patrick.net

Unfortunately, it's the sheep that are in the majority. I still wonder how it is that a sheep gets to tell the pack how to redistribute the kill.

Democracy is two wolves and a sheep debating what to have for dinner.

Liberty is an armed sheep contesting the election.

DennisN,

that is a good one.

I'm as mad as hell and I'm not going to take it anymore! I'm not going to tell you what to do about the inflation and the depression! History repeats-

http://tinyurl.com/23k65j

http://www.youtube.com/watch?v=90ELleCQvew&feature=related

http://www.youtube.com/watch?v=iicB80Mwz8w&feature=related

http://www.youtube.com/watch?v=_AI8mC8XucY

Too many links - please help me out of moderation.

Bernanke's theme song-

http://www.youtube.com/watch?v=JLJREBFtuAY

OO,

I can't claim it for myself. IIRC it's from Benjamin Franklin.

Well, if they stick to some sort of reasonable lending standard such as making sure that a borrower can actually pay his/her bills, the bond will be as good as has ever ever been, the average person still can't afford a house, and prices will still fall. They are just buying time and they can say that they tried.

And by the way, with inflation kicking into high gear, people are going to have a lot less money each month to spend on that house seeing as though wages are pretty flat.

You all are forgetting that the wolves are the easy majority of tax payers that are paying their mortgage on time. They have no love for the average SoCal FB'er. And the housing bubble wasn't everywhere.

Given that they are already getting dinged pretty hard by inflation I don't see much sympathy for the minority of real estate speculators out there.

You all are forgetting that the wolves are the easy majority of tax payers that are paying their mortgage on time.

But they are afraid of the "housing recession" as portrayed by the left-leaning MSM.

Well said Peter. The sheep may become the leaders.

I would hope that the premise of the post is wrong.
I would also love to believe that it's only a political talk and no action . And even the action is not going to be effective.

But that's the only talk I hear. That's the only plan of action I see.

WHO is even uttering a single word of caution, counter-point that is in favor of people who behaved responsibly ? Who is representing the people who either decided to not buy, or are paying their mortgages on time or who own outright ?

I will believe sanity exists in our politicians when I see it.

All the savers actually need to back up a few steps and think hard about one thing: are you saving in the RIGHT asset categories? Why are you saving fiat?

You can be a wolf too, if you save in the right asset categories. Let the dollar go belly up, you can profit from it as well. Lots of people can profit from it, including insolvent banks, FBs, WS, or small investors who dump dollars faster than the next guy, to be exact, the next Sovereignty Fund. In fact, savers will do better than the FBs in a dollar collapse scenario if they stay on the right side of the trade. The biggest losers won't be Americans, it will be the foreign governments that are hoarding our toilet paper.

The big picture is, you have to go with the flow. The flow is against USD, so jump ship before it is too late. I don't blame our politicians, I would have done exactly the same if I were in their shoes, and they are acting in a way that is beneficial to a much bigger proportion of Americans than this blog represents.

why I am being moderated again? Something unpatriotic?

StuckInBA,

Amen!

I think Stuck is pointing out a real danger that everyone is oblivious to.

OO and Paul, sorry about the moderation. New Homeland Security Rules for bloggers: unpatriotic comments must be reported. For national security reasons, you know. Blog code orange today.

OO: Great point about being on the right side of the dollar decline, but what is that? Oil, gold, Euros? Maybe I should get as far into debt as possible, convert to gold, hide it, and default?

I knew a guy who got divorced, got his wife to give him all the assets, then she got into massive debt, hid the cash, and defaulted. They are still happily together. It was all for the money! He's a sleazeball, but he does how to work this system.

Slaves would be a good inflation hedge. But they're only allowed by our dear allies the Saudis and Kuwaitis. Technically I think Saudi made slavery illegal in 1965, but it hasn't stopped anyone.

http://www.gvnet.com/humantrafficking/SaudiArabia.htm

400 teachers just got fired from the Chula Vista district (south of San Diego) due to emergency budget cuts.

http://www.nbcsandiego.com/mostpopular/15503667/detail.html

I work with a lot of smart folks - people with high IQs who solve complicated engineering problems easily every day - and you'll be amazed at how much they lack common sense, economic sense and clarity of thought.

They buy in propaganda and repeat the same nonsense that politicians and the talking heads say.

What is going to happen?

Things will obviously get a lot worse before they get better and the bad period will be prolonged because of "active involvement" from the government. If the new deal nonsense was foisted on the people back when most people still believed in liberty, personal responsibility and accountability, I have no doubt that nothing short of communism will be imposed here now.

The productive and the prudent will continue to be fleeced and it will have negative effect on the economy and the clueless control freaks in the government will wonder why.

Hopefully, out of the disaster, a fondness for freedom will re-emerge and things will improve from then on.

Patrick,

commodity is probably not everyone's tea. But getting into a currency which is showing more discipline and offering higher interest (be it Euro or my favorite AUD), may still not be a bad idea at this point. You just need to choose the least of all evils.

Right now China, the soon-to-be (or already so?) biggest hoarder of our toilet paper, has not started dumping yet. Premier Wen recently declared that China will not "pose a problem" for the US, in exchange for continued access to the US market, as it aspires to go up the food chain. But it can only refrain from "posing a problem" for us for so long. Once the hype of the Olympics is over and the reality starts to set in, any nervousness from China alone can rattle the USD cage further.

OK, I'm going to try to open an Australian bank account tomorrow. Unless the AUD tanks, the interest rates are too good to pass up.

As far as I can tell from google searches (and I'm by no means an expert, so feel free to correct), no countries are currently on the gold standard, or any non-fiat currency. I was looking to see if there were going to be any good safe-haven countries to perhaps migrate to when the US begins it's inevitable fiat currency collapse, but sadly every other country has apparently also discovered the joy of unlimited government spending.

If anyone has opinions/insight for which countries (preferably first-world) are best positioned to weather the US currency collapse, please post. It's going to be bad-times to be in America paying taxes in US dollars when the country gets to 20% inflation or more...

Is FormerAptBroker still on this site?

I was wondering what the previous mortgage/rent ratios were in the Peninsula. Did they ever reach 1:1?

PermaRenter,

I don't think you can guard against a sudden collapse of the USD. No country, no currency can sustain that. Right now it seems like there is a concerted effort to debase the USD, gradually, and it is more of a managed process.

The best currencies to guard against the slow debasement of USD are commodity-based currencies, namely CAD, AUD, S. African Rand. If you want first world, that leaves you only CAD and AUD, but I personally believe that Canada is located too close to the US so it can hardly decouple too much from the USD. I will throw in NZD in the mix, but NZ is too small of an economy (2M+ population) and it is in fact NOT that rich in natural resources except for timber and sheep.

Euro is obviously a solid choice, but Euro has a problem with concerted monetary policy across too many countries with various economic profile and needs, so it won't be able to appreciate too much against USD when recession hits. Swiss Franc has always been the perceived safe haven, although Swiss Franc is no longer gold-backed.

S. African Rand.

The Kruger kind? :)

What is going to happen?

It is already happening, including the end of Fidel Castro's rule and Hugo Chavez saber rattling, predicted two and a half years ago in this Atlantic Monthly piece:

http://www.theatlantic.com/doc/200507/fallows

sriromgopalan:

That's a good one for comedic relief, labeling people with high IQs who solve complicated engineering problems as smart. I laughed out loud so hard I had to catch my breath.

What do you think of the GBP? The UK is much bigger than CA, AU, and NZ combined. The Brits have hedged their bets with their "trial membership" in the EU by maintaining their own currency - I think only the UK and Finland have done so.

UK is in a worse shape than us. I actually think GBP has peaked against the USD and is on its last journey of unraveling as the former world's reserve currency.

At least the US still maintains a distinctive edge in high-end manufacturing (planes, aircraft carriers, or even 18-wheelers, etc), can you name one thing that the Brits can do that the rest of the world cannot? Other than pushing paper, of course.

UK's housing bubble is just as big, if not bigger, than ours.

In the 1929 Great Depression, Brits were the first to actively debase their currency. When Soros attacked the GBP, Bank of England just went along and depreciated GBP. Bank of England already started cutting rates last year.

I don't see anything the Brits did in the past indicating that they are going to fiercely defend the purchasing power of their currency. After all, we learned the debasement trick from the Brits.

Let's review what the UK has done so far:

They sold half of their gold in 2002 (around $303 - some speculate the buyer to be the Rothchilds) near the 25 year low.

They have now nationalized the failed bank - Northern Rock to the tune of 60 billion pounds!

What's next?

"I work with a lot of smart folks - people with high IQs who solve complicated engineering problems easily every day - and you’ll be amazed at how much they lack common sense, economic sense and clarity of thought. "

Absoltley right, there is something beyond intelligence. This reminds me of the story of Long-Term Capital Mangement (LTCM) which blew up in 1998. When the academics and wallstreet genius devised a complicated atbitrage trading model, just to FAIL.

Even the most intelligent people are scocially engineered and take crap for face value from the media or politicians without giving much tought

About high IQ people who are financially illiterate.

I have complained about that ad nauseam in the past. Engineers are supposed to be good at math. They were severely hurt during dot com bust, and still did not learn anything from their mistakes.

That tide has started turning. No, they haven't become smarter, there is just a realization that RE market is turning sour. The water cooler talk is decidedly bearish. No one is talking about a spring bounce.

But denial still runs deep. The tone is "it's not that bad" kind. People still worship the Fortress.

I expect the "BA Proper" to fare much worse post 2010, when the option ARMs reset en masse, the interest rates will be definitely higher than what they are and loan qualification even more stringent. The "BA Minor" is dropping on a daily basis. Morgan Hill, Evergreen, Dublin at al will revert back to 2001 levels in next 12 months. What's happening in Tracy, Mountain House today will happen there in less than a year.

"then she got into massive debt, hid the cash, and defaulted"

Just a few days ago I might have even found this mildly entertaining. Now? It's just depressing.

What is going to happen?

I don't know but I'm pretty sure NO ONE is going to jail! Angelo Mozilo won't and neither will this couple. I'm not even sure why they went to the trouble of pretending to be divorced? Why the ruse when it's so easy just to rob your OWN house?

This brings me to my point. What is occuring is that after years of abuse, conditioning and de-sensitizing the American Consumer is now every bit as adept at playing the game as any one in corporate America. They've finally learned that it's better to be a victimizer than a victim. Speaking of which, Nation of Victims my @ss, we're now a Nation of Sophisticated Debtors.

Thus far in all of the B-O language I haven't heard of one single consequence for these people. I say we should take down the "Another F@cked Borrower" web-site as the ENTIRE premise is no longer valid! It should be "Another PAMPERED Borrower" or "Another SHREWD Borrower". Unless you defaulted very early in "the game" you're going to be just fine.

I think many engineers are too smart for their own good.

(a) Because they are smart, they consider themselves to be experts on some piece of technology. Therefore, they have a lot of unwarranted respect for so-called experts in pseudo-scientific fields like economics (which in my opinion, is just a part of the study of human psychology). The bankers also deliberately complicate the terminology to make it sound more complex than it really is. There is a widespread faith in Bernanke's words for example. When I point out that he has been wrong on every public statement so far, I am met with blank stares.

(b) What they have in intelligence, they lack in common sense. Which is quite uncommon actually.

I think many engineers are too smart for their own good.

Many engineers are not even smart. They just think they are because they know trivial technical details that no one else cares to know.

pseudo-scientific fields like economics

I like that! :) Economics is probably less "scientific" than Astrology. The ancients build Atlantis and pyramids with stars and geometry. They knew no Keynes or Phillips Curve!

What they have in intelligence, they lack in common sense. Which is quite uncommon actually.

Worst of all, they totally lack EQ.

The US should develop a secret plan, whereby all the citizens keep mum, but fairly quickly convert any holding of US dollars into gold and some other pre-selected havens. Then, on cue, BB can hyperinflate the dollar, screwing over any foreign country or investor with alot of dollar holdings. We can then pay off our national debt, buy back into the system after the foreigners clear, and start fresh.

There isn't any silver-bullet solution to seize the erosion of value of any fiat currency unless that fiat currency is backed by an asset - usually silver or gold. You are right that there is no country which is in gold standard. So much I'd like to see the restoration of gold standard, but the possibility is less, at least in my lifetime. Going back to gold standard means forgoing the stability of the financial system at least for a interim period of time (hopefully). As much we would love to indoctrinate the idea of restoration of gold standard - in reality we are not ready. The general public wants harmony, peace, and stability , and they are willing to pay even a price of 20% inflation rather than see chaos in the financial markets through reversion to gold standard. The entire banking system will endangered, as they make most of their money out of credit expansion, which is not possible through gold standard as it will limit their credit expansion and money supply. Also the government will totally oppose, because incase of any unfortunate event, the government cannot get loans as now that the credit expansion is limited to the amount of gold in the vault. This is one of the reason that the government has to go away from gold standard to finance wars.

Read :
Gold and Economic Freedom by Alan Greenspan
The Case Against Fed by Murray Rothbard