World Economy Feels The Mortgage Meltdown
The New York Times says that stock exchanges all around the world took a hit on fears that the U.S. is already in a recession:
On a day when United States markets were closed in observance of Martin Luther King's Birthday, the world's eyes were trained nervously on the United States. Investors reacted with what many analysts described as panic to the multiplying signs of weakness in the American economy.Even optimists have bailed on us:Shares of banks led the decline in many countries, underscoring that the subprime crisis continues to hobble the global financial system. On Monday, a big German state bank, WestLB, said it would report a loss of $1.4 billion in 2007 because of its exposure to deteriorating mortgage assets.
Investors in Asia have been in a state of denial about a possible recession in the United States, said Adrian Mowat, JPMorgan's chief strategist in Asia. But now, he said, "there's no debate about it." The only question, he added is "how long and deep" a recession might be.Comforting.
Stocks Plunge Worldwide on Fears of a U.S. Recession [New York Times]
(Photo:dsearls)
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Comments:
It is called deleveraging and it leads to a flight to safety. What does everyone expect when credit is offered at no cost or even paid to take it. This is not much different than the global credit collapse of the Great Depression.
Greed. All based on greed. Heck the whole american system is based on greed. Frustrating, most amazing country in the world, yet they continue to try and make it otherwise.
@dapuddle: The ultimate downfall of the USA will be its own citizens. As to when that will happen is anyone's guess. I don't think this is it, but I do believe that the US won't be the super power it once was.
Man, this makes my recent raise not all that exciting. Thanks a lot, now I'm all bummed out... can I have some ice cream or something?
Does the main pic remind anyone of a bacteria colony in a Petri dish that has multiplied but with a limited food supply? Guess what happens when the food (cheap oil, etc.) runs out…
7 posts and still nobody complaining that the media is blowing this all out of proportion and stifling a still booming economy?
Or have the ostriches finally woken up?
i'm confused...when did slowing growth become a recession? You can't have a recession if the economy is still growing, no matter how slow the grow may be...
Hopefully not more than 2 years, or we are all screwed.
@ksf4: The problem is that a lot of assets drop in value. Most stokes dropped 10% to 20%, independently of industries.
People need to take a deep breath and get a hold of themselves.
I was just a lad in the late '70s and early '80s, but how does a 30-year mortgage rate in the 12%-18% range sound? That was the going rate back in the day. So yeah, things could be a lot worse.
The housing market represents a tiny percentage of the total economy. Even if 50% of mortgages went under (not likely), that's still 50% of a tiny piece. Job growth is still decent and earnings are still in good shape. The dotcom implosion had a much greater overall impact, and we survived that. People just love to worry and whip themselves into a frenzy about Bu$$$H!
Recession? Maybe. Great Depression-like event? Nope.
@dapuddle: Wanting to make money is not a bad thing. The reason this country is so amazing is because of the capitalistic system we have here (its not purely capitalistic but it is the purest in the world ).
And along those lines I believe all this talk about bailing out the mortgage industry is retarded. They made some (many) bad decisions, and they should suffer the consequences for those decisions. Otherwise what is to teach them not to do so again.
@jiminychristmas: Our first house (of only two) had an interest rate of 15.5% for thirty years when we first bought it in 1982. And we got a pretty good deal at the time. The house had been on the market for over a year when we made a low ball offer that was accepted the next day. We lived in the house for seven years, refinanced it twice for both lower rates and shorter term. By the time we moved out, and bought our present home, we sold it for almost twice what we payed for it, used the profit for down payment on the new house and paid cash for some new furniture. I had always thought that was the proper way to use the equity in a house. As a boost to get into a bigger or more up to date home, not to buy toys or to pretend to be rich with HELOC loans that put one even further into debt.
Ha, boy was I naive. I could'a been driven a beemer.
@pureobscure: Although the housing market may only be a "tiny" part of the economy the repurcussions go way further. A lot of the economic growth in the last few years came out of the housing market (if you ignore the Governments happy spending on the stuff that goes *boom*).
Add to this that many people financed their spending (only making up the tiny 70% of the US GDP) by taking out mortgages that are now worthless. Do you think those people will continue to spend?
Finally the US has selling itself like it's going out of fashion over the last three decades (ever since the Gold Standard was abandoned) to a tune that China is now the biggest foreign debt holder, essentially China has the US by it's (economic) balls.
@Snowrunner: FWIW, the US and China have each other by each other's balls. Sort of a double reach-around, if you will. Chinese exports to the US account for about 10% of China's total GDP.
If our economy declines, they're coming with us.
@ksf4: C'mon, you're actually expecting people to have learned something about economics in school!
There are some weaknesses in some areas to be sure, but so far as I can tell, most of the fear is something that has been dredged up by a media that revels in this country doing poorly, for whatever reason that is. At least in the sector of the economy I work in, there seems to be no shortage of folks wanting to spend money. Here's what it comes down to, people have got to keep a level head about all this and realize that unless they're on the cusp of retirement or up to their eyeballs in debt (which IS a real problem in this country) what happens tomorrow or even two years from now isn't going to ruin them. Heck, I actually look at the stock market losing some value as a good thing. I'm not retiring for at least another 25 years and this just means my money that goes into my retirement accounts buys more shares that will ultimately go up in price.
@jiminychristmas: That is if they can't pick up the slack in their own markets.... And although a 10% decline in the GDP is not small fish, if the rest of the economy is still solid they may just weather the storm.
The US has needed outside money for a long long time, without foreign cash infusions the US is broke the only saving grace right now is the fact that commodities are still traded in USD, how much longer do you think people want to continue to get paid in Monopoly money?
It will be an interesting 2008 and I predict a hot fall after which nothing will be as it is now.
wait till china want's it's money (1.4 trillion) that currently parked in T bills - then you'll see a crash that will make 1929 look like a hiccup.
TO THE WORLD; IF WE GO, YOU GO
the downfall of the US will be that everyone just assumes this is the best country in the world but not actually be a prime factor in making it happen. sitting on your couch watching sunday night football drinking beer, BUT having a US flag on the outside and listening to "TEAM AMERICA FUCK YEAH" does not make this the greatest country in the world. fortunately, we do have a lot of hard working individuals (and a relatively ingenious government) to keep us in the radar, but if we keep pissing off everybody else in the world, well, we'll not be liked much longer.
With regards to the Chinese, I'd remind you all of the following concept: when you owe the bank a hundred thousand dollars, you have a problem. When you owe the bank a hundred million dollars, the bank has a problem.
As for recession, I predict a mild one at worst. The problems we're having are cyclic, not structural, for the most part.
Anyone notice how the "liberal" media (yeah, right) didn't give a damn about jobs being lost by the thousands through layoffs and outsourcing but the minute the stock market starts to tank, they're all running around with their hair on fire?
The cretins who run our government and national media have next to nothing in common with most of us, making hundreds of thousands or millions of dollars a year and being large investors.
MOST people make their livings by working at a J-O-B. Only about 50% of the American population has so much as a penny invested in the stock markets--and much of that is via mutual funds and the like. We aren't sitting on our asses "playing the market."
Oh, NOW that it's hitting YOU in the wallet, you care about the economy? Thanks for nothing, elected official and pundits.
Here's the upside to all this:
1) gas prices will drop as crude drops due to less demand for oil (more money in your pocket)
2) interest rates are falling, so rates on credit cards and equity lines of credit will continue to go lower, meaning more money in your pocket if you have debt
3) mortgage rates are falling, so if you are a home buyer, this is your time. You're in the drivers seat
As long as you keep your job during a messy season like this ... if your income remains the same, and some expenses get less expensive ... then the only hit you'll take is in the market. Hopefully, we'll see a bottom soon, and that will bounce back in a nice way, so hang on ... and keep chins up!
(meanwhile, I'll go take some more malox)
I guess greed and idiocy on a world wide scale would be a problem :)
The fed just cut interest rates 3/4 of a percent... that'll certainly help in a couple years...
Last year I took a loan against my 401k to pay off all of our credit cards. I am paying myself back at 10% simple interest. I am also getting together a spreadsheet to track how many shares of holdings were sold to fund the loan, and how many I am buying back with my repayments. With the stock market dipping like it is, I could make out like a bandit, buying 10-30% more shares than I sold, for the same money.
Beats the heck out of a HELOC.
Easy credit got us into this mess.
Anyway, who else thinkgs the politicos are stoking inflation as a fix for the stocks, real estate and bad debt?
The US will fall peacefully, China will take all the jobs, poison all our kids with lead, taint our food which will take more lives and one day they will be invited to move over here to fill all the empty positions left by all the deaths resulting from lead, chemical and other types of poisoning.
Its the new tactic of world domination.
The only good thing we have to look foward to is that Bush will not be in office in 2009, well it could be a good thing.
@vision646:
I would agree. Wanting to make money is not a bad thing. My struggle is when wanting to make money trumps all other influences.
Capitalism is the best system that anyone has come up with so far as I can judge, however unfettered capitalism has it's own pitfalls.
I'm Canadian and proud of it. Don't take it as USA bashing as it's not. The USA is a great country, it just has so much potential to be even better.
I don't believe our economic meltdown is a "media issue." The fact of the matter is that the combined US consumers do not have sufficient resources to pay for nececities, pay their debts and also keep the economy growing. I that the Fed and others with some level of control have "done the math."
the pic looks like vegas. i wonder how close i am.