling to find and free more funds. Appreciate how massive this meltdown. Accounting changes and the CRA had near zero effect - obviously irrelevant to the problem.

Classic man - your admittedly limited research has led you to post the right wing extremist mantra. Blame it on Clinton. Blame an accounting change. A finance market meltdown due to those trivial reasons?

Ignore that the mental midget intentionally deregulated and kept throwing money at the economy as if tax cuts to the rich, tax rebates, and massive government spending solve everything. Even equities were carefully written to be regulated only by the SEC (not regulated by the states) where regulations were subverted, ignored, or liberated. Where even NINJA was the new model for business.

George Jr got the deregulated economy he wanted. None of which is mentioned in classicman's research. Research curiously echoes what right wing extremists say. Blame Clinton. Never blame the administration that all but refused to prosecute Enron, did nothing to address a lack of transparency, and even refused to increase the Security and Exchange Commission budget.

Why such great care so that securities would not be insurance? Then the equity had near zero regulatory oversight by federal regulators – George Jr’s deregulation.

Rule changes after 2000 made it easy and profitable to market equities without due diligence. As a result, $trillions were tied into unstable equities - especially mortgaged backed securities that started an avalanche. As a result, credit and equities markets froze because no one knew who was stable and who was about to go belly up. As a result, companies ran to government for corporate welfare while the reason for those failures walked away with $hundreds of millions. All these somehow are missing in classicman's posts that would attack the messenger rather than address a fundamental problem. His research parrots right wing extremist mantra.

Blame 'mark to market'? Why not also blame Putin? Classicman – do you realize that is equivalent to blaming an ant for causing you to stumble? Can you deal with the absurdity of your ‘research’ rather than take it as a personal attack?

This is why I am fretting about my simple savings account. Everyone I talk to tells me not to worry, its protected by the FDIC, but with banks continuing to tank, when mine reaches that point, will the government really be able to back up my money?

I wish I didnt have to worry about this.

I think I said something like this in the "Finger Pointing" thread when people tried to narrow it to a specific political party.

Greed drove the market to sell off the American dream, along with the paint for the pickett fence. Greed is not a political affiliation.....I have known libs. and conservatives bent on selling this dream.

On the other hand: It was also job opportunity for a great many people, and I am sorry to see that they have no income now either.

This is the biggie for me. This is the huge cultural shift that fed the rest. It happened here too. Owning a home became an expected part of being an adult; renting meanwhile, became stigmatised at all but the highest levels (executive let). Council housing (social housing projects) which had been the mainstay of working-class housing for a long time became associated with the underclass.

When I was a kid, one of the first things most of my friends did when they hit 18 was get their name on the Council's housing list. Unless you were pretty well off this is what you did when you grew up.

I know lots of people have said to me over the years, why don't I buy a house, instead of throwing my money away renting. Answer? I have never felt financially stable enough to risk taking on that level of debt and potentially having my home taken off me. I rent, I dont accrue more than a few hundred in debt and if I end up unemployed I can claim help with that rent. Whatever the economic climate there will always be landlords. I don't need to own a house, I just need to be able to live in one.

If government runs out of cash (and cannot borrow more from foreigners), then it will print money. You will have that money whether in a bank or under a mattress. And if the government prints money, your cash depletes in value equally whether in a bank or under a mattress.

Worry not about your bank. Worry more (or prosper) about what happens when the markets finally find a new value for America. This market crash (and the resulting upturn) is about discovering what America was really worth. The American economy was clearly overvalued due to so much bad equities. This market crash is finance markets desperately seeking our actual net worth AND for economic forces to take revenge for the money games.

In the short term, this is a stunning opportunity for people like me who never get out of markets, but saw this coming, and got out completely many months ago. For others who stayed put, expect to lose at least 20% because the American economy (like housing prices) was probably at least 20% overvalued.

Typically, markets overshoot in the downturn, and then rise up to what is a corrected market value. Obviously, everyone with cash is waiting for this market to find that bottom (at least a 35% downturn), then ride the wave back up to a new and lower American economy value (probably something below 20%).

When will it end? We don’t know. Too many shady institutions have not yet been punished by economic forces. One such possibility is hedge funds who I suspect are currently getting corrected which would explain the latest multi-hundred point market drop.

Worry not about your bank account. Worry more about how this economy, your job, and your government services may/must change now that America is revalued.

I'm with you (Dana). The only way I will do it is if it is paid for all in cash plus some for renovations. This is not going to happen until I win the lottery. ;)

And:

My husband and I can't stay in one place for long enough to really make it worth it. Not for now. When we are older and have the cash we might think about it. And by then maybe the dollar will be worth something again. Dunno. I love not worrying about the upkeep of the entire property when the pace at work gets too heavy.

I live in a place I could not afford to own. It's awesome and I love it. It really doesn't have to be mine for me to get pleasure from it.

Cheap gas actually started all of this.

Well, thats what Kunstler says.

This works as long as you have other investments. One reason that home ownership is encouraged: a home is the only investment that so many have. The home mortgage *requires* him to invest in something. If you don't have a mortgage, then you should be investing continuously in some other equity.

Mortgage makes it easy for one to accumulate some wealth by forcing homeowners to keep making those payments - to keep investing in their net worth.

The greedy* homeowners that took ARMs are now again being greedy* by defaulting when their home loses value, instead of just sticking with the program and paying until things get better.

*in this context, "greedy" means behaving pretty much like everyone else in the culture.

tw - you are a pompous ass and back on ignore you go. You repeatedly blamed ARMs and I countered every time. You denied and attempted to refute my points with half truths and conveniently avoided the question put to you 4 times. You disregard anything that doesn't fit into your little preconceived notions and any culpability implicating anyone other than GWB and the EVIL republicans. That is your game - You are as extreme left as UG is right. Buh bye

Are you refering to my post about greed in some way? Or are you calling homeowners greedy with a hint of sarcasm, or are you seriously saying homeowners were greedy? This is hard for me to read, if you are serious or not.

I think tw's been quite reasonable lately.

This is what happens here, with generation after generation being dependent on welfare. I didn't realize it was the norm in the UK.

So how does classicman respond? More personal attacks.

So is anyone else willing to admit that they rode this market down? We've got a couple Dwellars who say they saw this months ago and got out before the crash. I remember a thread back a few months ago where lookout asked if we were positioned where we should be. I don't know if that was supposed to be a subtle warning, but I ended up taking a long view after reading that thread and staying in the stock market.

So did you all get out months ago? Or don't any of you have 401ks?

I know it's tacky to talk about personal money, and I'm not asking for any details, but is anyone else wincing when they look at their 401k accounts? Or am I the only dummy?

My 401k is down 31% from one year ago, and I've been pumping money regularly into it for that entire year, so when you consider that, it's even worse.

I dunno...I have PERS and don't know a damn thing about it. :blush:

I guess I'm saying that home buyers and defaulters were greedy, but it doesn't matter. It's just human nature. If you tell people they can make a quick buck most of them will do it. When it became a notion that it was perfectly fine for someone to default if their house lost value, people took up the practice.

glatt, I'm probably in the same position as you. I've had that uneasy feeling for months and haven't done anything about it. I just got investment statements last week and haven't opened them. I've buried my head.

I put a lot more effort into making money than into holding on to it. I think this is true of a lot of us.

Thank you. Misery loves company, and it makes me feel slightly better to know I'm not the only one.

Oh, and I'm probably cursed to have my online account bookmarked. I've been checking it every day these last couple weeks. I should just delete that bookmark and forget about it.

(UT)? When I was marketing last year and a little prior for real estate (sub-prime) this never came up. People thought they had finally gotten into a position to afford a better home or a new home, when they in fact were not able to, but were approved. They could not afford what they were sold. Bottom line. But they were sold.

We worked with a lot of people just getting by, and shoving large families in what they thought they could afford at the time.

The market is also different down here. You get a broom closet for 200,000 and you are doing great...It's 1200 a month to rent a sub prime property so people thought they could buy cheaper and pay less, and they did. They could afford no substantial increase as they were already strapped. They thought they could save by not renting. All the rich white folks drove up all the prices and renting became outrageous. Buying a nasty shack was cheaper for all us poor folk that can't afford 1250.00 a month in rent. So they bought houses to fit their family in for 800.00 a month mortgages instead. At the time it seemed like a wise choice for them to invest and not spend so much on a rental they could not afford.

Long story long. They defaulted because they thought it was a more practical choice and one they could live by (more economical, can buy groceries too).

I am sure some people are doing what you imagine. Defaulting when the value dropped. I just haven't heard from any that weren't just ass out broke.

That's just how I see things on the local level. I almost fell for it and let my husband talk me into too. I did not. Thank god.

That's what I did. Its ugly, really ugly - down more than yours too. Maybe that'll make you feel a little better too.

Maybe it was Fall 2007 that I posted a warning of a serious market problem. I cautioned about unloading all credit card debt and setting up for an economic downturn. In Fall 2007 it had become obvious that a downturn was inevitable. I could not say if it was immediate or due to happen in a few years. But I do remember posting that caution especially with having no outstanding balances on any credit card.

It still applies. What happens in equity markets adversely affects jobs and Main Street some years later. Again, no way to know how severe that downturn will be. But that downturn will occur and will not be on George Jr's watch.

I'm sorry.

Yes, but tw, you've been warning of the collapse ever since I came to the Cellar years ago. Why should I have given that one post any more weight than the others?

Dollar cost averaging. It will come back up eventually. The people who really need to worry are those who just retired and are now living off those investments and I would say those who are within 5 years of retirement, because I bet it will take at least that long before they come back up.

As I noted, I could say why BUT I could not say when. The warning was not in 2007. The warning was posted in 7 Sept 2006. Since the problem did not happen in months, then was it 'Chicken Little'? Posted in
Which is your favorite paranoid fantasy? are also reasons why we knew something bad was brewng:

lol - truer words were never spoken.

Welfare? I am talking about social housing. All that means is that the landlord (owner) is the local authority instead of a private landlord. Instead of it being run for profit, as a private landlord must, the estate is run to cover its costs, thereby leading to much lower rent and more secure tenancy status.

Setting aside the wealthy rental market, getting a council house was a step in between private rental and home-ownership. It was seen as an affordable and secure option for people who didn't have access to the kind of capital or credit necessary for home ownership (i.e most of the working-class). It wasn't a solution to an underclass problem, or a way of housing the unemployed, it was a solution to the shortage of habitable housing stock in postwar Britain and quickly became a settled institution in British culture. Council housing didn't take on the stigma and connotations it has now until well into the 1980s, maybe even the 90s.

Same goes with our public housing. I really think it is due to a change of the generations from one of those being greatly appreciative of the help provided and among whom they had great pride and a sense of selfworth and work and changing to one of a generation of entitlement, hand outs, and dependency on the system based on some stupid idea of imaginary wrongs to a narrow group of people.

Not all those wrongs are imaginary, Merc. Whether or not they're relevant is an argument to be had.

I don't know what it's like over there, but over here most of the social housing is now owned by not for profit companies rather than the state. It was sold off in the 80s and 90s. The reputation the estates sometimes have for anti-social behaviour, drugs and nightmare neighbours is partially a fair one. But the reputation is down to a minority of the tenants. It's amazing what absolute chaos a relatively small number of people can cause. In terms of unemployment, the reputation is again partially a fair one. But higher unemployment than the national trend still amounts to a minority of the community. What is problematic is the high percentage of unstable, unskilled, low-paid sink jobs. But even then, that isn't the whole story. Most people on 'council' estates are just like everyone here: trying to get by, making sure their families are fed and happy, hoping their kids will do well and attending parents evenings, making good and bad decisions and coping with the consequences. They just rent their house from a social landlord.

The most frequent one around here is related to race. They are easily argued against in most cases. One thing is for sure, if Obama is elected much of the wind will fall out of the sails.

Given that everybody is so glum, what with the stockmarkets going into freefall an'all... I am injecting a little cheer into this mix:

Chin up everybody, some people have it worse:

... I could not be more excited. To me, opportunities abound like we have not seen for almost a decade. The market was so boring for so long with so few opportunities. Remember what generals were doing as the Battle of the Bulge started. Eisenhower had to turn on them. Remind them that this Battle was one of the greatest opportunities they had to end the war. This market meltdown is a rare and exciting opportunity even for those who may lose an average amount - maybe 20%. Exciting if one chooses to make it so.

Dana I'm not discussing the merits of the different social programs, or the justifications for using them - I'm responding to the tone of your post. The defeated-before-you-begin attitude. This specifically;

I'm just saying that these are the same sentiments as those expressed by generations of US welfare recipients. It's one of the reasons I'm not a fan of socialism... it seems to suck the initiative out of people. Just getting by becomes more attractive than trying harder and possibly facing setbacks...

"The lesson is, never try" - Homer Simpson

No. It's realism and pragmatism. I was not in stable employment. Years of working in sales jobs, then a family business that went under, then unemployed whilst going through a minor breakdown, then doing voluntary work and then into adult ed. I loved my job teaching literacy, but I didn't feel like it was in any way secure. A lass who started working there about 4 months before I did, signed up to a mortgage, got herself a tiny little one bedroomed terraced house (£100k). She, like me, earned less than 15K a year and was starting with no deposit. She was a sub-prime mortgage. None of the main sellers would take her on because of the rule of thumb on percentage of income.

The same people were saying to her, that she should try and get onto the housing ladder, that were saying to me I should get on the housing ladder. Houses are big, fucking expensive things. How in God's name does someone earning £13,500 a year think they are going to buy a house that costs £100,000?

Less than six months after moving into her house she got made redundant. She was scrabbling around desperately trying to make mortgage payments while the industry she'd been working in (in various firms) collapsed around her. It's since picked up again, and she may well be back in her usual line of work. But I do wonder if she managed to keep hold of the house.

If I make it to my eventual goal of history lecturer, I'll probably look at getting a very modest property, but until I am able to earn at a level that justifies that kind of investment/debt, I wouldn't touch it with a ten foot bargepole.

So basically she bit off more than she could chew and got in over her head buying a house bigger than she could ever afford. And somehow this all comes back to being "someone elses fault". And there in lies the problem with the generations which think they are owed something by the government.

No. It was her fault. But there were pressing reasons. She had just escaped an abusive relationship and I think was seeking some sort of security. But she was also swayed by the generl consensus around that adults shold own houses. I cannot tell you how many people have advised me to try and get a house. I have never earned enough, or been in a stable enough job to buy a house. I could have got a subprime mortgage. I'm very glad I didn't.

And as for choosing a house that was too expensive: that's the housing market round here. It was a tiny terraced house, she wasn't buying something greater than hr needs. It was significantly smaller than the one she was renting.

I got a better job about 6 months ago. Not a better job a great job with good money. That said...

It did take me two years to nail it. It was about 'who I knew' before I could talk about 'What I knew', I still get other state gov.job interview offers but I could never nail them. I would need to take classes to be competetive in other sectors. At my workplace we closed down a building to save money. Overtime is at risk. The buildings are old. The property is valuable and there are so many other reasons the D.O.E. wants to relocate it. If I ever get laid off I can lateral transfer into another position even if it means bumping someone. That means someone could bump me too.

There is good and bad. I feel secure but not TOO secure. I am driving a beater car so I can eventually save all my expendable cash in the event of a future emergeny.

On the back of my check stub there was information about employees contributing to a 457. I am torn about saving extra for myself, and not knowing if my investment would be at risk. Maybe it would be riskier not to, personally and by not making the government coffers richer. ?? Does not contributing make the state poorer? ( mostly just thinking out loud )

my boss asked me if I had any money in my 401k. (You'd think he'd know). But yeah, I lost a bunch, along with everyone else.

doom, doom, doom!

My experience is that if you are not with in 5 or better yet 10 years of retirement you can't go wrong putting money away for retirement. You may want to consider an IRA or a Roth IRA. There are some people on here that are much better at giving you this advice. I just know what has worked for me recently. Look up "dollar cost averaging", it works if you hang through the ups and downs.

You only lose if you pull it out at a loss. If you sit on it, it should come back up when the market recovers.

That's what my brother says, and I have to agree. He told my parents "you've only lost if you pull your money out now."

The problems with the house buying thing, in my eyes, is so many people don't WANT a modest home that's liveable, and comfortable, and safe. They want the McMansion and the people going "damn that is some nice house you got there."

I see that all the time around here, everyone wanting to live in a subdivision (is that what you call them? not sure) where all the McMansions sit next to all the other McMansions that all look vaguely the same. I find that boring.

There are so many beautiful old homes with character. Granted, an older home will cost money in other ways, but why do so many people (sheep) want to be like all the others, keep up with the Joneses, show your friends how well you've done (even if you're drowning in debt?)

My dream is to save up, get some land, slowly build a log home. Not a big one, just a sweet cozy little home for me. It may take a long time...but it's my goal.

Around here, the "old houses with character" are the ones closer to downtown, and thus they cost more than twice as much.

Ahhh, it is location location location, huh?

That makes sense: in this smaller town no one needs to live closer to anywhere. Across town is like 15 minutes, and many people commute out of town anyway!

Well, this one sucks. Take a stable company with a national brand that has been built up since 1936. Enter the 1990's and have the company be sold to two food companies, one of which imploded due to internal accounting fraud. Have it end up in the hands of an equity fund. Cue meltdown of equity markets.

Why do I feel that if the company had just maintained it's focus and sold cookies and not been treated as a financial poker chip, that everyone would still have a job? I also would like to know how they can duck the 60 day notice requirement if the parent company, Catterton, is still in business.

Read the blog at the bottom of the article where the current and previous employees are posting. Some of them make me want to cry and others make me so ****ing mad.

BTW, Michigan is/was a battleground state. Small towns like these were a Republican bastion which would offset the urban areas.

First question for the candidates - "How can the company violate federal law?"

And this differs from just picking up your Corprate HQ and transfering the whole thing lock-stock-and-barrel to Dubai how.

You should fully expect such action in the near future when NoBama is elected.