Sunday, August 12, 2007

Bubble boy

Mr. dilusional isn't in touch with reality. I wonder if he ever was for that matter. Let's look at some of the fundamentals to see where we are at present. Unemployment is higher now than it was just a few years ago. Gas prices are nearly a dollar more per gallon than when he first took office. If the economy is so great why is nearly every major country in the world pumping buckets of money into the financial markets to keep them propped up? Then there's the Iraq war sucking the life blood out of America to the tune of over a trillion dollars. Then there is housing.
There are a couple of factors here that just amaze me. Adjustable rate loans which should only be used when interest rates have peaked and are headed down. Let's see. In the last eight years or so the rates were at rock bottom between 5 1/2 and 7 percent. More than likely less (rate) than your parents paid for their house (adjusted for inflation). Anyone dumb enough to think that the rates would go down from those rates should be renting.
Then there's the issues of unscrupulous lending practices. One is to inflate the appraisal on a house. That gives the seller more money and the lender higher fees. A seller pays an appraiser a couple of hundred dollars extra to have the house value listed at 25K over what it's worth and the buyer gets stuck with negative equity. The other fly in the ointment are banks that don't verify income but merely have the borrower sign some papers without checking the actual sources. If this wasn't a receipe for disaster... Then there is the factor of the flippers who helped inflate the market to levels never see before. It's gotten so bad out here in the west that people are flipping condos even before they are built.
All of this and many other issues will have to be dealt with by the grown ups who take office next.


Snave said...

Oh, but the economy is just fine! Everything is great! Bush says so!

He may actually believe everything is fine and great, because his staffers may be afraid to tell him the truth. Apparently his staff has to walk on eggshells around him because he has a very quick temper. And in his case, the temper can get set off by him hearing things he doesn't want to hear.

The American middle class appears to be dying. What's with the record numbers of foreclosures, anyway?

Demeur said...

The record number of forclosures? That's easy, banks gave loans to too many people who were not qualified for a loan or gave 100% loans. They then sold those loans that were then turned into an investment that looked like or was part of a money market investment. When the variable rate loans ticked up the party was over. See the Invictus post over at Blah3 for the rest of the story. And sorry to say it's not over yet, this is just the begining.