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From the Wall Street Journal:

For months, Dale Albright, a 30-year-old Tampa, Fla., bankruptcy lawyer, has watched as his clients buckle under mortgage and credit-card debts. After an expensive recent hospital stay, he's worried that a run of bad luck could leave him in financial straits, too.

"I care about bringing our troops home...and for the most part, I believe as far as domestic terrorism goes, I think we've got that pretty much under control," Mr. Albright says. "But the economy really scares me." A longtime Republican, this election he says he's voting Democrat.

With the parties just weeks away from the first presidential nominating contests, economic concerns are seizing a top spot in many voters' minds. Falling housing prices, rising gasoline prices and health-insurance worries are supplanting the war in Iraq and concern over terrorism.

I realize the war in Iraq and the terrible foreign policy of the Bush presidency has caught everyone's attention for the last four years.  But during the same amount of time some huge economic fundamentals  have started to come home to roost in a really negative way.  Right now the economy is bleeding pretty pretty badly and its highly likely the economy will be a top issue in the 2008 election.

Consider the following.

We all know that housing is in the toilet.  This is an issue that won't solve itself anytime soon.  The basic problem is supply and demand -- as in, there's a ton of supply and dropping demand.

The total inventory of existing homes available for sale is huge:

And the months of supply at the current sales is increasing, indicating demand is plummeting.

And this problem is just getting started.  Consider this chart which shows the total amount of resets out there in the economy at large.  We've got a few more years of real estate trouble out there.

The US manufacturing sector is also experiencing problems.  Consider:

Overall industrial production started to drop in 2006.  But notice the gray lines which represent the monthly change in the number.  That number's increases have been slowing for the last few months at consistently smaller rates, indicating production is slowing down.

Durable goods orders have been dropping consistently or a year.  And notice especially the year-over-year line, which has been in negative territory for most of the last year.  

Overall employment growth is declining as well.  Total job growth -- which was never that strong to begin with -- has been slowing declining for the last year.

The financial markets have noticed all of these problems.  As a result, they have been selling the dollar, which currently stands at its lowest level in 30+ years:

Simply put, a lot of very negative factors are lining up right now.  Job growth is weak, manufacturing is slowing and housing is tanking.  The dollar -- despite the oft-repeated "strong dollar policy" of the administration -- is tanking.  By the summer of 2008 when the presidential race is in full swing it's possible we'll be in a recession.  At minimum, I'd give that 30% chance of occurring.  

In short, it could be the economy, stupid, in 2008.

Originally posted to bonddad on Tue Dec 04, 2007 at 04:12 AM PST.

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Comment Preferences

  •  200 million per day in Iraq (89+ / 0-)

    Drill that point home, over and over and over.

    When Republicans speak of cutting programs to shorten the deficit, say 200 million dollars a day.  Tax cuts for the wealthy and corporations?  200 million dollars a day.  

    This war isn't the only reason our economy is sick right now.  In addition to failing housing we have a 800 billion dollar trade deficit - nearly half of that (400 billion dollars) is goods (not oil).   The falling dollar is helping the trade deficit to drop slightly, but the GOP helped place us in this precarious situation.

    Without Republican "drown it in a bathtub" ideology and wreckless, unregulated trade (which feeds a seemingly insatiable consumer diet), we wouldn't be nearly as bad off as we are.  

    Spending 200 million dollars each day in Iraq is not helping matters.  Did we learn nothing from the USSR's collapse in the 80s?

    I've lamented at not being able to buy a house recently due to a mountain of student loan bills - the more I read these reports the more I realize how fortunate I was to wait.

    Separate is -not- Equal

    by pkbarbiedoll on Tue Dec 04, 2007 at 04:26:06 AM PST

  •  A colleague of mine (62+ / 0-)

    asked me "why does everyone keep talking about how great the economy is?"  He is a Republican voter, a scientist like me, but we work closely with a manufactuing plant.  We both know that people who work in the manufacturing industry are losing jobs and their pay is decreasing.  They aren't getting pay raises yet their medical increases by double digits every year.  I'm not really sure why this isn't discussed more - are there just not enough people in manufacturing anymore to discuss it?

    I think it's been frustrating to only hear about how the market is performing but not how wages and health care costs are changing?  Did the housing bubble cover up the real problems in the economy?

    End the Iraq occupation!

    by Unstable Isotope on Tue Dec 04, 2007 at 04:26:19 AM PST

    •  asdf (60+ / 0-)

      It's easier to talk about housing.  It's one subject that has a lot of press right now.

      I'm starting to hear more and more about medical bills.  Only time will tell if that trend continues.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Tue Dec 04, 2007 at 04:29:35 AM PST

      [ Parent ]

      •  Just Paid Off a Medical Bill (26+ / 0-)

        my little brother had go to collection. He went to the ED with stomach pains a few years ago and left with over $1000 debt. Minimum wage job, and no social worker asked him if he needed financial assistance. Now their out to further damage his (admittedly already terrible) credit scores. Ridiculous.

      •  Did you read today's (18+ / 0-)

        Financial Times yet?  I was reading it early this morning about the sub-prime mess and how it has spread all over the world.  Citibank is expected to write down billions more soon.  There had been estimates by the US "experts" that it would probably reach $150 billion, but now in the FT they're saying it looks more like $500 billion.  Yikes!  I think if that is the case some of our financial institutions might go belly up.  

        If the people lead, the leaders will follow.

        by Mz Kleen on Tue Dec 04, 2007 at 04:37:30 AM PST

        [ Parent ]

        •  Oooops........ (7+ / 0-)

          I'm sorry, I made it look like Citibank was losing $500 billion.  I meant to say that overall, the mess's cost will reach $500 billion.

          If the people lead, the leaders will follow.

          by Mz Kleen on Tue Dec 04, 2007 at 04:38:55 AM PST

          [ Parent ]

        •  Remeber though many of those writedowns are only (10+ / 0-)

          on paper.  The assets behind them are still producing cash flow, the problem is there is no market for them and thus they have "no-value".  It is highly unlikely that mortgage defaults are going to be high enough to actually make these securities worthless in the long run, and thus these companies will not see a reduction in cash flow, just a loss of asset value.

          •  Cash flow = asset value (0+ / 0-)

            The only value for securitized mortgage assets is the cash flow they are expected to generate. The two track in tandem with each other. An "on-paper" writedown indicates that the underlying asset will not generate the cash flow that was expected (otherwise, there would not be a writedown), or that the confidence that it will generate the expected cash flow has fallen (which amounts to basically the same thing).

            The reason why their market value is zero is because no one knows how to evaluate their future cash flow due to the high and unpredictable rates of default. As soon as someone figures out a reliable way to price these assets, the market value will fall to track with their expected cash flow level. If no one ever figures out such a method, then their prices will be very low or zero since it's unclear whether any positive cash flow will resul from them.

            For mortgage securities, stocks, and most other kinds of equity, cash flow = value. There is no other metric for evaluation.

            •  What? (1+ / 0-)
              Recommended by:

              As far as I know virtually all of the mortgage backed securities out there are currently producing cash flow.  And value is determined by what someone else will pay for something, not the cash flow it produces.  The problem that has lead to the writedowns is that there is no market for these securities as they are poison to a company's stock/image, thus while they are producing cash flow, they have no value.

              •  Re (3+ / 0-)
                Recommended by:
                loretta, Gary Norton, Justanothernyer

                Ah, but fundamental value of a security is determined more or less entirely by the cash flow it can generate.

                Lets say a given security is expected to pay $1000/year in dividends (or interest from mortgages, or what have you). What's an appropriate market price for that security? It's not $2000, right, otherwise you could make 50% for nothing. One probably would not pay $20000 for it, since you can make 5% in a money market at zero risk. So, it's priced depending on its risk. If it's a moderately conservative investment, you might think 7% is a decent return, so ~$14,200 might be a good market price for an asset that pays $1000/year.

                But what happens if that asset that you bought for $14,200 suddenly starts with massive defaults that you didn't expect, now bringing the yield down to $500/year? Oops, now $500/$14200 = 3.5%, a horrible investment. So, the market price of your security there is going to fall until the yield for an investor is appropriate.

                Assuming you were reasonably sure that the payout would be $500 from now on (even after the initial meltdown), the market price will again fall to levels that should suggest a 7% yield, so $500/7% = $7,150 (since again, you can make 5% no risk, and anything higher than 7% is too high a return so the seller won't want to sell for that price). The original owner of that security has lost either (1) 50% of its market value if they were to sell it or (2) 50% of their cash flow if they weren't. Either way, bad news.

                Now, consider a situation in which no one knows what the cash flow from a given investment might be. It could range from $0 up to the theoretical max payout ($1000 in our example), but it has just lost a lot of cash flow due to defaults, it might lose more, and even worse, very few people even understand the mechanisms through which it even pays its dividend at all! How do you value such an "investment"?

                If you're smart, you don't touch it at all. If no one wants to touch it, its market value is zero even though it's still generating cash flow because no one can figure out the proper price to buy it at since next month the cash flow could be a lot, zero, or somewhere in between, and no one knows what price will generate an appropriate 7% or whatever yield for the money paid.

                Like I said, if this situation sorts itself out and someone can reliably (and convincingly) figure out the cash flow for these securities, they'll have a market value again defined by the expected payout versus risk. But now, since no one knows the payout OR the risk, they can't be valued, so no one is buying them.

                •  Addendum (3+ / 0-)
                  Recommended by:
                  loretta, Gary Norton, Justanothernyer

                  Like I said, if this situation sorts itself out and someone can reliably (and convincingly) figure out the cash flow for these securities, they'll have a market value again defined by the expected payout versus risk. But now, since no one knows the payout OR the risk, they can't be valued, so no one is buying them.

                  Additionally, lots of banks and mortgage originators are actively doing what they can to see that the proper valuation of these securities is not done or done correctly, because banks like Citi still have lots of this toxic crap on their balance sheet, still written on their balance sheets as having a market value of (in our example) $14,200 even though the real value is much lower.

                  If anyone actually did the work to valuate these securities (by figuring out the actual and/or expected yield as I described above), the value would drop like a stone and banks would have to write that shit on their balance sheet, resulting in mega losses (Citi controls more subprime securities than its entire market capitalization at this point. If the subprime securities are worthless enough, Citi could go bankrupt if price discovery were forced!).

                  So, they try to push the price discovery out as far as they can so they can keep writing the fictional number on their balance sheet and stay solvent, hoping that the market will get better, that the Fed will help them, or some other event protects them.

    •  bondad (22+ / 0-)

      always makes it crystal clear--I get as much out of these diaries as any here on DK.

      Of course, the people who most need to listen...won't.

      •  That's the problem (12+ / 0-)

        We on the blogs are still treated contemptuously by many in the media (unless it's a conservative blog with a smear campaign).

        End the Iraq occupation!

        by Unstable Isotope on Tue Dec 04, 2007 at 04:48:47 AM PST

        [ Parent ]

      •  Yup. (13+ / 0-)

        Picked up the WSJ yesterday and made some contemptuous remarks about Bernanke talking about dropping interest rates again.

        I used to think that economics was sooooo complicated.  And that is true to some extent, but some things are really quite simple.  A significant drop in rates by the Fed will lift the market temporarily, further devalue the dollar and not make a long term difference.  It won't help and it may caused further damage.

        And all that I learned merely by reading bonddad's (and others) diaries right here on Daily Kos.

        No more lies - IMPEACH!

        by Fabian on Tue Dec 04, 2007 at 05:53:02 AM PST

        [ Parent ]

        •  Inflation (5+ / 0-)
          Recommended by:
          antirove, Fabian, greenearth, lemming22, kyril

          It is taking a big bite out of my paycheck these days, especially food and energy.  If the Fed lowers interest rates much more, there is a very real danger that high inflation will settle in again.

          Look, I have a lot of sympathy for people who were duped into taking on mortgages they could not afford, but the Fed's actions to bail out the lenders and mortgage brokers only leads these companies to the conclusion that it is okay to make outrageously risky business decisions, because a government bailout is always waiting if things go sour.  I think that it would be a good thing if some of the companies that caused this mess in the first place went out of business.  Then and only then will the lessons be learned.

          •  Some of the companies have folded. (2+ / 0-)
            Recommended by:
            greenearth, kyril

            But it won't change anything.  They'll just move onto new methods and new marks.  But at this rate, they'll have to start going after the top 5%-10% income bracket because everyone else will be loaded down with debt.

            No more lies - IMPEACH!

            by Fabian on Tue Dec 04, 2007 at 08:13:36 AM PST

            [ Parent ]

          •  The problem is (4+ / 0-)

            when we say "inflation," we don't mean the same thing as Wall Street does. "Inflation" of the sort that's bad for us is rising prices and stagnant paychecks. To them, that's "growth;" "inflation" is when wages rise. Real inflation, when wages and prices both rise, is great for debtors and bad for investors. However, cutting interest rates doesn't cause wage inflation (to a point) but does create "growth," so they'll push interest-rate cuts as far as they can.

            There's nothing necessarily wrong with cutting interest rates - the problem is the fact that they can create inflation for us, but not for themselves, due to our lack of ability to create strong wage pressure. Keeping interest rates high in a credit crunch can be deflationary, which is bad for everyone except people with lots of liquid wealth.

            Basically, there's a limit to what the Fed can do, given that there's absolutely no mechanism for protecting our paychecks in hard economic times in this country; given the choice between inflating the money supply, which hurts ordinary folks but keeps the bubble going for investors (and also protects retirees annd pensioners) and deflating it, which hurts everyone, they'll choose inflation and I can't blame them. We need to gain control of the economy ourselves through tools more refined than mere interest rate adjustments.

            During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

            by kyril on Tue Dec 04, 2007 at 10:21:44 AM PST

            [ Parent ]

            •  Remember... (3+ / 0-)
              Recommended by:
              greenearth, Hens Teeth, kyril

              ...that ultimately, the way to improve the economy is to generate real growth of productive industries that provide real value to people (and, make sure the productivity gains generally accrue evenly across the income scale, even if the rich ultimately do a little better than the poor).

              Inflating/deflating asset bubbles, monetary policy shenanigans, pushing money around from bank to bank, and most of the stuff the Fed can do will not help with this unfortunately. Against the reality of a declining real domestic industrial base, anything the Fed does is just shoveling shit against the tide.

    •  Yes. (22+ / 0-)

      Did the housing bubble cover up the real problems in the economy?

      The housing bubble allowed people to spend money that didn't exist, thus keeping "consumer spending" strong and most people's standard of living relatively high. But that could only be sustained as long as the debt-purveyors could maintain the illusion of ever-increasing home values by pushing people into mortgages that extended them further and further beyond their means, using the promise of increasing home values to convince them that they'd be able to either refinance or "flip" their homes before the reset made the monthly payment unmanageable.

      Home equity loans covered up the problem of stagnant wages. Bubble prices covered up the problem of increasing debt loads. And funny mortgages covered up the problem of bubble prices not being within reach of a population with stagnant wages. The whole house of cards was supported by the funny mortgages, and when that card was hit, the whole structure began to collapse, laying bare the underlying problems of stagnant wages and huge debt loads. Credit cards are standing in the way of a complete consumer spending collapse, but credit cards have limits.

      During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

      by kyril on Tue Dec 04, 2007 at 05:55:08 AM PST

      [ Parent ]

      •  Exactly. (9+ / 0-)

        Many people with ARM loans could probably have afforded their modest re-sets IF their wage increases weren't eaten up by increased health insurance premiums, $3.50 a gallon gasoline, and $5.00 a gallon milk.  All of it has come together to cause major pain for the average consumer.

        The fuckers on Wall Street are still walking away with their bonuses though.....I find that nauseating.

      •  I should have read the rest of this thread (5+ / 0-)

        Because you said exactly what I wanted to say and even block-quoted the same text.

      •  right on... (2+ / 0-)
        Recommended by:
        greenearth, kyril

        I've been following this mess for about a year now...every day practically.

        I think you've summed up the problem quite expertly. I just cannot see how there isn't going to be a great deal of pain that comes out of this.

        I don't really think it's going to be very "exciting" either...just a slow steady collapse, one that America will find a way to deal with...but only over next few decades.

        In a way it's almost necessary...there are ton's of people out there who could use a little time to figure out what's really important, and America needs to find it's heart again.

        It's not that I'm wishing for it...I'm in my mid twenties now and last year I landed the job I've always wanted...I'm also getting married in February, looking for a house...etc...believe me I don't want an economic collapse.

        Anti-War is not a protest, it's common sense.

        by Janosik on Tue Dec 04, 2007 at 07:57:45 AM PST

        [ Parent ]

      •  A while back there was a graph (2+ / 0-)
        Recommended by:
        greenearth, kyril

        that showed the real spending going on.
        It showed that if you took away all the spending from home equity and credit cards (DEBT) our actual total growth was IN THE RED-not the phony 4% or so that the Bush administration is spouting.

        It was frightening.

        1/20/09: End of an Error.

        by Esjaydee on Tue Dec 04, 2007 at 10:22:51 AM PST

        [ Parent ]

    •  How can he be a Republican and a scientist?? (5+ / 0-)
      Recommended by:
      Ohiocrat, greenearth, ER Doc, darrkespur, kyril

      I thought they were mutually exclusive. WHY is he a Republican? Does he believe that the jingoistic policies of Republicans are the reason for the US' former leadership in science?

      Look at the history. There's no correlation, excerpt perhaps a slight negative.

      -8.38, -4.97 "...there is nothing either good or bad, but thinking makes it so." Hamlet, Act II, Scene ii.

      by thingamabob on Tue Dec 04, 2007 at 06:05:38 AM PST

      [ Parent ]

      •  Cognitive dissonance (5+ / 0-)

        Cognitive dissonance is a psychological term describing the uncomfortable tension that may result from having two conflicting thoughts at the same time, or from engaging in behavior that conflicts with one's beliefs.

        "Control of the initiative is control of the battle. In the alley, at the poker table or in politics. One must raise." David Mamet

        by coral on Tue Dec 04, 2007 at 06:31:22 AM PST

        [ Parent ]

      •  Scientists and political views (11+ / 0-)

        Scientists' participation in politics is getting greater attention from historians of science and the research that's emerging is rather interesting.

        Definitely being a scientist and being a Republican (or at least a conservative) are not mutually exclusive if you look at the historical data.  Scientists who work in industry or who have strong ties to industry seem to lean conservative more than their colleagues in academia (with exceptions in both cases, of course).

        There could be a lot of reasons for this:  while a scientific world view promotes evidence-based critical thinking, for some, it seems to reinforce a political desire for a highly ordered society in which some things are clearly and unequivocally right and wrong (which we often see in conservatism).  Another reason is possibly how institutional values result in a certain self-selection of scientists who work in a particular field or shape the views of those who work in those institutions.

        There's nothing definitive of course, but there's a lot of good work coming out on this.

        Procrastination: Hard work often pays off after time, but laziness always pays off now.

        by Linnaeus on Tue Dec 04, 2007 at 06:45:32 AM PST

        [ Parent ]

        •  Not to mention... (6+ / 0-)

          having discussed things with a few scientists in industry, one thing that gets some of them is that the folks on the assembly line, with much less education may make more than them...or at least not far off. (A lot of scientists in industry are not well paid, despite having multiple degrees). So there can be this "backlash" against unions and a perceived inequality in contribution versus pay.

          I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

          by taonow on Tue Dec 04, 2007 at 07:16:06 AM PST

          [ Parent ]

          •  Not very good scientists, then (6+ / 0-)

            If they can't grasp the simple logic that the unionized employees are paid better, ergo, unions provide benefits.

            There may be some of this illogic at work--after all incoherence is congenital to some conservative modes of thinking. But I don't think this is a likely explanation--if scientists were to feel slighted by the higher pay of their unionized colleagues, I suspect they would hold management to blame.

            -8.38, -4.97 "...there is nothing either good or bad, but thinking makes it so." Hamlet, Act II, Scene ii.

            by thingamabob on Tue Dec 04, 2007 at 07:24:18 AM PST

            [ Parent ]

        •  And scientists are often not "open minded" (6+ / 0-)

          Sometimes what causes someone to excel in a field is the rigid application of scientific dogma until it yields a result. Occasionally, someone needs to come along and rip that dogma to shreds, but usually it works brilliantly for a while.

          Come to think of it, many scientists that I know probably erroneously equate conservative political views with conservative scientific method. At least it seems that way.

          -8.38, -4.97 "...there is nothing either good or bad, but thinking makes it so." Hamlet, Act II, Scene ii.

          by thingamabob on Tue Dec 04, 2007 at 07:27:06 AM PST

          [ Parent ]

        •  On being a scientist and being a Republican (2+ / 0-)
          Recommended by:
          greenearth, kyril

          A person, even a scientist, can not possibly research everything.  At some point they need to rely on others reviews, opinions and statistics.  One starts to trust sources of information and use that information in a decision making process. For example, a peer reviewed journal is given more weight than a tabloid.  The problem is that those sources of information that people have come to rely upon have been corrupted.    People have started to realize that their chosen brand has changed. A 2007 republican is nothing like a Goldwater conservative.  The time is ripe to present a new brand and maintain the reputation of that brand at all costs.  
          I find that almost all scientists I know have turned away from the republicans....especially doctors.

          If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy. James Madison

          by ScienceMom on Tue Dec 04, 2007 at 09:58:34 AM PST

          [ Parent ]

      •  Probably the same reason most engineers are Repub (4+ / 0-)
        Recommended by:
        k9disc, Cat Nerd, greenearth, kyril

        licans. Something about cream of the crop, and there must be something wrong with you if you can't make it on your own. It's amazing how stupid such intelligent, pragmatic, logical people can be on some things.

        Impeach or be impeached.

        by Hens Teeth on Tue Dec 04, 2007 at 08:00:10 AM PST

        [ Parent ]

    •  The economy is doing fine... (5+ / 0-)

      If the only people you talk to are the investor class. Besides, doesn't just everyone make at least $100,000 these days? That "federal poverty level" is just a myth.

      -5.12, -5.23

      We are men of action; lies do not become us.

      by ER Doc on Tue Dec 04, 2007 at 06:54:37 AM PST

      [ Parent ]

    •  you bet (6+ / 0-)

      Did the housing bubble cover up the real problems in the economy?

      Yes, it did.  That's one reason why an all-out effort is going to be made to prop housing prices up at their absurd levels, because those absurd levels already have been borrowed against and the money spent.

      I think one reason housing gets more press is that a house is part of the mythologized and commercially-exploited American Dream.  We don't dream about universal health care, even though we should.

    •  Elitism (6+ / 0-)

      This has been going on for a long time. It's only factory jobs. They can go back to school and get a real job. I have a college degree, so I'll be fine.

      In the meantime, we are no longer able to make our basic necessities. After the factories left, the engineering & management followed. So now we don't even know how to make our necessities.

      But no worries, we can all be retrained. Except that they are also outsourcing research, design, doctors, journalists, teachers, ... Just what is there left to be retrained for?

      Impeach or be impeached.

      by Hens Teeth on Tue Dec 04, 2007 at 07:54:41 AM PST

      [ Parent ]

      •  Got to go to college! (3+ / 0-)
        Recommended by:
        greenearth, Hens Teeth, kyril

        and get a fancypants degree.. it will only cost tens of thousands of dollars.  But don't worry!   That's what student loans are for.  Sally Mae wants to help you achieve your goals.  And hey by the time you get around to paying off your loan your balance will have grown to over a hundred thou.   Just think how much you'll be helping our economy by paying back all that interest money!

        By the way, have we mentioned how nice the weather is in India?

        Good luck!

        Separate is -not- Equal

        by pkbarbiedoll on Tue Dec 04, 2007 at 09:35:07 AM PST

        [ Parent ]

  •  My investment-counselor pal (21+ / 0-)

    said that his firm estimates the odds of a recession as 40% or higher. Of course, that foresight didn't keep the company from a write-off of billions of dollars this year.

    Baby, it's cold outside.

  •  Oh come on now bonddad....... (13+ / 0-)

    doncha know that the economy is doing just fine?  So says the talking heads on the business channels on tee vee, and the Preznitwit sez it's so too.  Whatcha talking about here?   (snark)

    If the people lead, the leaders will follow.

    by Mz Kleen on Tue Dec 04, 2007 at 04:31:41 AM PST

  •  None of the Presidential (13+ / 0-)

    candidates, Dems or GOP are going to talk about the "real" issues.  They're not really going to talk about how bad the economy really is, or how health care is becoming unaffordable, or how the insurance companies are refusing to pay for a lot of procedures because it affects their bottom line.  They're not going to say anything about Americans losing their jobs to outsourcing, or any of that stuff.

    We have to find a way to make them actually confront these issues and not just gloss over them.  These candidates are great at dancing around the issues, but now it's time to stop the dancing and confront head-on these issues that affect all of us, especially the vanishing middle class.

    If the people lead, the leaders will follow.

    by Mz Kleen on Tue Dec 04, 2007 at 04:47:09 AM PST

      •  You took the word (14+ / 0-)

        right out of my mouth.

        Now that I think of it, Kucinich is probably talking about these things too, but not in venues where the media are paying any attention. When the camera's on him, it's all about war, peace and NAFTA.

        "The great lie of democracy, its essential paradox, is that democracy is first to be sacrificed when its security is at risk." --Ian McDonald

        by Geenius at Wrok on Tue Dec 04, 2007 at 05:19:12 AM PST

        [ Parent ]

      •  Ahem...the word is Clinton...historically (2+ / 0-)
        Recommended by:
        coral, Lobsters

        speaking!  Same song...second verse?

        Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

        by oldpro on Tue Dec 04, 2007 at 05:29:27 AM PST

        [ Parent ]

        •  She dances around the (5+ / 0-)

          issues too much for me.  Her and Obama do too much dancing.

          If the people lead, the leaders will follow.

          by Mz Kleen on Tue Dec 04, 2007 at 05:34:56 AM PST

          [ Parent ]

          •  A certain amount of 'dancing' seems to be (1+ / 0-)
            Recommended by:

            required.  Clinton and Obama are the leaders for nomination, so their 'dancing' appeals to most people, evidently.

            The other thing about dancing (meaning, I suppose, not being totally specific about solutions to problems) is that an inability to dance can hem a candidate in to predetermined solutions once they are elected, making it harder for adjustments to changing circumstances or new information.

            Things change.  Problems get more complex and solutions must adjust.  Harder to do once you have specifically said "THIS is the answer to that problem!"  Many a candidate has regretted such specific and final statements when, months later, reality required backtracking and a different response.  Then they get called 'flip-flopper' or something worse...

            Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

            by oldpro on Tue Dec 04, 2007 at 05:45:10 AM PST

            [ Parent ]

            •  I see your point...... (0+ / 0-)

              but being vague about the issues and what is needed, to me, is not very settling.  I want more specifics, more dialogue.  I want to know what I am getting before I buy.

              If the people lead, the leaders will follow.

              by Mz Kleen on Thu Dec 06, 2007 at 05:09:09 AM PST

              [ Parent ]

        •  You have to be kidding! (7+ / 0-)

          What scares me most is that we will get same song second verse.  More bad trade laws, more outsourcing encouragement, more gooper lite.  Historically, Clinton is a good mainstream Republican.

          "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

          by NearlyNormal on Tue Dec 04, 2007 at 06:14:23 AM PST

          [ Parent ]

          •  Nope. Not even close. 70% of the (0+ / 0-)

            country would be thrilled to have the 90s and the Clinton administration back, even with all the problems.  There are always problems...always.  But. There were far more pluses than minuses for everyone except the greedy and if you don't know that, it's (Nearly) hopeless to discuss elections or politics with you.

            Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

            by oldpro on Tue Dec 04, 2007 at 08:52:08 AM PST

            [ Parent ]

            •  Clearly you haven't spoken with (3+ / 0-)
              Recommended by:
              greenearth, NearlyNormal, Hens Teeth

              the millions of poor Americans he kicked off welfare, or the millions of working class Americans he shafted with NAFTA.

              Separate is -not- Equal

              by pkbarbiedoll on Tue Dec 04, 2007 at 09:39:08 AM PST

              [ Parent ]

              •  You are correct...I haven't spoken with (0+ / 0-)

                million and neither has anyone else...but let me fill you in regarding those I have spoken with...from Jan '93-Jan.'99 (the Clinton years) in which I lived and worked in a district with up to 17% unemployment.  It's a natural resource district so job losses were in timber, fishing, mining.  It's also a rural district...huge...with small towns far apart and a wide range of voters, increasing retirees tending more Republican.  

                I ran the office for our new Democratic state legislator, who until elected had been in charge of the United Way campaign...vital to our people in those banks, homeless, domestic violence...the works.  We saw those people and those problems every single day...both at work and at home.  Mine was a union household...husband 42 years at the mill, union negotiator, etc. until it killed him.

                So, I am no starryeyed optimist. I live in the real world and so do my relatives, friends and neighbors.  Many people will not accept that welfare reform was, in fact, a success in many ways...not all.  Of course not.  But a step forward and a second-chance education and retraining for many many thousands of people...childcare and transportation paid for while they went to school (unlike the taxpayers who paid their own way).  As for NAFTA...yes and no.  I live in one of the most trade-dependent states in the country and thousands of jobs depend on selling our products internationally.  It's not perfect, NAFTA...but it's not all bad either.  It's actually a very complicated world, interconnected in ways we cannot even imagine...and trade is only a small part of it, albeit with a big impact...not unlike worldwide health issues which could have an even bigger impact...from SARS to birdflu...much to worry about, I'd say.

                OK...that's enough to give you a flavor that it doesn't pay to assume that someone who disagrees with you about an issue is a total fool with no anchor in the real world.  I'm still in as a retired low-income senior with health issues to face.  Lots of fun ahead...yup...

                Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

                by oldpro on Tue Dec 04, 2007 at 10:18:35 AM PST

                [ Parent ]

            •  70% of the country would be glad to have GHWB (3+ / 0-)
              Recommended by:
              greenearth, Hens Teeth, kyril

              back, so what.  I think you are the one that it is (Nearly) hopeless to discuss politics with.  The Clinton administration nominated weak judicial appointments (with the "permission" of gooper leaders, no less), sandbagged the middle-class on trade agreements, mismanaged foregn relations with China, and was very pro-corporatist in its actions generally.  And this doesn't even count the personal scandals we endured, but I don't hold that so much against them. Were they near as bad as these pukes that run the country now?  No, but so what.  What are the prospects that HRC would be any better?  None, as far as I can tell.

              "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

              by NearlyNormal on Tue Dec 04, 2007 at 09:53:20 AM PST

              [ Parent ]

              •  So what? So a lot of people suffer when stupid (0+ / 0-)

                and selfish people are elected...when religious nuts interfere in their lives...when programs are cut because taxes have to be cut (see Pell Grants, fyi).

                The trick is to "not let the perfect be the enemy of the good."  It's an old saying, but appropos.  In politics, one can never get the perfect solution.  Incremental change in fits and starts through compromise is the only way it has ever worked in a republic.  Otherwise...stalemate, which is regression, in fact...standing still is going nowhere...or going backwards, thanks to inflation or war or illness or ....fill in the blank.

                As for HRC...we'll just have to agree to disagree re the prospects that she would be any better than

                these pukes that run the country now?  No, but so what.  What are the prospects that HRC would be any better?  None, as far as I can tell.

                 None?  Wow.  You give people no credit at all.  But have you ever been in their shoes...even at a local level?  Run for school board or city council?  Ever had to take those hard votes, raise taxes on your neighbors, take the late night phone calls and the snubs in the grocery store...the namecalling at your kids' school (your Mom's a commiepinko nut!)  Until you've shared a bit of the responsibility of representative government, I think it's a bit much to be so judgmental of others.  Talk is cheap.

                Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

                by oldpro on Tue Dec 04, 2007 at 10:31:12 AM PST

                [ Parent ]

                •  You are right about one thing (2+ / 0-)
                  Recommended by:
                  greenearth, Hens Teeth

                  I didn't word the last thing you quoted well.  I made it sound like I didn't think she would do better than those running the country now, I don't believe that-I menat that I don't believe she would have an administration that did any better than the one her husband had.

                  Pity about your whine about the poor elected officials that I don't give any credit to, of course it is not true, that I don't give them any credit-it is true that I don't give credit to those that sell out the American middle class, that favor the corporations over the people of the country, that appoint weak judges and that act so reprehensibly that they give the goopers campaign fodder.  So take your strawman argument off the table and stick to the issues.

                  "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

                  by NearlyNormal on Tue Dec 04, 2007 at 11:13:40 AM PST

                  [ Parent ]

                  •  I reject your choice of words and your argument. (0+ / 0-)

                    No whine...and no strawman.  People who talk a good game but take no responsibility themselves are always one of the issues in politics and I'll bring it up whenever someone is as careless as you admit you were in your criticism of Hillary...see your first paragraph above.  Gosh, Nearly, you nearly apologized...but then, you had to attack me to even up.

                    I gather from your assessment of the Clintons and the Clinton years that it would have been just as good for the country, perhaps for the world, if Bill Clinton had never been elected President at all.  Is that what you meant?  You'd have been just as happy with 8 more years of Republican rule - '93 to 2000?

                    Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

                    by oldpro on Tue Dec 04, 2007 at 06:57:17 PM PST

                    [ Parent ]

            •  Yup everyone would like their cake and (3+ / 0-)
              Recommended by:
              greenearth, Hens Teeth, meatwad420

              eat it too.

              The 90s were the problem. This isn't just about Bush, and it's about Democrats too.

              Also, 2008 should not be "It's the economy stupid," it should be "It's the People, Stupid!"

              Stop Corporate Sponsored Public Policy and take care of our People.

              "It's the Economy Stupid" meant the full embrace of Corporate Sponsored Public Policy.

              If 2008 is "It's the economy, Stupid," the Democratic Party will die.

              We cannot continue feeding our people to the economy to grow profits for Easy Street.

              Sharing and Caring are for Commies! They should be illegal.

              by k9disc on Tue Dec 04, 2007 at 10:34:01 AM PST

              [ Parent ]

    •  are you joking? (5+ / 0-)
      Recommended by:
      MTgirl, greenearth, NearlyNormal, ER Doc, BYw

      You haven't been paying attention to what John Edwards has been saying for the last four years.

      Edwards '08 -6.88/-5.54

      by DrReason on Tue Dec 04, 2007 at 05:32:32 AM PST

      [ Parent ]

  •  Around our parts... (11+ / 0-)

    we hear alot about the housing market which has been booming for years (live in NW Arkansas...near Wal-Mart).  Now all of a sudden MANY homebuilders are going belly up.

    The market for housing here is just gone.

    •  Lobster, we are probably neighbors (11+ / 0-)

      You are so right.  The developers are going bankrupt. The banks are working with them, though. There is 3 and 1/2 to 4 and 1/2 years of housing inventory to sell off before it gets back to normal. These are prime properties that are going under, which surprises me.

      We have had a shortage of affordable housing for the minimum wage people for a long time.

      •  Shortage of affordable housing (15+ / 0-)

        So true. I remember back in '99 when I first started college, you could find an average room in a shared house in College Park, MD for under $300; the houses rented for about $3-400/bedroom. That's well within reach of a student on work-study. Apartments went for $5-600 in the crappy areas of PG county, affordable (though barely) even by a single minimum wage worker with a cosigner, and you could qualify to rent them with $20-25,000 income, putting them in reach of couples earning minimum wage.

        Within three years, that bottom-of-the-barrel housing shot up to $500/month for the cheapest rooms and $7-800 for the cheapest apartments, the income qualifications to rent went up to $30-35,000 for the apartments, and all of a sudden the local residents who had been renting out rooms and houses to any trustworthy-looking student were replaced by faceless corporate landlords who demanded proof of income and a credit and background check from prospective tenants.

        This was around the same time that the real estate market in the area was beginning to bubble; tiny townhouses in the suburb where I'd grown up had gone for about $60k and been affordable to local blue-collar workers, retirees and many, many people with disabilities, but in the space of three years the price of these incredibly tiny, 70-year-old townhouses doubled from $60k to $120k.

        But the people living in these places didn't change. Our income didn't change at all. Students on work-study still made minimum wage, which now amounted to less than their rent. Minimum wage workers and immigrants living in the poor areas of the county still made minimum wage, and it now took three people to qualify for a one-bedroom apartment. And the same people, elderly, disabled and blue-collar families, were still living in my town. By 2002, I knew there was something fundamentally rotten about the housing market.

        And it continues today; the $5-7,000 for 9 months of on-campus room and board at a state school now looks like one of the best deals you can get. When I started college, it seemed like extortion.

        During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

        by kyril on Tue Dec 04, 2007 at 06:19:54 AM PST

        [ Parent ]

        •  It seems (7+ / 0-)

          that most economy talking heads ignore that housing is different than say, electric bills. Losing your home, whether to a hurricane or a bank, is a disaster. Just seeing a foreclosure sign in your neighborhood is going to really scare people. It's a signal that the biggest investment you will ever make is failing. And, yes, this is all going to have a big effect on rent. I worry about our veterans being able to afford rent.

          •  Veterans and rent (6+ / 0-)

            My husband and I are both recently discharged vets. Unemployment for us is quite generous, and in Washington we're eligible to to continue to receive it for a year while we go to school. The GI bill is also a big help. And many veterans have decent amounts of savings compared to other high school grads our age because military compensation is very generous for a high school graduate.

            However, the job market isn't nearly as rosy as it's made out to be, nor is our military training in any particular demand in most places. So, while we're much better off than your average 22-25-year-old with no degree, that's not saying much; take a look at the recent statistics on young working adults still living with their parents. Rent's hitting all young people extremely hard.

            To be honest, though, I'm most concerned with the effect of the housing market on two groups: people released from prison, and people with bad credit.

            First, the issue with released prisoners: It's become increasingly difficult over the last decade or so to find housing and stable employment that doesn't require a criminal background check, and I think we're seeing the effects of that in recidivism rates; unstable living and employment situations, living in unhealthy family environments or staying with the same friends that one had been associating with when one went to prison can all contribute to the desperation and emotional turmoil that breeds recidivism.

            The effect on people with bad credit is similar. Nearly all landlords now do credit checks instead of the traditional rental history check, and this can make it very difficult to obtain any sort of housing; what is available tends to be more expensive and lower quality. This is a concern because unlike most other things that require credit, access to adequate housing has been determined to be a universal human right. Shunting people with bad credit (due to medical bills, foreclosures or just bad decisions) into expensive, inadequate housing in dangerous locations remote from their place of work negatively impacts their ability to rebuild their credit. Also, this housing tends to be the same as what's available to people with criminal records. The history of housing projects should have taught us how ill-advised it is to concentrate large numbers of financially-unstable people who have made poor decisions.

            During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

            by kyril on Tue Dec 04, 2007 at 07:44:48 AM PST

            [ Parent ]

            •  Some of the prisons (3+ / 0-)
              Recommended by:
              greenearth, Hens Teeth, kyril

              have no programs to train prisoners for jobs and the prisons are hostile to the prisoners.  They get out of prison, broke, angry and facing high expenses. This is a bad situation.

              Prisoners should get to vote once they have served their time.  That would help some.

              •  Agreed (3+ / 0-)

                Prisoners should get to vote once they have served their time.  That would help some.

                We also should have fewer prisoners, which is quite possibly the most important part of the problem; our prison system is designed for violent criminals, not drug offenders who need help and nonviolent property offenders who need economic hope.

                I have to admit that our prisons do a fairly decent job of keeping those who have committed violent crimes safe from each other (to an extent - I'm not discounting the rape situation and prison murders) and isolating them from society as a whole. However, the measures used are ineffective and in fact counterproductive when applied to people who have committed nonviolent crimes. We need to get nonviolent offenders out of the prison system and give them the help and hope they need.

                However, the disenfranchisement and discrimination issues are of great importance too. It's long been established that the factors contributing to a successful rehabilitation process are stable employment at a living wage, stable living arrangements and community involvement and belonging. Legalized employment discrimination, housing discrimination and disenfranchisement, along with more informal social stigmatization, create an environment that seems designed to discourage successful reintegration and rehabilitation.

                And in fact I believe we have to work on these issues before we can even contemplate releasing the prisoners of the drug war (which we need to do, but not if they're just going to end up in prison again).

                During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

                by kyril on Tue Dec 04, 2007 at 11:55:43 AM PST

                [ Parent ]

          •  Sorry (3+ / 0-)
            Recommended by:
            Sandy on Signal, greenearth, kyril

            should have said military, their families, and veterans.

            •  Military may be OK longer than anyone else (0+ / 0-)

              I have my differences with the way the military is run, but one thing it does, and does very well, is make sure that servicemembers have housing. As I noted above, military compensation is extremely generous considering the qualifications of most enlisted servicemembers. And housing allowances are scaled with rank and dependent status and adjusted yearly to correspond to actual rents of adequate housing units in each geographical area. The calculation of military BAH should be a model for all programs that provide benefits or regulation based on cost of living.

              Even in San Diego, the allowance for a single E-1 to E-4 is enough to afford good housing in some very nice areas - if you're smart about it and share an apartment, you can even come out with quite a bit left over and still live better than most college students the same age.

              Veterans are hit like any other young person these days, but even so we have some advantages. Veterans need disproportionate attention in some areas, like health care and the diminishing and inadequate value and excessive restrictions of our educational benefits, but with respect to the housing issue specifically, solutions need to be directed at all young and low-income people, as we're no better or worse off than anyone else our age.

              During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

              by kyril on Tue Dec 04, 2007 at 08:20:52 AM PST

              [ Parent ]

      •  Lobster, I live east of Bentonville (0+ / 0-)

        toward Bella Vista, in one of those houses that are too far out to make sense:-)  We hated living in town. We are country people, so we bought out here a long time ago. We couldn't afford to buy it now.

  •  Listen to Edwards (20+ / 0-)

    John Edwards has been talking about the effect of the economy on the average person.

    It will always come back to the economy, stupid.

    Don't lose sight of the AMT.  The Dems are trying to find a way to prevent millions more middle income folks from paying the AMT - essentially a major tax increase.  We've been paying it for the last 2-3 years.  So much for Bush's tax cuts.  More than swallowed by the AMT.

    $200 million a day.  Indeed.

    Thanks Bonddad for maintaining focus.

  •  The potential for panic in 2008 (13+ / 0-)

    Since it's pretty well set forth, I am just lifting this wholesale fromRuss Winter's blog today:

    The potential for a true panic continues to build.... . I’m not going to pan every money market out there, but do folks really know what they hold? To my readers I can only suggest reading the quarterly holdings report. The small print is important now.

    The latest on the tawdry money market front comes from Maine and Florida. Maine is POed because Merill Lynch unloaded hot potatoes and Old Maid Cards on them just a couple weeks before an investment vehicle melted down. Here’s the story:

    BOSTON (Reuters) - Maine’s state Treasurer blamed Merrill Lynch & Co Inc and credit agencies on Wednesday for leading the state into a failed commercial paper investment that later sparked a ban on these popular securities. Controversy is heating up in the state over who is at fault for having put $20 million, about 3 percent, of the state’s roughly $725 million cash pool this summer into an investment fund called Mainsail II — two weeks before its sterling ratings crumbled to junk.

    A real dry run example of what an Aunt Millie panic might look like comes from Florida, where the light bulbs at school went off about the slime in the state run fund. Florida has responded with what is in effect a bank closure. They are “working” through the issue. Don’t let this happen to you, think prevent defense.

    Dec. 3 (Bloomberg) – Florida schools and towns with money frozen in a state-run investment account are unlikely to get their cash back tomorrow, when officials meet to discuss a crisis prompted by withdrawals that drained almost half of the fund’s $27 billion in assets, a policy officer said. ... Officials raised the possibility of paying less than 100 cents on the dollar to governments seeking cash in a conference call  after learning the pool, described by state officials as a money-market fund, held $1.5 billion of downgraded and defaulted debt tainted by the subprime mortgage market collapse.

    Joining the hit parade comes Montana and Connecticut, whose pools were downgraded by Moodys.

    Dec. 3 (Bloomberg) — Montana and Connecticut state-run investment pools hold debt tainted by the subprime mortgage collapse whose ratings were cut or put under review by Moody’s Investors Service, the latest examples of downgraded holdings leaving local-government investors vulnerable to losses.

    But why keep the American Plague at home, spread it around, in this case to Norwegian townships.

    The SIVs involved in this are being downgraded by the rating agencies about as quickly as they can get around to it. In this FT article is a little background on the quantities involved. Obviously somebody holds these, and who?

    Assets in SIV portfolios are about 38 per cent financial institution debt, 16 per cent asset-backed securities, such as mortgage bonds, and 12 per cent collateralised debt obligations – complex securities backed by other bonds.

    So, state run pension funds and money market funds are vulnerable to sudden writedowns once it is discovered they are holding some of the mortgage backed toxic waste.  No recipe for panic there, right?

    But here are a few silver linings I throw out for consideration.  No hard and fast prediction yet, but beginning to look maybe so:

    I see signs that this recession will be brief and shallow.

    -  the yield curve has un-inverted and looks now like it did in March 2001 when the last recession started.  If the Fed continues to cut rates and the bond market continues to respond across the spectrum as it has so far, it seems quite likely that this recession will be over by next autumn.

    -  durable goods haven't declined by nearly as much as they did going in to the last recession.

    -  jobless claims are at the upper end of their range, but your graph only runs one year.  A longer graph includes several other times in the last 5 years (usually at this time of year) when jobless claims were at this level.

    -  corporate insiders are buying stock in a way I haven't seen since the end of the last recession.  What do they see?

    -  Wall Street players are more bullish compared with individual investors than I've seen since the end of the last recession.  What do they see?

    -  there is a lot of fear among stock market investors (a contrary sign)

    -  the advance/decline line isn't nearly as negative as it was in 1999-2000.  It should be if there is going to be a bad stock market accident.

    -  the Dow Jones Corporate Bond Index is at its highest level EVER.

    I still believe we are in the opening act of a long drama, I've called a "slow motion bust".  I still see that playing out.  But there are a lot of signs that we will have at least a brief respite later next year (perhaps due to exports).

    "When the going gets tough, the tough get 'too big to fail'."

    by New Deal democrat on Tue Dec 04, 2007 at 04:51:04 AM PST

    •  If Bush had his way, (16+ / 0-)

      these would be the guys managing our Social Security Privatized Fund.

      Bring it on!

      (I've got my 401k in a money market fund. Bad?)

      "The President does not have second thoughts." --Dana Perino via Amazing Froomkin

      by vicki on Tue Dec 04, 2007 at 04:56:31 AM PST

      [ Parent ]

      •  re: 401K in money market fund (5+ / 0-)

        Good short-term if the stock market tanks a lot. Good if interest rates move way up ahead of inflation. Bad in the face of high inflation.
            The tricky part is recognizing when the bad times are passing, and the market's ready to move up. By the times the pundits all agree the market's moving, it's already left the station. The index fund mavens recommend staying primarily in a low-expense index fund that tracks one of the major market indices, through the good times and bad, because no individual can consistently time the market swings, and individual investors are usually behind the curve. If you just hang in there with the index, you get whatever the market gets, which, in the long run, has been positive.

        -5.12, -5.23

        We are men of action; lies do not become us.

        by ER Doc on Tue Dec 04, 2007 at 07:23:52 AM PST

        [ Parent ]

        •  That Depends (3+ / 0-)
          Recommended by:
          tacet, greenearth, kyril

          On the start point and the end point of your long-term period. The long-term that started in, say, 1920 and ended in, say, 1940, didn't turn out so well.

          •  That's right. Warren Buffett (1+ / 0-)
            Recommended by:

            wrote something about this a few years ago. He compared the 17 year period between, I think (I can't really remember the exact dates) 1961 and 1978 and then from 1979 to 1998. In the first, if you had held onto your investments long term you would barely outpace inflation, if that.  In the second you would have made a bundle.  So, depending on when you want to retire, it could make a huge difference. I'm always skeptical of the "hold for the long term" mantra that investment counselors always tell you.  If holding for the long term is so great, why is it that those who work in the markets never do that?   I've owned stocks that went way up and then tanked for years.   Surely, I would have been better off selling them when they were up instead of stupidly hanging onto them forever in the hopes that maybe someday they would regain their former glory.

            Anyway, I'll see if I saved that Buffett info and, if so, I"ll post it here.

    •  Nope (15+ / 0-)

      This is a slow motion train wreck. There will always seem to be a light at the end of the tunnel, but it is an oncoming train.

      1. Credit is slowly getting tighter. No matter what the interest rate banks are becoming less willing to lend. Without lending the expansion stops, period.
      1. Spending still exceeds incomes. Even in good times spending is exceeding income, meaning debts are accumulating. We need to see people paying off debt, which means incomes being greater than spending...not in sight yet.
      1. The majority of the economy is now service based. Many service based industries have high labor contents. If restaurants, spas, home renos get hit, unemployment will start to accelerate. Its still too early to pick this trend up, but I predict we are in the early stages of seeing it. This weeks unemployment report could be interesting.

      basically there is very little, except exports, that can quickly provide a "push" to the economy because the interest rate cannon has been used and abused so much that it won't work this time. So expect a slow drip drip of bad news until the proverbial straw breaks the camel's back.

      I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong- Feynman

      by taonow on Tue Dec 04, 2007 at 05:05:19 AM PST

      [ Parent ]

      •  Domestic v. export economy (6+ / 0-)

        "Slow motion train wreck" and "slow motion bust" sound like we are describing the same thing.

        I see the same fundamentals you see.  It does seem that unlike the last recession (corporate spending contraction) this one will be a consumer and credit based contraction.

        But I don't argue with the numbers I read.  Not enough yet to be sure, but some signs out there -- especially the yield curve.  I didn't argue with it when it argued for recession a year ago, and I won't argue with it now.  Although I am concerned that it could reinvert at a lower level, which would suggest a deflationary liquidity trap to me.


        "When the going gets tough, the tough get 'too big to fail'."

        by New Deal democrat on Tue Dec 04, 2007 at 05:10:00 AM PST

        [ Parent ]

        •  Ok, I don't understand how deflation hurts (2+ / 0-)
          Recommended by:
          Janet Strange, kyril

          the economy.  My understanding only goes so far, as:

          3 dollar carton of milk drops to 1 dollar, how can this be bad?

          I KNOW deflation is bad, I just do not understand HOW it is bad.

          "Jedoch ich wollte, dass ihr nicht schon triumphiert: Der Schoß ist fruchtbar noch, aus dem das kroch." -Bertolt Brecht

          by Jeffersonian Democrat on Tue Dec 04, 2007 at 05:51:10 AM PST

          [ Parent ]

      •  The straw (14+ / 0-)

        could be the very thing that the retail sector is looking to for salvation: the holiday season. We're seeing increased average credit card debt load already. With tight credit and falling real estate values, this debt can't be refinanced or paid off with a home equity line. There are no more sources of easy credit. So when people reach their credit limit on their cards, which will be accelerated as usual by the holidays, they will have to pay it off the old-fashioned way, with actual earned income.

        This means that when people run out of credit, we're not only going to see spending drop down to near-parity with incomes; we're going to see a drastic drop below parity. People are going to panic and realize that they have no safety net. They have nowhere left to turn. That credit card they got for emergencies needs to be paid off before they spend any more money - what if they have an emergency? The cards suddenly turn from perceived assets to perceived liabilities. And the end result of this is that the retail and service sectors take a big hit, sometime in the first few months of next year. Will it be the final straw? Who knows? But it's going to hurt.

        During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

        by kyril on Tue Dec 04, 2007 at 06:34:16 AM PST

        [ Parent ]

    •  Panic (5+ / 0-)

      I'm going to say something very controversial. I think we need a panic. Yeah, I said it. We need a panic.

      It seems like the only time humans pay attention is when a balls to the walls disaster happens and then we cruise along for about 50 or 60 years having learned our lesson until the next cluster fuck.

      I guess it's just part of the human condition. Collective memory seems to fade and each generation has to relearn the same lessons that the previous generation learned.

      Sisyphus just keeps rolling that stone.

      •  That is not as controversial as you would think (2+ / 0-)
        Recommended by:
        greenearth, Hens Teeth

        many think that 9/11 should have been that panic. But you are correct something has to awaken the sleeping masses and I suppose if the collapse of the WTC didnt do it then maybe hurting our wallets will.

        Its not the coporations that run this country, not the economy and sure as hell not wall street, no it is the average citizen. We need to get back to that understanding.

        "We need an energy bill that encourages consumption." --Trenton, N.J., Sept. 23, 2002-GWB

        by meatwad420 on Tue Dec 04, 2007 at 11:48:04 AM PST

        [ Parent ]

  •  Who cares about falling housing contruction (16+ / 0-)

    It's idiotic that so much of our economy is (was) based on building and selling huge McMansions in the suburbs to people that can't afford them. I am concerned about folks (some of my friends) caught with ARM mortages, but building new expensive boxes way the hell out there away from cities and towns is not sustainable. As they say in the stock market, this isn't a downturn, it's a "correction".

    Who will stop this war of lies? Keith Olbermann May 23rd, 2007

    by Ed in Montana on Tue Dec 04, 2007 at 04:57:31 AM PST

  •  corporate insiders buying stock? (8+ / 0-)

    Very interesting.

    I'm assuming its stock in blue chip companies that have a wide moat to protect them from the subprime fiasco.  Corporate profits have been strong now for three years or so, but rather than paying out hefty dividends, corporations seem to be retaining cash and buying back stock.  Perhaps hunkering down for a long winter?  

    In uncertain times, money flies to "quality."  In years past, that has meant Treasuries and other government-backed notes.  But given the weak and declining dollar, blue chips seem like the better bet, yes?  

    Could be also that corporate insiders anticipate a Democratic victory in 2008.  The economy, especially the Dow Jones and S & P 500, always do better when a Democrat occupies the White House.

    So, New Deal Democrat, where'd you pick up on this interesting tidbit of news?    

  •  After republicans have been (14+ / 0-)

    feeding at the trough, it's always about "the economy, stupid". Time and time again, Democrats are left to clean up the mess and the voters never seems to learn.

    This ain't no party. This ain't no disco. This ain't no foolin' around!

    by Snud on Tue Dec 04, 2007 at 05:06:25 AM PST

  •  The reason WHY the economy (17+ / 0-)

    is so tanked is the damn occupation of Iraq. One trillion $$? Two trillion$$? "Pretty soon you're talking about real money." It is precisely the heroin addiction of a cowardly president.

  •  Yes. It's STILL "the economy, stupid!" (3+ / 0-)
    Recommended by:
    coral, YellowDogBlue, ER Doc

    I've been saying that for years as Bush borrowed us into debtors' prison.  Now the chickens are coming home to roost.

    This ill wind should blow Democrats some good...and particularly, perhaps, candidate Clinton.  After all, we've already test-driven this baby in the 90s and both the horsepower and the mileage were pretty damn good.  Only the Republicans think the country won't go to Hell in an Edsel...and only the Democrats seem to know that the best social program is a job with benefits.

    If they play it right, the Clintons will once again be the rescue rangers of the economy...and a lot more.

    Works for me.

    Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

    by oldpro on Tue Dec 04, 2007 at 05:08:45 AM PST

  •  A few things to keep in mind (5+ / 0-)

    One, exports are way up, which may help to mitigate against a recession (a weak dollar is good for some things).  Two, the treasury (much to my dismay), is going to come up with a bailout for the subprime borrowers, which may reduce that issue somewhat.  Three, it looks like oil may finally be coming back a bit to reality.

    Now, two things that will guarantee recession:

    1. No AMT fix.  This would be a huge tax hit (and a surprise one at that) to about 18 million families and would likely be able to push us over the top into recession.
    1. A rise in interest rates (unlikely at this point).
    •  Do you doubt congress will fix AMT soon? n/t (0+ / 0-)

      Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

      by oldpro on Tue Dec 04, 2007 at 05:24:54 AM PST

      [ Parent ]

      •  Its actually about 50-50 (4+ / 0-)
        Recommended by:
        coral, New Deal democrat, TomFromNJ, kyril

        In order for it to get done, the Dems are going to have to waive pay-go.  

        •  Ahhh...there's the rub. Not good. (0+ / 0-)

          This may be where push comes to political shove.  In theory, it might seem better to stick with pay-go, let all those unpleasant things happen, blame the Republicans and run Dean's 50-state strategy on "it's STILL the economy, stupid."

          On the 'no pain no gain' theory, that is.

          Cynical...yes.  Strategic?  Dunno...maybe...

          Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

          by oldpro on Tue Dec 04, 2007 at 05:37:15 AM PST

          [ Parent ]

          •  A true Clinton acolyte (3+ / 0-)
            Recommended by:
            PsychoSavannah, darrkespur, kyril

            Fuck the middle class for political advantage.  Apply your sig line to your statement and see what you come up with.

            "I said, 'wait a minute, Chester, you know I'm a peaceful man.'" Robbie Robertson -8.13, -4.56

            by NearlyNormal on Tue Dec 04, 2007 at 06:24:09 AM PST

            [ Parent ]

            •  Ahem...pretty quick to jump to that assumption, (0+ / 0-)

              Nearly!  What I said was, "Dunno...maybe..."  And the reason is...politics and elections are not the same thing.  One informs the other.  And the thing is...without political advantage, you have nothing.  Without political advantage, the middle class is already screwed, by definition.  In elections, winning is everything.

              But that doesn't mean I would 'do anything' to win.  I apply my sign line every day all day.  It's the touchstone.

              Tell me how you spend your time and how you spend your money -- I'll tell you what your values are.

              by oldpro on Tue Dec 04, 2007 at 09:52:10 AM PST

              [ Parent ]

    •  adsf (7+ / 0-)

      Exports are helping.  But I think the issues in the credit markets stand a fairly good chance of really screwing up the economy by drying up credit in a big way.

      The bailout is still in its early legs.  We'll have to see the details.  

      Oil's direction for the foreseeable future will be determined with OPEC's announcement about production.  If OPEC doesn't raise production I would expect a price spike with a possible further run to $100/bbl.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Tue Dec 04, 2007 at 05:42:50 AM PST

      [ Parent ]

    •  What are we exporting? (1+ / 0-)
      Recommended by:

      Other than raw materials and jobs?

      Impeach or be impeached.

      by Hens Teeth on Tue Dec 04, 2007 at 08:14:22 AM PST

      [ Parent ]

    •  One thing that is discussed too little (1+ / 0-)
      Recommended by:

      is the impact on employment and incomes.  A slowdown in  housing not only impacts the value of the houses and perceived wealth, but it also reduces income on all of those dependent on the housing boom.  This includes both layoffs and reductions of commissions (my guess is most real estate agents are earning much less commission, but are not counted in the unemployment rolls).  These areas include:
      Mortgage Banking
      Interior Designers
      Real Estate Agents
      Newspaper advertisers

      The key question is, does fear for future income reliability cause a contraction in consumption.

  •  National Debt Grows $1 Million dollars a Minute (6+ / 0-)

    Here is a link to an article that says this country is going about a million dollars a minute farther in debt.  It is by the associated press and links to a debt clock.  It seems so unbelievable, I knew it had to be linked to, so I could prove it. Part of this is the interest adding up on the debt.

    It is disheartening to think about the debt running up so fast.  If they have to raise interest rates, that will create really serious problems and speed up the debt clock.

    I don't see how the government would be in debt for what we buy overseas.   The businesses that buy and hire pay their own vendors overseas.  The article I linked to only mentions Social Security and Medicare as part of the reason for the debt.  The debt it is over 9 trillion. What they owe Social Security is two trillion. We probably owe as much for military retirements and VA medical care and elected official's retirements as we do for Social Security. Medicare shouldn't be teetering on bankruptcy.  Everyone pays that in and there is no cap. Plus we pay premiums when we are eligible for it.  We spend a lot overseas for medical care for poor countries. A lot has been spent bribing other countries to let us fight Iraq. A lot was given away to the 911 area and Bush gave the airlines a lot of money.  It would be interestig to read where it all has been spent.

    I don't see a lot of people buying a lot of cheap crap. And how many TVs can a family buy?  Buying and selling is what keeps the economy humming. The only 'wasteful' purchases I see is some buying certain expensive cell phones & plans, because they are 'it'.  Plus, some people paying more than they can afford for cars and housing. But personal debt is not the national debt, is it?  

    The old timers who lived thru the great depression were so thrifty they saved used plastic bags and any thing else they could even after it was over. Even before the depression every penny counted and life was hard, but the depression was so hard they never forgot the scaricity.  The younger generations are a lot more extravagant and it will be harder on them, if we have a depression, but they wll deal with it gracefully I am sure.  I am not so sure part of the people aren't in one now.  The older ones can help the younger ones, I hope.

    The biggest problem is low wages and a shrinking job base.

    They don't count what people have in their 401ks as savings and they should.  

    •  Interesting statistic re the national debt (3+ / 0-)
      Recommended by:
      dvx, sxwarren, Utahrd

      As a % of GDP, The US' national debt at ~70% is less than that of the UK, Germany, Italy or Japan.

      Which suggests that as long as interest rates remain historically low, right now the problem is the trade deficit (oil, China), not the budget deficit.


      "When the going gets tough, the tough get 'too big to fail'."

      by New Deal democrat on Tue Dec 04, 2007 at 05:54:25 AM PST

      [ Parent ]

    •  As a young student (1+ / 0-)
      Recommended by:

      I actually think it'll be more of a problem for the middle ones who are now 28-45. When you're young and studying or on low/minimum wage, you're already pretty used to scrimping. The danger is going to be to those who've graduated/been promoted and have been living comfortably with lots of credit cards for a while. People in their thirties (the 'friends' generation) are not going to know what hit them, I feel.

      follow my world without oil!

      by darrkespur on Tue Dec 04, 2007 at 09:47:30 AM PST

      [ Parent ]

  •  Bondad, question for you (4+ / 0-)
    Recommended by:
    Fabian, greenearth, ER Doc, kyril

    I read there's a plan to allow subprime borrowers who are current to extend their teaser rate for 2-5 years. This will eliminate 1.1 million foreclosures so estimates are we will have 400,000 foreclosures in 2008 vs the previous 1.5 million?

    Then I read economics say this won't put "enough of a dent in the problem."  How would eliminating 2/3 of the foreclosures not put enough of a dent in the problem?

    Also, I read that investors do not like this plan because it modifies mortgage loan terms. Wouldn't this plan be to their benefit?  Won't foreclosures cost them far more?

    I understand your pessimism - we have a lot of negatives right now. American wages are flat yet  the consumer has kept spending too much. Credit
    card debt is a whole separate problem. However,
    won't this ultimately lead to a political backlash which could easily lead to a progresive majority and new policies that help ordinary people and not just the big corporations?

    •  asdf (3+ / 0-)
      Recommended by:
      greenearth, ER Doc, kyril

      I haven't thought about the proposed mortgage solution too much.  I'm waiting for all the details to emerge.  

      I agree that some solution is a good idea, however.

      "You think you can intimidate me? Screw you. Choose your Weapon." Eliot Spitzer

      by bonddad on Tue Dec 04, 2007 at 05:58:03 AM PST

      [ Parent ]

    •  Many things wrong with that plan (7+ / 0-)

      though details have yet to be released.

      First, foreclosures are not primarily a result of jumping teaser rates, but of falling house prices, per a new Fed study.

      Second, foreclosures are not going be "eliminated" but delayed only. In many instances, a homedebtor is better off walking away and mailing in the keys now than being sucked dry by a few more years of mortgage payments on an asset whose price is falling.

      Third, in order to get the fix in quickly, the plan allows lenders to continue avoiding case-by-case reviews, giving relief equally to people who were misled on mortgages as well as people who took out massive HELOCs to buy TVs and SUVs. This will guarantee other homedebtors will want in on the party, too, and threaten to stop paying their mortgages unless they get some goodies as well (see Fed study above).

      Fourth, Paulson thinks local and state governments are going to finance this bailout by issuing new debt. Unlikely, especially because states and municipalities are going to face their own budget crises due to declining property values.

      All in all, a poorly thought-out pander.

      •  The made in Japan solution (6+ / 0-)

        The proposal made by the administration has some appealing aspects. But it also has some unappealing aspects, including apparent government collusion in a scheme to delay recognition of losses.

        If this idea (non-recognition of losses) catches hold on a large scale, we can have a repeat of the Japan experience, 1990-2003.  A large bubble bursts, and everyone does what they can to avoid recognizing the losses, therby prolonging the malaise and ultimate day of recovery.

        •  Bingo (4+ / 0-)
          Recommended by:
          greenearth, ER Doc, darrkespur, kyril

          The seize-up in the credit markets is caused by the "where's Waldo?" problem. Nobody knows where this garbage is hidden, so investors are reluctant to extend credit even to apparently-sound borrowers. There was too much smoke and mirrors.

          Further shell games are not going to help. We're going to face pain either way, and the economy will be much healthier if it comes as a "short, sharp shock."

      •  They like to refer to subprime messes (0+ / 0-)

        as complex.  They are also saying it about the Florida's teachers fund.

        It was deliberately made 'complex' so we don't even know whose fingerprints are on them.

        The financial field are smarter than to be duped like that.  They knew what they were doing.

    •  my SIL (0+ / 0-)

      has negative equity in her house.  Bought on a 3 year ARM and just abandoned it as part of a bankruptcy.  Didn't pay a penny for 3 or 4 months.

      The bank contacted her and wants to "work this out" and is offering a FIXED 40 year (yes, forty) in the 6%-6.5% range, paying IO and property taxes for the first year, and a balloon payment somewhere in there after 3 or 5 years, to pay off her delinquency.  Refi charges are bundled in the mortgage.

      She's going for it.  This is in FL.  I don't know how other mortgage lenders are handling this, but hers was thrilled when she said yes, and the deal has been finalized.  What the multiplier effect on this means for the economy, I don't know.

  •  must start saving money (3+ / 0-)
    Recommended by:
    ER Doc, darrkespur, kyril

    The economy has been strong the last few years and in certain aspects it still is. Unemployment is low (especially when compared to Europe), consumer spending has been high, the weak dollar has helped manufacturing, and the economy was humming along.

    The problem is that the housing market rush has created a credit problem and that is hindering growth as companies can not borrow money for capital improvements. Individuals also have less credit options. No more 0% credit cards or auto loans. Those introductory rates 12-18 months ago are going to be readjusted and there is nowhere to move that credit to a low rate loan, credit card, or ARM.

    It is time for the consumer to pay up. This is difficult because fuel costs are causing prices of everything to rise. The weak dollar is also making those cheap imports more expensive. Then there is healthcare...

    Not sure what the Fed can do about it. They can lower rates but that doesn’t help lending credit out willy nilly. 08 ought to be an interesting political year.

    •  There is a bigger underlying issue. (14+ / 0-)

      Real wages have stagnated since the 1970s. Households have devised several different ways of coping. It began by sending both mom and dad to work. When that was still now enough to maintain a middle class lifestyle, folks began borrowing--from credit cards, from home equity, etc. The problem now is that, with rising costs (gas, food, education) most of America can't save anything, and many Americans are struggling just to pay their bills.

      •  Right (3+ / 0-)

        a lot of the Credit Card charging is for medical and groceries and to pay other unexpected expenses.

      •  inflation (0+ / 0-)

        Real wages have stagnated since the 1970s.

        True but times were different. In 1970 a 1k sft home was large and now closets are that big. Cheap overseas goods kept wages low but still allowed everyone to have a tv in each room, 3 cars, cable, 3-4 phones. There was no real need for salaries to go up. especially as you said women started bringing in money as well.

        Most women did not go to work at first because they had to financially, after WW2 they wanted to. Money = freedom. This is why divorce rates skyrocketed. This also meant more family income and thus the excess consumerism. Hopefully with prices rising and credit falling rampant consumerism will be curtailed a little.

    •  Funnily enough... (12+ / 0-)

      Unemployment is low (especially when compared to Europe),

      Funnily enough, this assertion was recently deconstructed over at European Tribune. It's rather an extensive diary, but here's one interesting excerpt:

      European Tribune - Where the jobless go...

      To illustrate this - and throw some light on the "discouraged workers" syndrome - let's have Laurent GUERBY's now-famous point about the employment rate and the unemployment rate, now updated (though it goes on being true over the years) :

      According to the OECD'sStatistical Annex to the Employment Outlook, 2007, Table C, p252, the employment rate (employment/population ratio) and the unemployment rate for men between 25 and 54 years of age in 2006 is given as:

      CountryEmployment RateUnemployment Rate
      United Kingdom87.8%4.2%
      United States87.3%3.6%

      This is a demographic one would expect to have a high employment rate, and in fact it's quite high in all three countries, with little difference in the rates. But the unemployment rate in the UK and US... is half that of France. How can that be, if the proportion of employed people is similar? A hint lies in another line in the OECD table: the Labour Force Participation Rate (that's the ratio of the labour force to the working-age population) is 91.7% in the UK and only 90.6% in the US, while it's 93.8% in France. Take those 2% difference in the UK and add them to the UR, and you get 6.2%; for the US, it's 3% to add, giving a UR of 6.6%. Suddenly the French unemployment rate doesn't look so out of line...

      Basically, the implication is that unemployment in the US is undercounted for several reasons. The fact that incomes have remained demonstrably flat would tend to support this conclusion (because if unemployment were really low, employers would have to bid up wages and salaries).

  •  Foreclosures will continue to skyrocket .. (8+ / 0-)

    In fact, a story up at shows that's true.  All it takes is falling housing prices to trigger foreclosures.  You don't even need an ARM reset.  ARM resets just make the timing worse.
    I predict in six months, we'll have more foreclosures than home sales, period.
    BTW, in the Portland area, there are a surprisingly high number of people that don't understand how bad things will get.
    Sales have dropped, inventory has ballooned.  And yet, people just don't see that the other hiking shoe is about to drop, BIG time.
    It'll be interesting to see just what is the final blow to the economy.
    Thirty percent chance of recession? Hell's Belles... Goldman, Sachs forecasts 50 percent chance.
     I say we're already there.

    "If the Nuremberg laws were applied, every post WWII US President would have been hanged." =Chomsky

    by abenjaminc on Tue Dec 04, 2007 at 06:02:08 AM PST

    •  My friend in metro Detroit (9+ / 0-)

      I haven't lived there in over ten years, but I still have family and close friends in the Detroit area and the housing market there looks like it's on the brink of collapse, if it isn't already.

      A good friend of mine just lost his house; as a matter of fact, he has to move out by tomorrow.  It's a shame, really.  He wasn't one of these people who thought he could flip the house for a quick profit.  He's pretty savvy about money and finance, so the ARM he ended up taking he did after some pretty careful consideration.  He even brought in a boarder so that he could save some extra money himself, knowing that his payments could go up.

      Then he lost his job and couldn't find a steady one for months and months.  He found one that looked like it would enable him to save the house just in time, but a month after he started, his superiors told him, "We can't pay you the salary we thought we could" and fired him.  That was it.  There was no way he could keep his house at that point.

      This is going on all over the area there, and no one seems to know what to do, if they even care at all.  It makes me sad because they don't deserve to be thrown on the economic scrap heap.

      Procrastination: Hard work often pays off after time, but laziness always pays off now.

      by Linnaeus on Tue Dec 04, 2007 at 06:58:16 AM PST

      [ Parent ]

    •  Portland area (10+ / 0-)

      Still better off than a lot of the rest of the country. At least we have water, and while not being able to afford heat would certainly be unpleasant, it wouldn't be the killer that it is in most of the northern half of the country. We have the most walkable city in the country; practically every neighbourhood west of the 205 in Portland and Vancouver is walkable. We have more gardens and local food production than any other metropolis in the country. Even in an apocalyptic scenario, Portland-Vancouver will be one of the last cities to remain inhabitable. So we have a lot of things to be positive about.

      On the economic side, our housing prices, at least in the rental market, are still very reasonable compared to other comparable areas. A bubble pop wouldn't hurt nearly as badly. Even the low-end speculators here might pull through.

      Nonetheless, it's going to be painful. But unlike Atlanta, we're not staring the death of our city in the face; unlike Phoenix, we're not confronted with the reality of the housing problem painted starkly on the streets of nearly-abandoned subdivisions. Unlike DC, New York and San Diego, our minimum-wage residents can still afford shelter. Unlike Detroit, our business sector, small and large, is still functioning, still serving our people. We have no food deserts. We have no blight of abandoned houses, factories and warehouses. We have a thriving culture and a relatively sustainable model city, and even if another depression hits, we will get by!

      Perhaps, as someone who has been perpetually low-income, my point of view differs somewhat from that of the investor class; it seems that many people are more concerned with the financial fallout itself than with the real, tangible fallout of that fallout. People in this country are facing real hunger, thirst, homelessness and death. In that light, nothing that could happen to us here seems that bad, even if the middle class is sliding into poverty; in Portland-Vancouver, poverty isn't as bad as it sounds.

      During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

      by kyril on Tue Dec 04, 2007 at 07:16:11 AM PST

      [ Parent ]

      •  Thank you for keeping me focused on (4+ / 0-)

        what really should concern me/us, to wit:

        it seems that many people are more concerned with the financial fallout itself than with the real, tangible fallout of that fallout. People in this country are facing real hunger, thirst, homelessness and death. In that light, nothing that could happen to us here seems that bad, even if the middle class is sliding into poverty; in Portland-Vancouver, poverty isn't as bad as it sounds.

        The longer the party goes on in everything, the bigger the potential correction in something will be.

        by brjzn on Tue Dec 04, 2007 at 07:37:08 AM PST

        [ Parent ]

        •  True, but you can ennumerate financial fallout .. (1+ / 0-)
          Recommended by:

          That's why analysts, bonddad, and other folks focus on that.  It's unknown what will happen as the worst waves of fallout hit.
          Will it be like 1982, when unemployment in Oregon hit 13 percent?  
          Will entire families set up tents to 'squat' in national parks? (talk to a local ranger who was working in 1982 .. it happened everywhere).
          Four teachers asked me about buying a home in the last two years. I told every single one of them, 'No way' in no uncertain terms.  Every single one of them bought anyway.
          Every single one of them is now 'underwater' except for the one who was able to get out from under her house with no loss.
          It will be a very sad, sad time.  Portland will survive better than a lot of places.
           But 'surviving' won't necessarily look like you think it will.

          "If the Nuremberg laws were applied, every post WWII US President would have been hanged." =Chomsky

          by abenjaminc on Tue Dec 04, 2007 at 12:35:34 PM PST

          [ Parent ]

  •  Excellent diary - I think they're just juggling (4+ / 0-)
    Recommended by:
    greenearth, ER Doc, darrkespur, kyril

    now in hopes of staving off a serious recession until after the 2008 presidential elections.

    The Fed lowering interest rates in the face of a weakening dollar may help a bit in the short-term: some people may be able to refinance their mortgages or sell their homes, but there is going to be economic hell to pay in the long-term.

    When Nixon attempted similar to stave off a recession in the face of looming elections, it took the economy a nearly a decade to recover - we had stagflation and inflation until '83 or '84.

    I'm not a member of an organized political party, I'm a Democrat - Will Rogers

    by newjeffct on Tue Dec 04, 2007 at 06:35:27 AM PST

  •  Conservatives viewpoint in 08 (7+ / 0-)

    We wont be hearing much about the economy in 08 from conservatives.

    All we will hear is Gay marriage, Illegal immigration, Democrats wanting to raise taxes and anything else to distract from a truly genuine discussion on the direction the economy should be taking.

    If anything 08 should be a break from trickle down economics, instead talk of balanced budgets, paying down the debts, responisble spending in key areas like health, education, training, law enforcement and defence.

    Democrats will only win over republicians, independents and more importantly, the NON VOTER, if its starts being honest and engaging the electorate.

  •  It will feel like a recession either way. (4+ / 0-)

    Most economists are now putting the chance of recession at around 50% so bonddad is being optimistic. Even if the economy doesn't slip into recession, I believe it will, it is going to feel like it with growth hovering around 1%, the continued housing bust, tight credit and stock market volatility. Voters are already pessimistic by next November they will be positively depressive.

  •  Tipping point was passed months ago (5+ / 0-)
    Recommended by:
    k9disc, greenearth, ER Doc, darrkespur, kyril

    Although the diary implies it, kindly allow me to state it unequivocally, "The tipping point was passed months ago". A couple of observations, with an existing home inventory nearing 11 months, one can guarantee builders will not engage in "spec building" for most, if not all of 2008; the subprime meltdown has really yet to max out; we will not see and feel the full consequences of the subprime meltdown until early May 2008, when we will experience increased mortgage foreclosures, decreased consumer spending, and financial corporations writing down their mortgage portfolios for what will seem like the umpteenth time.  And all of this on top of an economy that is having a difficult time creating life sustaining employment positions.  What the presidential contenders would do well to focus on is creating and developing a new economic engine, e.g., American energy independence, and the resulting saving of the middle class, without which there will be no America. Finally, see Figure 1.7 above, please observe the second blip, or should I say tsunami, the resetting of 'option adjustable rate' and 'Alt -A' mortgages that will commence beginning early 2010, and no one is speaking about. Although unconfirmed, I've heard it suggested that this second blip could make the subprime resets look like a cake walk.

    The longer the party goes on in everything, the bigger the potential correction in something will be.

    by brjzn on Tue Dec 04, 2007 at 07:29:48 AM PST

    •  Option Adjustable Rate Mortgages defined. (3+ / 0-)
      Recommended by:
      greenearth, darrkespur, kyril

      Optional-Payment Adjustable Rate Mortgages, or Option ARMs, are the flashy and increasingly popular option in home payments. Super low payments and plenty of flexibility are irresistible to many homeowners looking for more home and less fuss.

      Option ARMS

      The adjustable rate mortgage (ARM) has become a staple in today’s housing market.  The concept is that your mortgage payment starts out at a certain (low) interest rate and is adjusted periodically, usually on a yearly basis.  The rate adjusts in conformance with some money market indicator, such as the cost of one year Treasury notes.  If the cost of T-bills has gone up a certain percentage, so goes your interest rate for the next year.

      That’s a relatively simple formula.  But as housing costs have skyrocketed, the lending institutions have cooked up increasingly complicated forms of the ARM that have allowed home buyers to obtain mortgages for homes they would not be able to touch with a thirty year fixed rate mortgage, or even a normal ARM.  One such beast is the option ARM.

      An option ARM (aka Optional Payment Mortgage) is an adjustable-rate mortgage that allows the borrower to choose from four types of payment each month. The borrower can make a standard mortgage payment (principal, interest, taxes, insurance or PITI) that will pay off the loan off in 15 years or in 30 years. Or, the borrower can choose to pay only the interest charged in the previous month. Finally, the borrower can make a minimum payment that doesn't even cover the interest – a convenient option when times or tight, but one which increases the total amount owed on the mortgage.

      Most option ARMs have ridiculous introductory interest rates that are simply teasers, sometimes below 2 percent.  Those rates usually last a month or two, rarely more. At that point, they begin to rise and continue to do so with clockwork regularity.  The truly hidden risk in an option ARM is that although the interest rate changes every month, the required monthly payment changes only once a year.

      If the introductory interest rate starts at two percent, it is going to double, then triple, then probably quadruple and maybe continue beyond that. While the interest rate hikes are going on in the background, the minimum payment rises at a maximum rate of 7.5 percent a year. The result is often what is known as "negative amortization."  What is occurring is that as the home owner is making payments on the option ARM, the balance owed on the loan is steadily increasing.  

      People who select option ARMs as their mortgage of choice had better be fully informed and be adept at math.  It is not uncommon for mortgage debt to rise at the rate of several hundred dollars per month while the home owner is making those easy payments; however this process can only proceed to a point.  Most lenders will not allow debt on an option ARM get beyond 110 percent of the loan’s initial amount.  When you hit the principal cap, you will be required to begin making payments on principal as well as interest.

      What the new payment schedule will be dictated by the terms of the mortgage and your current interest rate.  If you reach the principal cap, however, the jump in your monthly obligation is going to be enormous.  The option ARM has financial factors built into it that shift constantly and many home owners are simply not geared to keep up with them.


      The longer the party goes on in everything, the bigger the potential correction in something will be.

      by brjzn on Tue Dec 04, 2007 at 07:47:00 AM PST

      [ Parent ]

    •  Alt - 'A' Mortgages explained (1+ / 0-)
      Recommended by:

      Alt - 'A' Mortgage Link

      Also, although I cannot say every Alt - 'A' mortgage is written like this, the few I have seen and heard about are "interest only loans" for the first 5 years, after which they must/are rewritten.

      The longer the party goes on in everything, the bigger the potential correction in something will be.

      by brjzn on Tue Dec 04, 2007 at 07:54:00 AM PST

      [ Parent ]

  •  Arrrgh... (4+ / 0-)

    A longtime Republican, this election he says he's voting Democrat.

    Can't these people show a little respect?  It's Democratic.

    After 9/11, Dubya told us to shop.  And shop we did.  But we didn't pay for it on rising payroll rates - we paid for it by borrowing against our homes.  Now, the equity is tapped out and people have to live with their lousy salaries.  Oh, and Dubya had the foresite to tax work, instead of wealth.  A nice twofer.

    "Frankly, you epitomize weak. Your every pore exudes feebleness. You *are* surrender monkeys." - Meteor Blades to Capitulation Dems

    by RichM on Tue Dec 04, 2007 at 07:45:18 AM PST

  •  Nine Midwestern states now in recession (5+ / 0-)

    That's according to the Business Conditions Index used by Creighton University, which uses the same methodology as the ISM.

    "Over the past two months, the region's leading economic indicator has taken a sharp, negative turn from September's healthy 56.7," said professor Ernie Goss, who released his Mid-America Economic Survey on Monday. "The pattern we are tracking is very similar to that recorded shortly before the recession of 2001," he said.

    The Business Conditions Index for November dropped below growth-neutral, to 49.2 from a weak 50.1 in October, said Goss, who oversees the survey. It's the first such sub-50 reading since 2002, he said.

    Also troubling...

    Goss also reported that the regional employment index dropped again -- to 47.3 from 49.5 in October.

    And in Utah...

    Utah's economy is primed for a slowdown, according to a business-conditions index released Monday.

    The index, compiled by the Creighton University Economic Forecasting Group, puts the state's figure at a neutral 50.0 for November, down from 60.6 in October.

    I also fear that the jobs numbers are going to be absolutely terrible. The nationwide ISM manufacturing index put employment at 47.2, the worst in years.

    The manufacturing report showed a decline in the employment index to 47.8 from 52.0, indicating manufacturing jobs are contracting, according to Doug Porter, deputy chief economist at BMO Capital Markets.

    "The one concern in the report is the steep drop in the employment index," Porter said. The weak result could foreshadow a disappointing national employment report on Friday, he added.

    "To be a poor man is hard, but to be a poor race in a land of dollars is the very bottom of hardships." ~W.E.B. DuBois [-7.12, -5.95] as of 09/2007

    by rovertheoctopus on Tue Dec 04, 2007 at 07:58:02 AM PST

  •  It's this or that stupid! (0+ / 0-)

    The phrase brings back visions of Bill Clinton, like sugar plums. Isn't it time to pack it in and find something else because you know better than I do that none of the candidates can offer a solution to the mess he (or she, which looks less likely everyday) will inherit. Not even Bill Clinton as the ex-president husband of an eventual HRC president will know how to do anything. Maybe that Mr. Rubin guy can be called in to drag us out of the mud. Or Mr. Greenspan who has served her husband and his disturbed successor so well.

  •  I've been saying the economy would emerge (3+ / 0-)
    Recommended by:
    Noodles, pkbarbiedoll, kyril

    as THE issue for months now, especially since the Dems don't seem very willing to play the winning "get out of Iraq" card.

    At the very least they should make Iraq a big part of the economic nightmare that has descended... trillions (Stiglitz's estimate) wasted, ultimately.

    One problem, however,is Democratic complicity.  Who's that over at Citibank?... Why it's our own Robert Rubin! (best reason to hope HRC is NOT the nominee)

    And wasn't it Schumer who has insisted that hedge fund  money manager salaries should be taxed (at the lower rate) as capital gains, not income...

    And so many Dems seem to be silently cheering the collapse of the dollar as well.


    "You can't be neutral on a moving train." - Howard Zinn

    by bigchin on Tue Dec 04, 2007 at 08:54:37 AM PST

  •  My father's house (1+ / 0-)
    Recommended by:

    in Ocala FL has lost 40-50 grand over the last year.

    The last time we mixed religion and politics people got burned at the stake.

    by irishwitch on Tue Dec 04, 2007 at 09:12:39 AM PST

  •  I'd be interested in Bonddad's opinion of the (3+ / 0-)
    Recommended by:
    tryptamine, Noodles, kyril

    so called sub prime 'rescue' plan. Today I read local governments are to do the bailing out. THE COUNTIES? No doubt the states told the feds they weren't doing it.

    Behind the scenes, from what I've read on Kos, the feds are giving money to banks who are then funneling it to the hedge funds who are in trouble.

    So as usual, the billionaires are bailed out of their investment mistakes, and the victims are not. I don't see county governments in this country rescuing the homeowners, unless it is their own houses or those of relatives.

    Am I reading this right?

  •  Mostly it's the economy (1+ / 0-)
    Recommended by:

    but other things are working in the Democrats' favor too, especially in the House and Senate.

  •  Citibank - 41 Billion Off Balance sheet (0+ / 0-)

    Apparently this recent 7.5 Billion infusion from the ME was a result of their capital getting perilously close to the 6% of capital to loans minimum that the Fed requires. Like Enron, they have managed to keep 41 Billion in direct exposure to the sub-prime crisis off the balance sheet. If they were to write say half of it off, I'd guess they would be on the block.

    The other gotcha is consumer debt at 2.5 Trillion at the end of Q3 of this year. It's sure to rise as Christmas approaches. Another 700 Billion of this debt was sold in bundled securities like the sub-prime garbage which ultimately could be final nail.

    The major banks recently put together a 75 Billion dollar fund to create a market in these securities becuase of the new Mark to Market rule. No more guessing on the value of securities no one wants.

    This seems strikingly familiar to the end days of Enron with their numerous off-balance sheet shenanigans and selling to other companies at the end of the quarter to boost numbers. The banks fund is essentially buying and selling these consumer debt securities to each other so no one will be wise to the real value.

    The question is will 75 Billion be enough to keep a falling knife from cutting their throats if a nasty recession hits?

    I do like the bad karma involved here as it appears the bankruptcy reform these guys paid big bucks for had some unintended consequences.

  •  They are talking about putting a floor (3+ / 0-)

    under housing prices.  WHY?  Houses are priced too high for the ordinary American.

  •  Especially with Iran falling off the 2008 "table" (0+ / 0-)

    Giuliani's whole focus is his dubious "national security credentials". Scaring voters with a nuclear Iran was key to that strategy and now that issue has disappeared.

    It leaves room for economic issues to have a higher profile and that benefits Democrats.

    Energy policy is the real key since it affects war spending ($1T in deficit/debt), trade deficit (oil 50% of US trade deficit) and economic growth (funding for alt. energy industry and jobs) and dovetails with national security.

  •  Today's EURO: .67 (0+ / 0-)

    One dollah gonna get ya .67 Euro.

    The US Dollar - it's the new Peso!

    Every day's another chance to stick it to The Man. - dls.

    by The Raven on Tue Dec 04, 2007 at 11:31:06 AM PST

  •  We're still involved in a war/occupation... (1+ / 0-)
    Recommended by:
    Hens Teeth

    of two countries. Afghanistan is deteriorating, along with Pakistan. Al Qaeda and Taliban are on the rise there. Iraq has quieted for a short time, but could likely increase in violence as political reforms stall and the old hatreds reassert themselves. The cost of these wars are also a drag on the fed budget and debt.

    Yes, it's the economy AND the wars.

  •  Nice hedge. (0+ / 0-)

    At minimum, I'd give that 30% chance of occurring.  

    So regardless of what actually happnes, you get to play I told you so.  Just like you have been for years.

    Broken clock is right twice a day, I guess.

    Liberals drive me crazy. Unfortunately, conservatives are even worse.

    by goblue72 on Tue Dec 04, 2007 at 11:33:05 AM PST

  •  9 Trillion debt, 62 Trilion Medicare shortfall (0+ / 0-)

    projected. Potential shortfall with social security. As a young person, I feel that the government is screwing me and my children over.

    •  Don't fall for right-wing crap...those numbers (4+ / 0-)

      are put forth just to scare. Medicare can be dealt with in universal health care reform. The $62 trillion is a bogus number. The total debt as a % of GDP is a more relevant number. We can get a handle on it by ending the wars and getting this economy back on track.

      •  What about the 9 trillion debt? If the Chinese (0+ / 0-)

        decides to dump some of the US treasury bills that they are holding, the interest on the debt could easily go up to 5% or more. That's nearly 500 billion a year on the interest alone.

        I also don't see how the President and the Congress will end the war and get the economy back on track. They all seen to be more concerned about getting elected, not solving problems.

    •  Medicare can be saved by (1+ / 0-)
      Recommended by:

      setting medical patents aside during the peak period.

      Every major industrial nation [US, Germany, Britain, France, Japan] will simply have to reduce the per patient cost for a few decades.

    •  You might want to research Cato Institute - (0+ / 0-)

      It has been in the forefront to privatize anything that moves - Or perhaps you know that and believe in privatization of government services.  As an old person, I also feel that this government is screwing me and my grandchildren too - or do you mean to say that any government in place is screwing you and your children?  

      What's the plan? The plan is I go in and start hitting people in the face hard. (Angel, from the Series)

      by xanthe on Tue Dec 04, 2007 at 04:48:52 PM PST

      [ Parent ]

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