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alstry (34.92)

Bass Ackwards

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October 13, 2008 – Comments (6)

The pundits still are missing the boat.  We don't have a credit crisis because banks don't have money to lend.....we have a borrowing crisis because there are too few qualfied borrowers to borrow.  Those that we loaned money to in the past few years were unqualified and are now defaulting and destroying banks' balance sheets. 

We are waking up to the nasty fact that much of the revenues in the past few years came from simply loaning money to nonsense deals.  Can you imagine how many jobs are created to build a shopping center or condo development that we don't need.  How about building an extra five million cars....or hundreds of schools without enough enrollment.. or hiring thousands to service subprime mortgages....and the list goes on and on......

The following is a video featuring Ara Hovnanian:

http://www.bloomberg.com/avp/avp.htm?N=ceo&T=Hovnanian%20Urges%20Housing%20Stimulus%20to%20Help%20U.S.%20Economy&clipSRC=mms://media2.bloomberg.com/cache/vreScxkEvqZM.asf

People are not holding back because they don't have enough incentives to buy homes....there are plenty of incentives....they are holding back because they are afraid of losing their jobs or that half the neighborhood will lose their jobs.

Without figuring out a way to stimulate the economy.....the plane gets closer and closer to hitting the ground.  You can incentivize or fund banks all day long....without a productive enconomy...there will be few qualified to borrow.....regardless of the incentives or how low the rate!!!!!

6 Comments – Post Your Own

#1) On October 13, 2008 at 11:20 PM, kirkydu (93.74) wrote:

very good observations.  The destruction handed the American economy the past seven years has been severe, and this credit crisis is the result of poor economic policies and the resulting losses of job security and real wages. 

While I am an actual financial person, and pre-disposed to being middle of the road to slightly right of center, it is very clear to me voting for Obama is incredibly important, as McCain (who I worked for in 2000) is an economic rube with an economic rube as a consultant (do people realize Phil Gramm failed three grades, geeesh, no wonder). 

I wonder if making sure everybody had better paying jobs so they could have paid their mortgages, would have cost a couple $trillion like this bailout has?

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#2) On October 13, 2008 at 11:58 PM, abitare (31.77) wrote:

Yep

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#3) On October 14, 2008 at 12:32 AM, dwot (42.57) wrote:

Good post alstry...

Amazing how they keep talking the need for more debt...

Rolling over debt seems a serious problem.

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#4) On October 14, 2008 at 12:39 AM, RainierMan (78.24) wrote:

The problem is, what CAN anyone do right in this whole mess? By all accounts, we're in a world of trouble, and about all we can do is move the brunt of the pain around to different players, or opt for different bad outcomes.

It's making it really hard to know where the best place is to put your money over the medium and long term. 

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#5) On October 14, 2008 at 12:52 AM, awallejr (85.54) wrote:

Except that you simply miss the point.  It is not the lending to new homeowners that is the issue.  It is the lending to existing, current, functioning companies that is the issue.  AT&T having a tough time getting short term funding? 

You don't want the Gov'ts to try to unfreeze all this?  You'd rather see perfectly functional companies fold for a lack of short term financing?  Let's throw more people out of work while we are at it. Yes we are going to go through a recession.  The market has more than priced that in.  It was now pricing in a major Depression.  While the recession is inevitable, a depression isn't.

These moves by G7 and presumeably the US tomorrow, are designed to put the damn brakes on the collapse.  I think it will work.  In fact I argued for them to flat out guarantee lending between banks. There is still alot more work to do, but it is DOABLE.  But without shoring up the financials, we'd be toast. 

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#6) On October 14, 2008 at 1:32 AM, alstry (34.92) wrote:

Kirk....we are tracking....too bad Ron Paul is not Obama's treasury secretary.......but I guess Buffett and Volker are two pretty decent advisors.

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