T Nation

Nearly 1/3 of Mortgages Underwater


#1

http://www.loanperformance.com/infocenter/library/FACL%20Negative%20Equity_final_081309.pdf

I'm with the Austrian deflationists in thinking we're going to have an L-shaped recovery (economic recession will stop at 65-70% of previous GDP followed by a decades-long plateau).

We've spent all of our GDP through 2019 with the bailout. Consumer credit is maxed out and consumer spending (2/3 of our GDP) continues to decline and is not coming back. No one will buy our MBSs anymore, so we'll be unable to re-blow the housing bubble.

I'm thinking we're going to have Japan's economy for the past 20 years writ large here.

Discuss.


#2

I am going with yay, for the Chinese are still growing, their own demand seems to start to substitute for the American consumer.

Just imagine, their companies get actually paid in real money now and their workers get to keep the fruits of their labor.

It is a capitalist dream come true, sniff.

The dollar still has to collapse though. Nobody wants no stinking dollar, the Japanese even publicly declared how much they trust the dollar. That is how little they want it.


#3

Nice thread, PR.

If this happens, we'll not grow enough to even pay the interest on all the debt.

I am surprised at how people around the world continue to buy our debt. They're for sure going to paid back in a very depreciated currency.


#4

Well, the entire world needs a non-fiat currency that can't be manipulated. The Chinese are pushing for a new reserve currency that is a combination of a lot of other currencies, including ours. One currency would be able to gain on the others.


#5

We're not growing enough as it is. The private sector of the GDP has been in a recession since 1999.

The rest of the world is buying our debt for now because, despite how bad we suck, everyone else sucks a lot worse.


#6

That is not true, Europe sucks far less for now, we just do not have such a deficit yet and nobody needs to prop us up because we owe him tons of money.

The reason why they buy is because you suck so bad that you might not make it otherwise and drag your creditors down with you.


#7

I read that the Chinese increased their own money supply by 28% last year. So it appears to be something like the early 30's again where countries compete in irrational manners. Even the Swiss are engaging in the craziness.


#8

Delaying the inevitable? We pretty much have to default on our debt sooner or later, or we have to find a way to return to fiscal sanity, ie. increasing our exports and cutting our expenditures. There's no way that'll happen. It hasn't happened in a long, long time.


#9

There is some logic to it because it would be brutal for Switzerland if everyone devalues their currency when they do not.

They are small and export oriented after all.


#10

This may be a compelling reason for a global currency -- becoming dependent on exports puts one at the mercy of the currency abuse in another country. I'm sure the Chinese would prefer not to be stuck with all those depreciating dollars.

A global currency backed permanently by gold may be what the world will have to eventually embrace or there will be NO currency that anyone will accept.


#11

Disagree. Something always fills the void. It's the law of competition. There is simply no way to be isolationist in the same sense as a century ago. Economies are too inter-dependent. Someone's going to make a leap and come jumping into the void with a currency people will want to accept.


#12

Damn, I thought this would be about houses under the sea :frowning: