Monday, December 24, 2007

Hey – Wassup?

GLOBAL ECONOMY WKAHEAD-Consumer spending foundation cracking

"From Madrid to Malibu, the housing meltdown is cracking the foundation of consumer spending, and barring a last-minute shopping spree this week, the holiday season looks likely to be the latest casualty". "The wild card may be politics as the United States heads into the 2008 presidential election. President George W. Bush hinted last week that something may be in the works, saying he would consider "all options" to help the economy". (Not another war - surely?)

Posted by alan @ 02:32 PM (3562 views)
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4 thoughts on “Hey – Wassup?

  • “In the United States the connection is even stronger because many households took out home equity loans in recent years to buy everything from stocks to big-screen televisions”

    Absurd situation if this is true – so now the stock market has partly been propped up by releasing equity from residential property – no doubt in the belief that just as property prices can only go up so can share prices (LOL)

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  • And all that equity will have to go back from somewhere.

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  • Cristiano Barbaro says:

    We have an interesting (if it wasn’t so darn serious) set of events happening:
    1. The Subprime issue triggered a collapse in the rotten mess that is the modern day gambling (-err sorry, “financial “) system
    2. This in turn is triggering lower consumer spending, thus bringing down the silly model of consumer debt driven growth for the economy in the West
    3. I expect the huge derivatives bubble to begin deflating too sometime in the next 6 months

    For a recovery to happen what a sane set of politicians should do is to erect a legislative firewall protecting the banks from defaulting, though only for necessary basic salary management, deposit/withdrawals, home loans and pension management. All de-regulation should be immediately scrapped – banks shuld be banks, not fancy market gamblers with other people’s money. The hedge funds, the Morgan Stanleys, Bear Stearns of this world, the gamblers and the speculators must be left to go to the wall.
    All home repo’s must be stopped and the mortgage rates reset to affordable levels for the population. This only for first home purchasers. Buy to let gamblers must not be protected in this way. The coming depression will make sure anyway that the house values will reset to realistic and affordable levels. Therefore it is not necessary for the government, whose duty is to protect the general welfare of the population to let the financial system itself (the free market) drive most of the population to living standards comparable to the third world.
    The above measures sound crazy and interventionist? Well Roosevelt applied them and they resulted in the US recovering not just from the Great Depression, but becoming the leading nation in the world until the late 60’s when a new generation of progress hating and of course hard work loathing individuals ascribing to the romantic ideas of Rosseau (the good savage ideal) began taking hold in the West.

    But of course they won’t be any good if they are not joined by other measures for long term capital budgeting dedicated exclusively to the creation of technology intensive infrastructure projects for things as badly needed as power stations (nuclear and the soon coming fusion that is, forget the claptrap environmentalist dreams). Maglev development on a grand scale is also required to by-pass, slow, outdated and inefficient shipping. These kinds of projects will generate the necessary realistic growth model which will not only keep people employed in realistic jobs (not call centers), but will actually stimulate the economy through a percolation effect of the wealth generated.
    Thus financial wealth, and financial wealth creation per se is now showing itself to be nothing but an empty monetarist dream, with no substance, every day more, with people losing their real jobs and capacity to make a living as the consumer economy collapse worsens (http://www.larouchepac.com/news/2007/12/24/what-were-hoovervilles.htm , http://www.larouchepac.com/news/2007/12/24/bushvilles-dont-go-shopping.html). The physical-economy growth model adopted by Rossevelt yesterday, and Nestor Kirchner of Argentina today, are instead proving themselves to be far superior in their ability to generate sustainable growth.

    However it is also interesting to note how the West,being so brainwashed in its green quasi-religious dogmas is unable even to mount a discussion on the need to create these huge infrastructure commitments, in particular nuclear power. And this is contrasted by third world nations and other developing nations who are developing just such projects to get them out of their econmic plights. India, China, Iran, South Africa and others have made huge physical growth model commitments which will pay off for them. The only things which the politicians and the media in the West can bring o the table are cuts, cuts and more cuts – which of course have no chance of working when the debts are so high, the gambling has been so deep. The only effect these cuts will have is a genocidal on on the population – but economists and accountants only think in balance sheet numbers, and boy do today’s Wall St. balance books frighten them!

    On the other hand, just this very situation which is developing in the west is the realization of the hippie-greeny dreams, of a post industrial society, throwing us back (if they have their way) to an 18th century living standard with a food production model completely incapable of satisfying the basic needs of the population. I won’t even bother to o and analyse possible developments for other segments of the economy fulfilling basic human needs.
    Sorry for the long post, but the above are just my thoughts on the whole current Western conumdrum.

    P.S., for those who will invariably post that “uranium is about to finish, so what’s the use of building fission power stations” claptrap, please read this, it may get you thinking along broader lines, I found it both interesting and inspiring:

    http://www.larouchepub.com/eiw/public/2006/2006_40-49/2006-40/pdf/12-39_640_feat.pdf

    It took me a while to read but it was worth it.

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  • Hi Jack C,
    Yep, totally true and EXACTLY what’s happened here in Britain. Since 1997 the entire economy has been prop’d up by low interest rates allowing mega-debts on houses to be built up, which has fuelled speculative property purchasing and allowed people to “take out” cash from their homes to spend in the nearest shopping mall. Except the fools didn’t realise the cash they were “releasing” was turning an affordable mortgage into a big, unaffordable one when the inevitable happened and interest rates returned to their normal, long term average. We’re talking the entire retail, manufacturing and banking sector being propped up by cheap consumer credit taken out as a cheap debt on the back of a mortgage, it’s become a way of life here in Britain. And now it can be no more as none of the banks are trusting anyone with a loan and 49% of credit card applications are rejected because the applicants already have too much self-induced debt based o nthe need to keep up with the neigbours. And now it’s all crashing around our ears – very poor sales in the High Street, busy but no one spending money.
    Merry Christmas !

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