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> Greenspan is VERY much a responsible party to the position this country is
> in. In the early 1990s, the Fed, in an effort to reliquify a
> balance-sheet-troubled banking system (due to shoddy lending practices),
cut
> interest rates drastically, engineering the steepest yield curve in
decades.
> Banks were able to borrow short-term and pocket up to 5 percent in profit
> from loaning to the bond market at the higher long-term rate.
Yes, and the strategy worked perfectly.
> The Fed also inflated the monetary supply.
The money supply was increased in direct proportion to the growth in real
GDP. Had the Fed "inflated" the money supply, the rate of inflation would
have increased. Since it decreased, your statement is simply wrong by
definition.
> Here we are today with: Bankruptcies at record levels,
Bankruptcy laws are much more liberal than they used to be, plus the social
stigma attached to bankruptcy filiers has clearly diminished. The average
person filing for bankruptcy today is in much better financial shape than in
previous decades.
> savings rate at record lows,
Totally untrue. The way the US government measures savings is so
pathetically flawed that the figures they release are meaningless. The only
reason no one challenges them on it is simply because it is "politically
correct" to tell people to save more.
> corporate/personal/government debt at astonomical levels,
Government debt as a percentage of GDP is the lowest it has been in decades,
and is falling. Both corporate debt and personal debt are high, but as a
percentage of assets held are historically average. In addition, lower
interest rates mean the payments on this debt are lower.
> real wages below 1970s levels,
Totally untrue.
> trade deficit at astonomical levels.
Totally untrue. US trade statistics are also heavily flawed, but even more
important is the fact that all this number shows is how horrible the
investment environment overseas is relative to the US. It is a sign of
strength, not weakness. Some of the biggest trade surpluses the US ever had
came in times of a terrible domestic economy.
> Consumers (which make up 2/3rds of the economy) are BROKE; studies show
that > 25% of Americans have less than $1,000 to their names, another 25%
have less than
> $5,000. HALF of the US population are a few paychecks from the street.
Another bogus number. Very few people are willing to honestly state the
true value of their assets (and income), especially people at the lower end
of the economic scale. Many of them receive financial assistance from
various federal and local programs which are means-tested. If they revealed
their true fiscal situation, they would lose their benefits.
> Real estate prices are at astronomical levels (especially on the East &
West
> Coasts). In Silicon Valley, prices have vaulted over 70% over the last two
years.
In an economy as large as ours, the real estate prices in one small
community are completely meaningless to the overall picture. Real estate
prices in several coal mining regions in West Virginia are down 30% over the
last few years. Would you make any financial decisions based on this info?
>
> Banks leveraged to the hilt, for example: Freddie Mac and Fannie Mae now
> have issued bonds totalling over $7 TRILLION, backed by mortgage debt.
> Remember the S&L crisis which blew up 1.5 Trillion in questionable real
> estate loans. When (NOT IF) this economy goes south, tens of millions
will
> lose their jobs and default on these mortgages, making the taxpayer likely
> to be given the big screw in the way of bailing out Fannie and Freddie.
>
Comparing Fannie Mae and Freddie Mac to the S&L industry is ludicrous. They
are two different animals competing with two entirely different sets of
competitors.
> Real estate prices are so out of touch with reality in California, loans
are
> no longer based on appraisals, just the 'ability' of the applicant to pay
> his/her monthly payment. The debt/income levels have been relaxed to 50%,
> up from 26%.
The value of anything is what someone else is willing to pay for it. What
someone is willing to pay for anything that they want is very dependent on
their income. If real estate loans were only made on pure appraisals
(comparable sales), then the value of residential real estate would NEVER go
up in real terms. Does that make any sense?
Having said that, acceptable debt to income ratios in the lending industry
have been going up, and that aspect is disturbing.
>
> Bank lending standards have been deteriorating for years, this year alone,
> we had the largest ever series of bank failures take a large chunk out of
> the FDIC fund.
Somehow I missed this, and my gut instinct tells it's not true. Please let
me know where you read or heard this so it can be checked to see if it's
accurate.
> I give my clients the real deal, (let the empty suits on CNBC candy-coat
and
> lie to the lemmings) give them access to reading materials so they can
> prepare themselves when the veneer of this so called 'new' economy wears
> off, as it already is, as the dot-coms fail, and hapless (hopeless,
> clueless) 'investors' lose their retirement money and life savings. If
you
> manage money for clients, do them, and yourself a favor, and do some
reading
> on the economic history and familiarize yourself with the hard numbers,
> before it is too late.
James, I think you could use a little brushing up on your economic history
and the :hard numbers" yourself...
Bruce
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