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An interesting take on the Global Credit Crisis

1K views 9 replies 5 participants last post by  ksinc 
"Their trust in the society that encouraged them to incur the debts is also destroyed. Again, the shock that is felt when a major part of a lifetime's savings vanishes, seemingly overnight, does not come only from the prospect of a diminished standard of living. It comes also from the collapse of the narrative according to which people have hitherto understood their lives."

Indeed.

On one hand, for some (like this lady ) trust in a society that is going to give them a home they can't afford; then promise to pay their mortgage and buy their gas SHOULD be destroyed. That narrative should be diminished and people should demand the true skills and opportunities to create real wealth for themselves and their descendants.

What's going to be true in some cases, and the indications are, that most people who will walk away will do so because they didn't have a lifetime's savigs invested. I've heard numbers in the 94-96% range of people that are current on their mortgages. How do you end up in a house with no money down? You have no savings. I'm active in our HOA and most of the people I talk to with their true life's savings invested are planning to try to stick it out 5, 10, however many years to break-even. We have a bunch of people who cashed out up north and put their last $500k into a home here in Orlando and it's now worth $250k on paper. They are stuck. They are not going to walk because they are 50,60,70 years old and they can pay the mortgage. It beats renting and they or their children will recover "some day."

Also to contemplate is what about the "trust" of lenders. Alot of the so-called fat cats were little old ladies invested in bonds. Take for example, my own GrandMother who has a HUGE portfolio of bonds. Fortunately she has an 'ok' GrandSon who looks out for her $, but think how many people bought 7% bonds to hold? Think of the pension funds full of retirees and widows that are now taking huge losses in their bonds which were supposed to diversify the risk in equities which are also down.

Looking at bonds: compare what the interest deduction for bonds says about incentives with the cramdown of GM bond holders. Conflicting signals? We just destroyed confidence in one of our most important sources of capital. We just turned bonds into credit cards with one stroke of a person's pen that has zero experience in business or financial matters that is simply paying off his campaign supporters. The unintended consequences of that are going to haunt us a lot longer than some excess real estate inventory and/or whatever some people may learn that never learned the lesson before. I mean if you didn't already know, are you really going to learn your lesson or just get a new bankroll and double down again on a promise?
 
Further to this The New York Review of Books has an article "The Crisis and How to Deal with it" on line at present well worth a read.

And here in Oz the news for the economy is looking good, the Oz dollar is maintaing its health.

But only time will tell if indeed we have turned the corner, personally I think its still a case of don't hold your breath or break open the champagne just yet.
I heard the gold bugs are more popular than ever there in Oz. I always thought the advice to hoard scotch vs. gold was well taken. Champagne is probably just as good as a trading medium. ;) I agree to not hold your breath. This is a pretty big scam IMHO.
 
Actually if you want to horde anything try Mornington Peninsula Pinot Noir. Oh and the Tasmanian is good for short term investments.:icon_smile_big:

Yes Gold is very popular here a couple of friends of mine were big on it in the late 80's at one stage they had about 5lb stashed in their house.
Ah, good advice!

I like to tease the gold bugs although I share a lot of their views and probably appear to be one to a lot of people.

I will say, "I had about 20 ozs, but with the inflation it probably weighs a lot less than that now. Wait; inflation means it weighs more, right?" And then watch their heads spin off! :devil:
 
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