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-- Posted Tuesday, 30 March 2010 | Digg This Article | | Source: GoldSeek.com
Rick’s Picks Tuesday, March 30, 2010 “Phenomenally accurate forecasts” (Editor’s note: We wrote here yesterday that mortgage forgiveness would crater the housing market to much greater depths, with homes ultimately falling 70% from their peak values. The following response, from “Donniemac,” was one of the more interesting posts in the Rick’s Picks forum. He sees signs of a recovery, but also the death of the America Dream for many chastened borrowers.) Loan balances are either paid by the bank or the lendee. Therefore, the someone who is going to “pay” for the housing bust is the banking industry. And, eventually, the taxpayer probably will be called upon to prop up the banks -- maybe through very liberal tax write offs of bad debt or through another round of bailouts, who knows? What the collective “we” need to have happen is to have the current economic growth be real. I know that doom-and-gloom attitudes seem to be the norm, but from my view, a return to a functioning economy is slowly becoming a fact. But there will be a large number of citizens who will have their lifestyles drastically altered -- in particular, early boomers who are, say, 55 or older and who did not create any savings to speak of. I know, as my wife and I have a family full of them. And some of them are running scared. But I am off-topic. As the economy starts to gain some momentum, the pain of deflating the housing bubble can be eased, hopefully enough to not put economic activity back into a tailspin. The big unknown, IMHO, is how are the masses going to react to not being able to satisfy their consumer itch at the flick of a piece of plastic? For sure, the extension of unsecured credit, or credit lines secured by home equity, is going to be greatly curtailed. This is being seen by raising of credit scores to get mortgages, or good car financing, or something other than an 18% rate on a credit card. What I think is going to happen is more of a stagflation period similar to the 1970s as we unwind the debt bubble and return to a more 1950s/1960s-like period of credit usage. People will be employed (and will hopefully learn how to save), real estate and real money (when I first learned of gold, this is what it was called) will appreciate in fiat money terms. And that will allow the bubble to deflate. At some time in the next ten years or so, fiscal conservatism will become the norm. Those of us who have practiced that in our private lives will celebrate a return to sanity and the next bubble will be born. Nanny Society You are correct about those of us who will not see balances reduced (as we did not allow ourselves to get into trouble) being angry about paying for the sins of my irresponsible family members. But the reality is we all pay for the dummies. I used to be opposed to laws that protect people from themselves and create a nanny society. But I have slowly come to the realization that those laws also protect me from the irresponsible. So, as I pay for some idiot who cracks his head open when he falls off his motorcycle, I become a supporter of that person losing a bit of his freedom through mandatory helmet laws. And thus it goes. For we all pay, one way or another, for the less mature and responsible among us. So back to the anger of seeing my brother get “bailed out,” I will get over it, as that is better than the alternative, which is to have him come live with or off me. *** Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. There is a substantial risk of loss in futures and option trading, and even experts can, and sometimes do, lose their proverbial shirts. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Tuesday, 30 March 2010 | Digg This Article | Source: GoldSeek.com
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