Or so said Jon Stewart this evening during his commentary on what I like to call Behemoth Black Monday. Surprisingly, today the House of Representatives failed to pass the biggest bailout in US history. Perhaps because a large percentage of Americans who have no savings, investments or any direct relationship with Wall Street whatsoever contacted their congressional representatives in angry protest, wondering why taxpayers should bail out the so-called fat cats? Ah, there’s nothing like a 777.68 drop on the Dow to brighten your day.
WaMu died last week as Mike McGonagle demanded it should. Reno Ignoramous rings in my ears because for more than two years on this blog he’s been talking about a house-of-cards ponzi-scheme leading to a meltdown of epic proportions. I took it all in as certainly possible and watched with presence as the pieces started to unravel, but I could not possibly have imagined how vividly accurate his predictions were until now as we see it unfold in front of us.
And now, in a world where McDonalds is more credit-worthy than the US Government, Bantering Bear, another proven soothsayer on this blog, has suggested the possibility of riot. Sound extreme? Don’t dismiss the possibility.
Foreignpolicy.com tracks failed states worldwide. Each year, more and more countries drop into the red zone. When economic health reaches a certain low point, any little disaster can tip an entire country into chaos. This year the US was a comfortable light green on the map, measured before our latest financial unraveling… but what’s disturbing is how much of the world shows as yellow, orange and red. Soon, we may be joining them.
I believe the US has reached the end of its superpower reign. Don’t call me unpatriotic… the emperor simply has no clothes. That’s it.. Many years ago I got through college by majoring in history, and if there’s one thing I remember, it’s that all great empires inevitably get too big for their britches and collapse from within. The British, the Dutch, the Soviet Union, us… and so many others before.
It is what it is.
You have no idea how many realtor sales meetings I’ve sat through where the bottom has been proclaimed, the end is near, activity is up, NAR says this, Lawrence Yun says that, the media is negative, so ignore them all, go forth and sell with confidence because now is a great time to buy… I’ve seen so many of my colleagues nod their heads, toast to continued success and drink the Kool-Aid, chanting that the glass is full as we march unwittingly towards Jonestown.
But thanks to you all, even if I didn’t fully understand the horrors that might unfold, I at least knew not to totally consume the Kool-Aid. Which means I get to live another day, more fully prepared, and not so shocked as the majority of the population might be.
Yeah, sure, a few people with means will still buy houses for reasons that work for them. But as the rest of the market freezes, it will be fascinating to see how this whole mess plays out. (RI? BB? Care to make any further predictions?) Hmmm, maybe it’d be a good time to become a government investigator… I hear the FDIC is hiring.
Geez, this is heavy. I need a beer, and I bet you do too.
So don’t forget to join us for Beer with Bloggers this Wednesday at Tanamera from 5:00 -8:00 pm. And don’t worry if you’re flat broke… we may be too by then, but it’s totally free! Mike will be there, and I betcha he’ll have at least one piece of hot, local gossip to share.
55 comments
Come back off the ledge. If the US is over as we know it, God save the rest of the world.
People always think it’s over. Things will turn around. It will jsut take forever and a day to happen.
Wow Diane, that’s a very Microcosmic view of what’s going on. We’re not the only country hurting, we’re not the only country with a housing crisis. Look at Britain. Look at Spain. Look at the majority of Europe.
I guess one needs to define ’super power’ for me to decide if America’s best days are finally behind it.
But I don’t think so. Pardon me for getting a little deep, but everything runs in cycles and corrections. From nature to Wall Street. I’m sure people thought back in the Great Depression there was no future or hope either.
Everything runs in cycles, whether it’s stars, planets, the universe, the economy, the rise and fall of countries etc. What happened this morning? The stock market rose over 300 points, slicing its loss in half from yesterday. So go figure.
I don’t think by any means the best days of this country are behind it. I think this is more of a wake up call to Americans, who as a whole, maybe got a little too greedy, a little TOO capitalistic, and wanted things they can’t afford.
Suze Orman, who I love so much, said it best ‘It’s time America to realize we have been living out of our means for over a decade now.’
Buying houses one can’t afford, continuously charging goodies on credit cards, buying new cars when maybe we didn’t really need one. All because of the perceptions in this country that this is the way we’re supposed to live. We’re supposed to own a nice house in the burbs, or something is wrong with us. We’re supposed to have a nice new shiny car that costs $10,000 more than what we can afford. We’re supposed to continue racking up credit card debt each holiday season buying gifts for people even if we can’t afford it. Consume consume Consume.
I have been in another country during the holiday season, and the spending chaos this country goes through each holiday season is unmatched.
Yes, the lending companies are partially to blame for this…but who are the ones who signed the bottom line before fully researching or thinking about their own home loan? I researched mine.
Sure blame the lenders, but some of these people who got ‘voodoo loans’ as BB and Ignoramous call them, must have known deep down they shouldn’t be signing for a $400,000 loan with a credit score of 600 and making $15 an hour. If not then that’s gross negligent self-responsibility.
If America wakes up, and realize we are holding an unsustainable way of life, I think our best days are ahead of us.
Suze Orman, by the way, says this mess won’t be over and fully corrected until 2015, and I am leaning more toward that prediction than any other.
I must say, that despite the failed passage of the bail-out, I am positive on the long-term outlook.
While a bail-out would have addressed a short term crisis, my belief is that 700B would have been the first of what would amount to a 4 Trillion dollar package. How often does the government estimate one number only to exceed it by a factor of 4 or 6 or 10.
For this reason, while the short term losses are painful, and the market took a hit, to me it means that the sooner we can climb out of the mess. I’d rather have heart surgery now with a near term recovery than be bleed to death over several years.
Honestly, 700B would hardly cover even one of these failing institutions. While liquidity will be a short term issue, there are several healthy firms that will see this as acquisition opportunity.
So Diane, I respect you and your blog, but do find your latest post to be a somewhat bleak and narrow view of our current state. I think if we can compare two realities (pro and con bailout) the reality without a bailout will bring a bottom to the real estate market sooner, thus ultimately benefiting a Realtor.
My 2 cents.
Well said, all. It seems to me the law of unintended consequences is at work in the deleveraging of America. As banks, investment companies, manufacturers, wholesalers, retailers ans service companies come to grips with reality, the only thing one can hope is that the end result of the deleveraging is stronger balance sheets for everyone.
But the media frenzy surrounding the negotiations reminds me of an old saying: It’s not pretty watching sausages or laws being made. The end product might be palatable, but the process is really messy.
That’s my 1.5 cents (inflation took the other half cent).
WOW! Im shocked, but I would have to agree with Diane. Yes, the article is bleek, however there is truth in it. From what insiders at executive levels on WallStreet are saying the FDIC will become insolvent soon. THEN WHAT? Then you money isnt insured. Run on banks are next.
FDR once said, war is necessary to get the country out of a depression.
I can hear the war drums tuning up now. Iran anyone?
Diane: Hang in there, tough time for everyone ahead. Stay strong.
Gene in San Francisco
P.S. The cloud of smug has finally lifted this week in San Francisco.
Unemployment up, layoffs, bank closures, no jobs, run on food, home values falling like rocks.
Not too off topic but…
We are here b/c of a lack of leadership and vision from the single greatest dissapointment of a president I have ever seen and hope to experience. Blame me - I voted for him.
I’m a registered republican that will be voting for OBAMA. Let’s get it right this time!
Gene,
Your comments are not only irresponsible, but they are factually incorrect. WTF?
Royal Flush,
Both Bushes represent(ed) what the Republican party has become, which is why so many of his own party will have to “hold their noses” and vote for McCain (in the words of his own mother). However, you are wrong to point your finger solely at Bush. I will correct you to say this whole falsehood of “homeownership is the American Dream” and thus the ratio of homeowners to renters should be ever higher, started way before Bush. It started well into the Clinton admin, and possibly before, but primarily rests in the Congress’ laps. And everyone up and down the line share responsibility (homeowners, flippers, Fed, banks, realtors, Wall Street and foreign investors, yadda yadda).
I remind us all of the adage that “No single raindrop believes it is responsible for the flood”.
Do not count the US out just yet. We are still a super power and that can be seen in just the fact how we effect the world, both good and bad.
And just a bot off topic. Even Obama is starting to realize his tax increase is no where near enough to pay for some of the things he is promissing. I feel sorry for any politician as this mess is going to take a while to fix. And while George may have been asleep at the wheel, congress has been out of control!
And the CDS (Credit Default Swap) problem is starting to raise it’s ugly head. I think that 700 billion was just the tip of the iceberg. Insuring risk? Who thought of that anyway? Was that the only way for sub-prime to be so wide spread and available? Estimates for these wacky instruments are in the neigborhood of 45 trillion dollars!
CommercialLender said:
“Your comments are not only irresponsible, but they are factually incorrect”.
Im sorry you feel that way, but this is America, and I am entitled to my opinion. Sorry you dont agree but thats ok. This is the GREAT USA and we can all have opinions!
As for facts on my comment, I work in the Financial Industry at the Executive level, and THIS is what is being discussed, soooooooo take it for what’s it worth.
Hope you fantastic week!
Bush is blamed for everything. It is just easy and lazy. You don’t really have to know anything, jsut blame the president.
It has been that way since the beginnning of time. It won’t change now.
The media is basically 90% DEM, so they are all to ohappy to go along and push the DEM agenda. So, the casual observer American listens to it, then spews it out as fact. It is sad, but Americans are basically il or un informed. They vote on emotion and are ignorant.
For instance, most Americans listen to Barney Frank and Chris Dodd talk about how it is the Republican’s fault - this whole financial mess - but fail to realize that Frank, and Dodd and the DEMs pushed home ownership through political correctness, versus credit worthiness.
That won’t be reported, so the people will remain un-informed. And they will blame, who else????
It’s Bush’s fault.
I for one am exhausted by people saying ‘it’s Bush’s fault.’
There are 635 members of the legislature, 9 Supreme Court judges, and 15 Cabinet heads that can and do make policy decisions. Now I recognize that the Executive branch of the government is headed by the President. But the Legislative and Judicial branches are equally powerful, in my view. It’s still difficult for presidents to impose their will on the rest of the country without the support of the other governmental branches. And that was done on purpose when the Constitution was drafted.
So let’s just say that everyone in power shares some of the blame, not just Mr. Bush.
chewgumm - Well it has been said that those who don’t keep up with the news are un-informed and those that do are mis-informed.
Suly,
Prbably right on. I am probably a little of both. It is frustrating though.
Blood in the streets! Time to buy?
Thought you might like this one…
Subject: Tax Break
This little story about some beer drinkers explains a lot.
A good lesson for our country.
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it
would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good
customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for
free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would
each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same
amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
‘I only got a dollar out of the $20′, declared the
sixth man.
He pointed to the tenth man,’ but he got $10!’
‘Yeah, that’s right’, exclaimed the fifth man.
‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’
‘That’s true!!’ shouted the seventh man.
‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’
‘Wait a minute,’ yelled the first four men in
unison. ‘We didn’t get anything at all. The system exploits the poor!’
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have
enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college
professors, is how our tax system works. The people who pay the highest taxes get the most
benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat
friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is
possible.
diane i have watched in antisapation of the reno area developers getting a grip of what is going on and lowering there prices of last year by at least the twenty percent that the area has lost hanging on to ther fliers of august07 and comparing them to august 08 prices have remained the same and there more arrogant than ever i have invested in hawaii where they know that cash is king i would love to by a piece of reno but not at the cost of being in the hole from the get go you should be selling to your developers that there huge profit margins are gone
Great post Sully. The liberals will never understand it, though.
It’s an interesting story, but if it’s supposed to illustrate our income tax situation, it doesn’t. For one thing, the people in Sully’s illustration are “taxed” on their assets, not their incomes.
To Sully,
Great post, and I appreciate you putting in terms we can all understand.
But under the current tax systen, the poorest four (who drank for free in the first place) would get $2.50 sapiece for every beer they drank, while the tenth man would pay $55 to subsidize a portion of the transfer to the poorest four. The 7th-9th men would see their beer tab go up by between $2-3.
The tax system today has become a massive wealth transfer system, that rewards less productive people with part of the gains earned by more productive ones. And I think it will get worse.
As an aside, Diane, Guy, and all of you others at the mixer (my memory isn’t what it was–forgive me for forgetting everyone’s names), it was a pleasure meeting all of you and placing faces with handles. I wanted to stay longer, but family duties intervened. I also truly appreciate the massive amount of effort you all spend on maintaining this space, keeping it relevant, fun and informative.
Thanks. And it’s cheaper than therapy.
Take a look at a lenders rate sheet at Jumbo loans..You also better qualify with tax returns, 3-12 months reserves, etc etc
Wells Fargo Jumbo loans where 9.125% last week when I looked
To inclinejj,
You’re absolutely right. The jumbo market seized up first, and the qualification requirements are getting onerous even for those who easily meet the income and DTI numbers. It’s the reserves that are a sticking point in many deals, and with the stock market down as far as it is, many people who had sufficient reserves six months ago are now short.
I apologize for my poor spelling in the previous post. My fingers weren’t completely awake, nor were my eyes.
Sully and billddrummer - The bar example is incomplete because it fixates on income taxes and excludes other equally important taxes. Rich people in the US (which FWIW would probably include moi) may not pay their proportionate share of taxes, much less a disproportionate share. First of all, income from investments (capital gains) is taxed at extraordinary low rates (15%). (There is BTW no economic justification for this). Second, rich people don’t pay payroll taxes whereas poor people do. Again, no justification for this.
Bottom line: if you count all forms of income and all forms of taxes you’ll get entirely different numbers. So no, the current tax system is hardly a massive wealth transfer mechanism, which is actually proven by the fact of the ever increasing disparity between rich and poor in this country. (IOW if there was wealth transfer going on the disparity would be decreasing not, as it is, increasing).
On to the actual subject: WOW, are we gloomy or what? Look, the US economy is a great performer. Right now it’s injured. We need to get it back on it’s feet, and when we do it will be a great performer again. The bill that will hopefully be passed today should start the healing process (Point one: it’s more investment than bailout. Point two: it’s not a silver bullet that fixes everything, we’re in for some tough times).
I think we’re at the point where, if you have the cash and staying power, there are a lot of attractive investments. Two or three years ago that wasn’t the case. Are we at the bottom? I have no idea. Probably not, and I don’t have a crystal ball that tells me when we will get there. But buying on the way down works as well as buying on the way up, so if you find something that looks attractive, be it reality or something else, now would not be a bad time to act. (This may be the first time in my life I’ve ever agreed with Yun). Basically you want to be greedy when others are fearful and fearful when others are greedy. That’s why Warren Buffet and Berkshire are making big investments at the moment - right now most people are fearful so things are priced very attractively.
During the 20th Century the standard of living in the US rose sevenfold. And that included times like the Depression. It’s likely that the standard will rise even more this Century. We have huge household formation, something like a million a year, and those households need somewhere to live. So if you have the means now is not a bad time to put your money to work.
To DonC,
Thanks for the response (it’s been quiet here). And I must agree that rich people have more benefits with respect to tax rates, multiple income sources, and the flexibility to take advantage of the existing system to their benefit (which isn’t a bad thing, because the rich are typically more productive than the non-rich).
Perhaps I should have been a bit more careful in characterizing the system as a wealth transfer system. You’re right: In this country, the rich are getting richer in relationship to the poor. But is the tax system designed to run the government or provide a safety net for less productive members of society? Or both? Or neither?
These questions should be asked in the upcoming campaign. But they won’t.
As far as I’m concerned, this is still the best place to create wealth. My biggest problem is that I’ve been too busy working to make any money.
I’m hoping that I can change that sooner rather than later. Otherwise, I’ll be giving out shopping carts at Wal-mart on my 80th birthday (if I live that long).
The trillion dollar “bailout” just passed. Get ready for a painfully long, drawn out correction/recession. Our corrupt government is completely out of control and working against the will of the people. It’s a sad, sad, sad state of affairs today. Paulson, Bernanke, and Co. just pulled a fast one on the masses. Sickening. Really, really sickening.
For those who aren’t sure what the “bailout” really means: watch in dismayed horror as the likes of B of A and JP Morgan unload tens of billions of dollars in toxic loans from Countrywide and Bear Stearns onto the government in exchange for windfall profits funded by your taxpayer dollars. What for they paid pennies, they will receive dollars. It was a brilliant fleecing on an unimaginably massive scale, one which will have Paulson, Ken Lewis, and Jamie Dimon grinning from ear to ear, as giddy as young schoolgirls.
What was REALLY sad is Congress celibrating the passage of the bill.
The recesion we are NOW in is going to be a long one. Cycles are normal but this is nuts trying to borrow to prevent one.
Anyone here remember Carter? Inflation, unemployment, and high interest rates. Oh boy! I can’t wait. A little deja vue as we are about to put another ineffective leader in charge. And that means either of choices we now have or who we have in there now.
The banks should have failed! We should have bit the bullet, and got this mess over. I think this will prolong the mess, and make future generations pay for it for a long time to come.
Anyone notice the gains of the morning went poof once the bill was passed?
Oh well. Now that I am one of those 50 somethings, I feel a bit uncomfortable as jobs are drying up, and my retirement savings took a huge hit this last year. ATM, worse than my housing loss.
BB,
We should all be afraid, very afraid, when the govt tells us we ‘must act’ as the justification for a complex socialist solution. Does anyone on this blog think the $700B is the last number we’ll hear, or will this be just the first?
Back to taxes, and further, back to Reno real estate:
I have read recent articles that validate what I’ve been telling anyone who’ll listen that the next shoe to drop in housing affordability is taxes.
Say mom-n-pop six pack already spend upwards of 30% to perhaps 50% of their income on housing costs. Say their income is suspect this year already and certainly into next (no or low bonuses, layoffs, no raises, no capital gains). Say the city of Reno (et.al. all across the land) is going broke due to declines in tax revenues. Say the schools are too, and the money is not flowing in adequately to pay for already bloated govt expenditures, and inflation to boot.
Well, mom-n-pop six pack can bet the farm that their real estate, income (not yet in NV, but payroll taxes for sure) and sales taxes are all going up. Now their 30-50% ratio of housing expense to income could easily reach much, much higher, as every dollar in tax increase has a disproportionate decrease in their financial situation because their ‘disposable’ cash is already 1/2 or so taken up by housing.
Today’s bailout, to my knowledge, does absolutely NOTHING to help alleviate this snowballing financial effect for the typical homeowner. Therefore, Reno real estate values will further plummet, only now at an accelerated pace from our earier estimates that involved only Alt-A and Prime ARM resets. Mom-n-pop six pack will be forced to abandon homeownership to rent for pure cash-flow reasons.
So, regardless of this bailout, this housing crisis and the problems in the overall US economy will take years, and years, and years to correct. I sure hope I’m wrong…
http://www.cnn.com/2008/POLITICS/10/03/california.loan/index.html looks like California will need its own bailout plan from the feds. Lovely. State Treasurer Bill Lockyer issued a statement a day earlier saying because of the national financial crisis, California “has been locked out of credit markets for the past 10 days.” Now they want $7 billion just to pay for little things like teachers, police officers, etc.
Let’s see.
How do I qualify for bailout money?
My daughter needs a calculator for school and new shoes.
bill - just say you need 2 billion for a school upgrade and retail remodel.
Good idea. If you ask for a couple hundred, you’re ignored. Ask for a couple billion, and it’s approved, no problem.
Like the mortgage business used to be.
amazing http://reno.craigslist.org/reb/865541103.html better buy now, will not last
Good catch, cash buyer. Ian and Joe are sort of like Diane and Guy’s retarded blogger brothers over at Chase.
To Sully,
Thanks for the tax story…unfortunately it’s just not close to the truth. Do you know that listening to Limbaugh & FOX Cable news is bad for your health?
For example.. you always hear that “America has the highest Corporate tax rate in the world?” This is true… unfortunately 60% of the largest corporations operating in the US paid $0 from 2000 to 2005. We all know that those were really difficult financial times. Now I don’t know about you.. but I don’t think that this is close the the highest. So I don’t support higher taxes… but what I support is FLAT RATE % taxes with no writeoffs except medical. Nothing else that has to do with a choice. Not even college, babies, farms, donations, floods, hurricanes, ferraris, yachts or anything. Sorry but to operate a business in the US, offshore accoutns are not accepted. If we want to subsidize something such as college then we do it directly on a seperate Subsidizing bill that can be viewed clearly as to our investment.
But no politician will ever, ever do this becuase they are all paid for, by the rich who wine about paying so much… but can qualify the Ferrari as a business car writeoff.
So I dare the rich and “most productive”… to come clean.. stop whining about paying more and lets pay a flat % tax on every earning no loopholes.
I bet if we did… the deficit could be repaid, and the recession would end alot faster.
The State of California today is saying they will need a $8 Billion Dollar loan. We in California are already paying far to much for what we are receiving.
Both Obama and McCain voted for this bill today. Wooden Arrows?
Helping the Rum Industry? HUH? Has everyone gone insane?
Is this the best we can do with regards to electing someone who sincerely cares about the future of America?
The rich get richer and the middle class and the poor get screwed.
Very sad indeed.
McCain told us all that if he’s elected, he’ll veto EVERY Congressional spending bill that comes across his desk with ornaments [aka pork, marshmellows, etc.]. Then he’ll expose those in Congress who added the pork, purportedly subjecting them to public ridicule.
So what does he do? Approves this bail out bill which includes an additional $140B of garbage [like the effects of wooden arrows] having nothing to do with the present economic crisis.
Then at the debate the other night Sarah was asked if she disagrees with any of McCain’s positions? She could have answered yes - her co-”Maverick’s” vote for $140B of crap. But she didn’t.
Then at the debate the other night Joe volunteered that he and Barack support legislation that would allow bankruptcy court judges to unilaterally rewrite mortgages [talk speak for reducing the amount borrowers owe their lenders (or now their assignees) because their security (i.e., their homes) has gone down in value].
Oh, and did I mention the additional $25B big three auto bailout Congress voted for last week?
And you really think taxes for 95% of us won’t go up a penny? And there will be money available for universal health care? And we’ll be able to bail out the poor homeowner who can’t afford to pay his/her mortgage because he/she didn’t realize you can’t borrow at 1% APY when the bank will pay you 4.25% on a short term FIDC insured CD?
These people, and I’m talking about ALL of them, are absolutely out of control! Two observations: it looks to me like we’re in for a whole heap of trouble no matter who gets elected; and I’d ask Barack, what exactly he means now by “change?”
I see that AIG has already drawn down $61 billion of the $85 billion the government has made available to it. Would you like to start a RRB pool as to how long it takes AIG to come back and say it needs more money?
“it looks to me like we’re in for a whole heap of trouble no matter who gets elected….”
Smarten, are you still predicting that the bottom of the housing market will arrive on January 11, 2009?
Suppose that every day, ten men go out for beer… The tenth man (the richest) would pay $59.
So the top 10% pay 59% of income taxes?
How much of the income do they earn?
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.
A textbook Appeal to Authority! First, state your credentials, then, for good measure, pre-insult anyone who might disagree.
Don’t worry! Bernake and the Fed will save us all by printing more money!!
That was a little tongue in cheek, but basically that is my prediction: hyperinflation.
it looks to me like we’re in for a whole heap of trouble no matter who gets elected….”
Smarten, are you still predicting that the bottom of the housing market will arrive on January 11, 2009?
To quote Marla
I think regardless of who wins Nov 4. The country is in for 4 bad years..
Marla posted:
“Smarten, are you still predicting that the bottom of the housing market will arrive on January 11, 2009?”
I’m wondering the same thing. Most people from CA are completely jaded when it comes to real estate prices. They’ve become accustomed to ridiculous price to income ratios, and cannot fathom housing prices falling to affordable levels equal to, or less than equivalent rents. A recommendation for these people would be to look at Detroit, Cleveland, and a few other cities which give away houses for FREE. This is the yin to their yang.
I’ll up Suze Orman to the year 2023 or thereabouts for slight housing recovery for Reno.
I used to think it would be 2015 or so with the prime and alt-a resets working their way through and the housing bailout, but now I don’t think it will uptick in median price until 2023.
The things that can move the time frame up a bit are:
1) major businesses fleeing the economic collapse of California and relocating to Reno with incentives to do so,
2) lowering sales taxes enough where Sacramento and possibly the Bay Area will find it worth the price of gas to shop here (example is Woodbury Commons in upstate NY, a huge outlet mall with a pleasing outdoor layout that people from the NYC travel over 2 hours to shop at),
and/or
3) reducing cost of homeownership with lower property taxes and energy costs.
Since these efforts largely depend on the voter base and the local gov’t to act, I don’t put much stock in it happening.
Whoops, forgot #4: no more new residential construction awarded until the current ones are completed.
Highly doubtful that is going to happen!
Students of history like Diane (excellent post) recognize that few things are more conducive to a very rapid change in government than economic upheaval on the scale that now seems possible. Sometimes the change is toward socialism, and other times it might move toward fascism. Diane mentioned the possibility of riots, and of course nothing goes quite so well with a good riot as does martial law to restore the order. When people become truly desperate, we find out what’s underneath the thin veneer of civilized behavior, and it’s not as pretty as we like to think.
That said, the economic rescue package is not a cure by any means, and it will introduce new problems into the mix, but it should prevent the sudden shock and panic that would likely result from the quick seizure of our credit markets. Hopefully, the time it buys us will be well-spent in planning a more successful exit strategy from this negative feedback loop in which we’re currently trapped.
To Gary,
Well, it looks like the negative feedback loop has finally hit the Dow, with the index falling over $400 (they call it ‘points’ but it’s really dollars) so far today.
There’s seemingly no floor.
There is a floor on the DJIA.
We haven’t hit it yet.
When one considers how overvalued many stocks have become, it’s no surprise that they’re getting crushed, though panic does have a lot to do with the current slide. I posted on another blog more than six months ago, that Google was going to get creamed (it was over $700 at the time). This was when people were manic and screaming Google $1000. Well, it never reached $1000, and got creamed. Where is it now, in the $300 range? People seemed to abandon fundamental things like P/E ratios and were driving up stocks just for the sake of jumping on what was “hot”. This nonsense had to stop, and we’re seeing that now.
From the Associated Press:
“Congress hears Lehman sought millions for execs
[Rep. Henry] Waxman read excerpts from Lehman documents in which a recommendation that top management should forgo bonuses was apparently brushed aside. He also cited a Sept. 11 request to Lehman’s compensation board that three executives leaving the company be given $20 million in “special payments.
“In other words, even as Mr. Fuld was pleading with Secretary Paulson for a federal rescue, Lehman continued to squander millions on executive compensation,” Waxman said before Fuld appeared as a witness. Waxman quoted Fuld as saying in one document, “Don’t worry” to the suggestion that executives go without bonuses.
Waxman quoted George H. Walker, President Bush’s cousin and a Lehman executive who oversaw some Neuberger Berman employees, as responding with a dismissive tone to the idea of going without bonuses.”
Anyone still confused about what’s really going on in this country?
I just heard they’re having an early pre-Christmas sale down on Wall Street, so if there’s anyone on your list this year who wants a nice block of stock, the prices are really good today. In fact, they’re so cheap that they don’t really count as a main gift, but they’d make an excellent stocking stuffer for little Billy or Mandy.
If it seems a little early to sing Christmas carols while you’re shopping, you can just sing the Lehman Brothers theme song instead (everybody now)…
You’ve got to accentuate the positive
Eliminate the negative
Latch on to the affirmative
Don’t mess with Mister In-Between
You’ve got to spread joy up to the maximum
Bring gloom down to the minimum
Have faith or pandemonium’s
Liable to walk upon the scene.
To cash buyer,
I think one of them is a cook at a restaurant in Spanish Springs.
Nice guy, but not a ‘qualified RE professional.’
Well, all of 5 days ago I questioned how much longer it would be before AIG announced it had blown through the $85 billion it got two weeks ago and would ask for more. Today AIG got another $38 billion loan, on top of the $85 billion.
I guess another $440,000 week at the spa is in order for top AIG executives.
The stench coming out of this is getting worse by the day.
To Marla,
When you’ve got an $85 billion secured line of credit and more assets, why not advance more money? It’s still secured, isn’t it?
Oh, but perhaps the $3 trillion of market cap that’s evaporated in the past week could have been used to buy some of those assets?
Houston, we have a problem. There’s no money around to buy the assets we need to sell. Can we get some more money just to tide us over until the markets come back?
Marla posted:
“I guess another $440,000 week at the spa is in order for top AIG executives.
The stench coming out of this is getting worse by the day.”
Not only did AIG cancel their current spa retreat, they’ve also canceled an upcoming event as well.
We are in the midst of an historic shift in this country. When things turn ugly, people love to assign blame, and as multitudes of individuals find themselves unemployed and quite literally hungry, they’re going to be calling for these elitist’s heads. And rightfully so.
The fact that many CEO’s are earning many tens of millions per year, sometimes in excess of $100 million, is despicable. NOBODY is worth that. There is only one reason for this: greed. These pigs are about to find out what happens when you leave nothing behind for the masses. As desperation sets in, people will want their heads to be served on a platter, and the politicians, fearful for their own standing, will do their best to see that it happens.
With such horrific economic conditions in store, I don’t see how the Dick Fuld’s, Angelo Mozilo’s, and Stanley Oneal’s of the world can escape the punishment they so rightfully deserve. They sold their companies, employees, shareholders, and ultimately the country, down the river for their own personal gain. There will be hell to pay, for sure.
BanteringBear, do you suppose that the next great growth industry will be security and bodyguards for America’s fallen financial executives? I’m guessing that the moat builders are seeing a spike in business as well