Peter Schiff of Euro Pacific Capital writes, "The grim reality is that
trillions of dollars were borrowed and spent that will never be repaid. No
government program can alter that fact. Someone is going to have to pay the
piper for all those granite counter tops and plasma TVs. The price tag is
staggering and for all the bailouts and stimulus packages, all the government
can do is exacerbate the losses and shift the burden through inflation. Nor can
the government resurrect bubble home prices and the fantasy of real estate
riches that went along with them. One way or another, rational home prices will
be restored and the myths of
our asset-based, consumption-dependent economy will be finally discredited."
(See Bailout
cure worse than disease, Asia Times Online, July 29, 2008.)
If that wasn't enough, as a long-time homeowner, I can tell you that buying the
house is just the beginning of house-induced-bankruptcy, as staggering property
taxes and homeowner insurance are major recurring items, but which doesn't even
begin to address the fact that you need to paint the damned thing every 10
years or so - costing many thousands of dollars - and replace the roof about
every 15 years - costing many more thousands of dollars - and replace every
damned thing in it (air conditioner/heater, dishwasher, water heater,
televisions, video players, furniture, carpets, etc) in the thing every seven
years or so, costing umpteen MORE thousands of dollars, not to mention all the
front doors you knock down and have to replace when your family locks you out
as part of some doofus "tough love" thing, like I'm going to put up with that
crap even if I was sober!
So, it seems little wonder that so many people are allowing themselves to go
into foreclosure. Nobody told them about that part!
And given that banks, when selling foreclosed houses, actually net about half
the price of the mortgage. That means to me that houses are, by extension,
overpriced by half, and as such will surely not be rising in price for a long,
long time to come.
The businessspectator.com is not interested in how I am trying to unload my own
eyesore of a house at a seeming top in the market, or how I am holding the
dishwasher together with duct tape until then, but says that that National
Australia Bank has made a "decision to write off 90% of its US conduit loans",
which apparently comes out to a tidy $830 million! Wow! Talk about biting a
bullet!
They go on, "A US recession is now locked in, but more alarmingly, 55% loan
losses point to the possibility of a depression."
Possibility? Hahaha! The essay "Dead Cat Bounce" by Edgar J Steele at
conspiracypenpal.com hits the nail on the head when he says, "Not only is
something wrong with the dollar, the banking system and the economy, there
almost literally is nothing right with any of them. Truth is, that whistling
noise you hear is the air streaming past your ears as we all plummet into the
deepest economic abyss ever seen by mankind."
So why haven't things collapsed? The answer is simplicity itself: desperate
actions by desperate people in Congress and the Federal Reserve, who are using
every slimy trick they can think of, as I gather from Michael S Rozeff, a
retired professor of finance and writing at LewRockwell.com, who asks, "What do
our officials most fear? They fear the public's loss of confidence. Events are
driving their improvised attempts to stem a general loss of confidence in the
dollar, in them, the financial and monetary system, and the government as a
whole."
The motivation, I assume, is because the November elections are just around the
corner, where all the House of Representatives and a third of the senate are up
for re-election! Hahaha! Now you know how things work!
And they may be onto something there, as the latest Gallup poll has congress
receiving its lowest approval rating ever. Only 14%! And when six out of seven
people think you are doing a bad job, you become desperate people doing
desperate things, too.
Some will be desperate enough to buy gold and silver. They will almost
certainly prosper, if history repeats itself as it always has.
Others will be desperate enough to invest in other things. They will almost
certainly not prosper, if history repeats itself as it always has.
So it comes down to a bet on a 100% long-term probability, which makes me go
"Whee!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2008, The Daily Reckoning.)
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