Americans are saving?

[Usury]

Thanks for your post 66. I disagree, most people I know are saving more because the future looks worse and so a larger emergency fund is a necessity. Many people are making an extra effort to work hard and save money even if they have not lost a job.

IMHO, the problem with Americans is they did not save money when the economy was doing good and now they do not have any savings to rely on to get through the tough times.

This 'toxic debt' is doing terrible harm to this country and the whole world.

It is scary how blind I was, and how easy credit was it just fueled my stupidity. I had no problem putting it on credit because 'I'd just pay it later as my income went up'. Credit was so easy to come by I'd just keep transferring balances, playing the 0% interest shell game.

Well the 0% interest is gone, due to the deflationary forces my income (commissioned sales) has actually gone down a little bit, and I'm still stuck with this debt, which I swore would be paid off by now. A life lesson, and I'm fortunate to have learned it this early in life (late 20's). While at any other point in time I would have killed my self to pay this back, out of integrity, it's hard to feel obligated to these companies based on current circumstances (taxpayer backstop, etc). I'm sure many disagree.. but that is my personal feeling, and I will act out of principle, even if it is somewhat hypocritical. Look, as mentioned above, lots of toxic debt on everyone's books. Best to wipe out this toxic debt, and start fresh. The road to recovery is faster this way.

Haven't used a cc in 4 months and actually have a decent savings nest egg built up. Adjustment hasn't been that hard... I just realized all the shit I was buying was just that. So easy to go hog wild at amazon.com (especially with $25 gift certificates for every $2500 spent, of which amazon.com purchases are triple points!! woohoo!!).. LOL.

Fool me once, shame on me. Fool me twice..well, fool and don't get fooled again.

[Usury]

Thanks for your post Usury. There was a segment on NPR where a high school senior stated that credit card debt was foolish and wrong. How can someone so you understand this simple concept?

I propose we start calling then convenience cards and not credit cards so emphasis that the cards MUST be used only when there is plenty of money in the bank to pay it off every month.

Why is it best to 'wipe out toxic debt'? Who pays for the toxic debt? Why not get in debt lots of times if a fresh start is so easy?

I was that same high school senior, saying credit cards were only trouble. Well.. maybe I have a slightly addictive personality, because I got a little 'taste', saw how easy it was, and decided to fill my life with stuff one historically accumulates over many, many years and some don't get in their lifetimes. "we only live once".. "i deserve it" .. i was very good at selling these purchases to myself, and rationalizing the debt. The whole 'why save to buy, when I can buy now at 0%, start enjoying it immediately, and just pay it off over time'.

Most debt is created money that doesn't technically exist in the money supply in the first place. It has to be paid back with production - labor, goods, etc. That's why we enjoy our wonderful 8-5 jobs, so we can pay our mortgages, afford our healthcare, feed ourselves, afford gas for the car, etc. All with money the FED has been so nice to lend to all of us to use, at interest. Due to the effects of compounding interest, the amount of 'debt' (i'm talking nationally/globally) far exceeds the ability or possibility of being paid off. When something compounds, at some point when charted, it goes 'parabolic' -- and like a runaway freight train will only stop when 'crashed'. If not crashed, you get effects like the hyperinflation in Zimbabwe. These boom and bust cycles are literally built into the system -- the busts absolutely necessary to reach equilibrium again.

This is why the banks (and even entire countries in the EU) are failing - toxic debt. The subprime mortgage loans were chopped up and repackaged with other mixed mortgages, stamped AAA (highest investment grade) and sold as securities to any and all investors willing to buy them (a huge amount overseas). On top of these securities they created derivatives (additional investments/bets on these already bad securities). Well, once the mortgages started failing, it was like an atom bomb to these securities, which led to robbing peter (stock market) to pay paul (monies lost to security defaults). Basically a single subprime mortgage could have been sliced up 9 ways to Sunday and sold several times over - multiplying the toxic effect of JUST the mortgage holder defaulting. This is the toxic debt bringing down banks, and whole nations. Wall Street made HORRIBLE financial decisions that they knew deep down were wrong, but hey, 'everybody else was doing it'.

The reason this debt needs to be wiped out (allowing these corporations to fail, i.e. let economic darwinism play its hand) is because at some point you are throwing GOOD money after bad. This bad debt is a black hole sucking any and all brand new 'good' (newly created, emphasis on created) money (which remember, is paid back with the labor and production of us hard working taxpayers) into it, and the net effect will be nil, seeing as it's estimated just JP Morgan Chase has exposure to over 90 trillion (yes, that is NINETY TRILLION) dollars of derivative exposure. So how many years of 'slavery' (deficit spending to be paid back by the hard work of taxpayers like you and I) will we sell ourselves into trying to 'prop up' JP Morgan and it's 90 trillion dollars in LITERAL GAMBLING DEBT EXPOSURE?

That's why debt is toxic. That's why it needs to be cleared. That's why we need an entire paradigm shift not only in our financial system, but also in our personal lives and how we view our relationship to 'the system'.

I was at the party having a good time, just like Wall Street. Now I have to suffer through the hangover. Sadly.. looks like they're (govt/wall street) having bloody mary's for breakfast.. it will be interesting to see if they can turn it into another 'rager' or if they'll end up in ICU with alcohol poisoning.

[Usury]

Maddog, this will explain the derivatives, if you are interested: http://en.wikipedia.org/wiki/Derivative_(finance)

and here is a quick quote from the link, if you/anyone just wants the 'gist' of it:

Leverage of an economy's debt

Derivatives massively leverage the debt in an economy, making it ever more difficult for the underlying real economy to service its debt obligations and curtailing real economic activity, which can cause a recession or even depression.[8] In the view of Marriner S. Eccles, U.S. Federal Reserve Chairman from November, 1934 to February, 1948, too high a level of debt was one of the primary causes of the 1920s-30s Great Depression. (See Berkshire Hathaway Annual Report for 2002)


//ps I suddenly realize this thread has gone a bit off topic.. so my apologies to the OP and mods...

[debtmonster]

The hundreds of thousands of jobs lost in the past two months haven't even started to affect the foreclosure situation. My prediction is that there will be a second wave of foreclosures, this time a tsunami.

Your prediction is correct and is backed up by tons of data. All of the sub-prime people are the ones who had their adjustable rate mortgages adjust and that's what caused all of this foreclosure mess.

What people don't seem to know is that there's a 2nd wave of foreclosures coming from people with REGULAR CREDIT who also have A.R.M.'s that are also going to be adjusting for the next couple of years just the way the ones have been doing all along.

I saw a whole video on Youtube a while back that explained the whole thing. This is why I have no plans on buying another house after I foreclose as it will be YEARS until the housing market bottoms out. The next waves of foreclosures is going to keep banging home prices into the ground. Nobody can re-finance their homes because they all have negative equity and many people will just give back the keys and call it a day.

Folks... just sit back and enjoy the fireworks. It's going to be a LONG show.

Whatever you do, DON'T plan on buying any real estate in the next 2-3 years. You'll lose a ton of equity the moment you do.

[OhioFiler]

oh yeah i forgot to mention i really get tickled when i hear someone complain about Obama and big government. Let's just completely overlook Bush's historic deficit spending the last 8 years... that doesn't count, ok? I think the count is still 2 Bush TARP's to 1 Obama TALF... but who cares Obama is the one having to deal with it.. so we can all just blame him..

I wasn't pleased with GWB's spending sprees. Unfortunately, Obama has proposed spending more in his FIRST six weeks than this country has spent in the past 235 years.

Obama's spending spree is not a stimulus plan. It's a government creation plan.

[OhioFiler]

Your prediction is correct and is backed up by tons of data. All of the sub-prime people are the ones who had their adjustable rate mortgages adjust and that's what caused all of this foreclosure mess.

What people don't seem to know is that there's a 2nd wave of foreclosures coming from people with REGULAR CREDIT who also have A.R.M.'s that are also going to be adjusting for the next couple of years just the way the ones have been doing all along.

I saw a whole video on Youtube a while back that explained the whole thing. This is why I have no plans on buying another house after I foreclose as it will be YEARS until the housing market bottoms out. The next waves of foreclosures is going to keep banging home prices into the ground. Nobody can re-finance their homes because they all have negative equity and many people will just give back the keys and call it a day.

Folks... just sit back and enjoy the fireworks. It's going to be a LONG show.

Whatever you do, DON'T plan on buying any real estate in the next 2-3 years. You'll lose a ton of equity the moment you do.

"Sub-prime people" is a euphemism people who should NEVER have been given a mortgage. Most were either fraudulently acquired with false application data or forced on the lenders through government mandates.

[Usury]

I wasn't pleased with GWB's spending sprees. Unfortunately, Obama has proposed spending more in his FIRST six weeks than this country has spent in the past 235 years.

Obama's spending spree is not a stimulus plan. It's a government creation plan.

Here are bailouts under Bush: http://www.ritholtz.com/blog/wp-cont...ailout-pie.png

Can you supply data to support your argument?

[debtmonster]

"Sub-prime people" is a euphemism people who should NEVER have been given a mortgage. Most were either fraudulently acquired with false application data or forced on the lenders through government mandates.

I am sub-prime and I didn't lie about anything on my application. They made me send in 2 years of bank statements and all kinds of stuff.

I wish I could find the videos that I saw to show how all of this is going to collapse.

[Usury]

"Sub-prime people" is a euphemism people who should NEVER have been given a mortgage. Most were either fraudulently acquired with false application data or forced on the lenders through government mandates.

nothing was forced on lenders. It was Wall Street financial firms, not Fannie/Freddie that started the subprime lending. Yes, they should have NEVER been given mortgages. But when you can repackage and resell the risk, why not?

So it was start by wall street, but in any competitive market, if someone is doing something and taking all your business (as was wall street from FNM/FDM) now FNM/FDM had no choice but to 'enter' these markets to keep lending and stay 'competitive' in the business.

Yes, it was stupid on everyones part. The government might have encouraged a bit more lax lending standards, but they never said 'give a 0% down loan for a $600,000 house on stated income to a guy making $60,000 a year'. There had to be some fiscal restraint by the companies making these loans, and there wasn't. There also should have been fiscal restraint by those obtaining the loans - who the hell buys a house at 10x income and is okay with that? Now we all are paying the price. And the pain is exacerbated by the mortgage derivatives, as well.

I for one, am excited. In SoCal the housing mark far outpaced my income to the point I don't see how everyone didn't realize how ridiculous things had become. Now, finally, housing pricing can come back to realistic, affordable levels.

[debtmonster]

All of what you described forced me out of the housing market. I had to move 6 hours away from where I was living since the median cost of a home sky rocketed from $260,000 in 2004 to over $400,000 in 2005. The most I could qualify for was $130,000. I contacted over 30 realtors begging them for an affordable house and they all laughed at me telling me that I would not find nothing worth living in for under $200,000. Lots of people were moving out of the area to Ocala to find cheap housing. I tried that thinking I could get a decent paying job in Ocala. Well, turns out we were all wrong. I haven't been able to find a suitable job up here in over 3 years. Even with the housing crash, homes down there are still nowhere near $120,000 like they used to be.

We need the foreclosures to come more and more to help bring the cost of homes back to a realistic, affordable leval. Back in the 1980's you used to be able to buy a nice home for under $100,000. Most people I know are making around the same salaries today that most people made in the 1980's. The jobs that paid up to $12/hr. back in the 1980's are still paying that now. So if the salaries are the same, then the price of homes and cars need to be the same. Not everyone can turn into some drug dealer in Miami just to afford a home.

[Usury]

I am sub-prime and I didn't lie about anything on my application. They made me send in 2 years of bank statements and all kinds of stuff.

I wish I could find the videos that I saw to show how all of this is going to collapse.

a video isn't necessary. Just look at the historical case-schiller (adjusted for inflation) graph to see what the historical 'normal' is, where we went, and where we must go:

http://www.travelsur.net/forum/messages/20/2563.jpg

as of December 2008, we had dropped to the following levels:
Los Angeles - 170 (still a long ways to gooooo....)
Composite 20 - 150 (index of 20 major cities, you could say the national average.. still a long ways to gooooo)
Detroit - 80 (Detroit has bottomed. What's the average home price there, now, $15,000 or something crazy, right?)

I bet the composite 20 drops to at least 110 -- meaning an additional 30% drop on average. If Los Angeles hits 110, that would mean another 35-40% drop.

[debtmonster]

a video isn't necessary. Just look at the historical case-schiller (adjusted for inflation) graph to see what the historical 'normal' is, where we went, and where we must go:

http://www.travelsur.net/forum/messages/20/2563.jpg

as of December 2008, we had dropped to the following levels:
Los Angeles - 170 (still a long ways to gooooo....)
Composite 20 - 150 (index of 20 major cities, you could say the national average.. still a long ways to gooooo)
Detroit - 80 (Detroit has bottomed. What's the average home price there, now, $15,000 or something crazy, right?)

I bet the composite 20 drops to at least 110 -- meaning an additional 30% drop on average. If Los Angeles hits 110, that would mean another 35-40% drop.

Yep... so we need YEARS of more foreclosures to help get these price of homes back to where they need to be.

I just want to be able to buy a new 3 bedroom, 2 bath, 2 car garage house for $700-800/mo. like other people I knew were doing and I don't want to have to do it out in the boonies. I want to live in the big city just like all the people I knew who did it back in the 1980's. All I am asking is for the same opportunities that people int he 1980's had that were all taken away from us after the year 2000.

[Usury]

We need the foreclosures to come more and more to help bring the cost of homes back to a realistic, affordable leval. Back in the 1980's you used to be able to buy a nice home for under $100,000. Most people I know are making around the same salaries today that most people made in the 1980's. The jobs that paid up to $12/hr. back in the 1980's are still paying that now. So if the salaries are the same, then the price of homes and cars need to be the same. Not everyone can turn into some drug dealer in Miami just to afford a home.

Yeah SoCal is still screwy. They SAY the 'median' home price is $360k right now. I can't find a 'median' home for 360k

If I go on Redfin (which shows previous sale prices), houses the sold for 20% LESS THAN MEDIAN and the late 90's are now LISTED at 40% over the current median of 360k. Basically, median price DOES NOT reflect a median home.

So will the market continue to go down? ALL signs point to yes. And there is nothing Obama or anyone can do to prevent us from reaching equilibrium - he might defer it, but we will get there.

[debtmonster]

Yeah SoCal is still screwy. They SAY the 'median' home price is $360k right now. I can't find a 'median' home for 360k

If I go on Redfin (which shows previous sale prices), houses the sold for 20% LESS THAN MEDIAN and the late 90's are now LISTED at 40% over the current median of 360k. Basically, median price DOES NOT reflect a median home.

So will the market continue to go down? ALL signs point to yes. And there is nothing Obama or anyone can do to prevent us from reaching equilibrium - he might defer it, but we will get there.

I don't understand how people are able to afford those expensive homes. You're not supposed to be buying houses that are more than 3x your annual salary. If the median income is $40k, then why are the median prices of homes not $120k?

I just want to keep the money I make now (which is like 1980's income) and have the prices of new homes go back to where they were in the late 1980's.

There's too many prices increases from the homes changing hands. We need all of these people to take the fall and help bring homes back to where they need to be.

I know when my mom bought her 2 year old home in like 1986 for $95,000, in 1991 she had people gawking at her for wanting $110,000 for it. That's the way it should have been all along. $95,000 homes should not be going for $400,000. Salaries don't support it. Yet everyone was willing to go into my debt than they could afford. Why was I the ONLY ONE who had to show income statements and buy a house for 3x what we made?!?! Why did everyone else get to buy homes for 6-8x what they made?! WHY WAS I SCAMMED?!?!

[debtmonster]

http://www.businessweek.com/the_thread/hotproperty/archives/2007/10/want_to_know_wh.html

WOW!!