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alstry (35.96)

No Credit No Spending No Jobs

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April 17, 2008 – Comments (3)

Over the past seven years, banks loaned cities, businesses, and individuals trillions and trillions of dollars.  You think money supply grew, debt grew exponentially more.  Debt spends exactly the same as money.  If you don't believe me, just take your credit card to Target and see what you can buy.

Did America Buy!!!! New Houses.  New SUVs.  New TVs.  New Vacations. 

Simply from the stimulous of NEW credit, millions and millions of jobs were created in America in many different industries: Construction, Sales, Retail, Finance, Manufacturing, Government just to name a few.  Even health care benefitted because higher incomes allowed people to pay high insurance premiums.

But for issuing credit, sales would have never occured and millions of jobs would have never been created.  While these new jobs were being created from credit, many of our manufacturing jobs were being sent overseas.  Who needs to make anything when you can borrow as much as you want.

Banks made hundreds of billions issuing, packaging, and selling that debt around the world.   Bank executives made billions in bonuses.  Who cares if the banks knew that the debt was likely to default, why worry about what will happen in a few years when you can capture profits now. 

Well, now the banks have slowed lending to people, business, and cities.  Spending is slowing.  Debt is defaulting. All those jobs that were created as a result of credit......, thousands are being eliminated everyday. 

Heck, in one swoop, Merrill is cutting 10%, Citi is cutting back 20%.  TWENTY PERCENT!!!!!  Bear is cutting 50%.  FIFTY FIFTY FIFTY PERCENT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!That is just in the last few days.

There is no replacement for these job cuts.  The jobs were created by spending from NEW credit and are being eliminated because credit is evaporating.  No credit no jobs.  No job no spending.  No spending, no taxes.  No taxes, no services.  No services, no jobs.  Here we go again.

The jobs cuts are really just starting to kick in.  Unless banks start lending again, we still have millions and millions of job cuts to go.  You think exports are going to make a difference, think again...the numbers are not even close.

Jobs created by credit will be lost as credit is eliminated. 

Credit stimulated unprecedented spending.  Lots of jobs were created.  Lots of homes were purchased.  Credit is being eliminated.  Now lots of jobs will be lost.  Lots of homes will be foreclosed.  So goes the the credit cycle.

 

3 Comments – Post Your Own

#1) On April 17, 2008 at 11:41 PM, jahbu (85.21) wrote:

So what happens to the value of the US dollar?

 In other words will the $ buy more or less in 3-5 years?

Jahbu

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#2) On April 18, 2008 at 12:00 AM, alstry (35.96) wrote:

Who knows, but this is what happens to houses:

Below are the real March foreclosure numbers for CA just released minutes ago from ForeclosureRadar. Sit back, relax, have a large bottle of brown liquor nearby and read away. Remember when reading, that Notices-of-Default lead foreclosures by several months in some cases. Also remember, this housing and credit crisis will not end until home prices/sales/foreclosures bottom and stabilize. By the looks of the most recent data, that is a long way off.

**In CA for March, there were 27,541 FORECLOSURE FILINGS and 42,704 NOTICES OF DEFAULT for a total of 70,246 early/mid stage foreclosure filings. This is the killer that nobody reports...in CA in Feb, ALL HOMES (New & Existing) SOLD WERE ONLY 20,513. ALL NEW HOMES SALES for the ENTIRE 10-STATE WESTERN REGION in Feb were only 13k and ALL EXISTING HOME SALES for the ENTIRE 10-STATE WESTERN REGION were only 55k. One more thing...the MAJORITY of the Notice of Default surge is not from subprime loans. Not even close. I can't specifically tell you which program types are defaulting to the greatest degree, as that is part of a paid service rolling out soon, but I can say they are not subprime and they are not fixed...actually they likely are subprime but the ratings agencies just haven't got there yet!

This means that March CA foreclosure activity is...A) greater than all THE HOMES PURCHASED IN THE WESTERN REGION the month prior. B) nearly 350% GREATER than all the homes bought in CA alone! C) Not primarily a subprime problem. This is a disaster.

Also note that repossessed homes that are sold through a real estate agent count in the Existing Home Sales number, so the problem is alot worse than the public data show.

Foreclosure sales at auction declined 6.5% to 15,833 units likely due to the unavailability of financing and general fear.

Wow!! ONLY 2.3% of foreclosed homes sold at auction...the rest went back to the lender swelling inventories...how about tham apples Charles Bederman. This is despite an average discount of 21% with 39% of the homes offering a 30% or greater discount.

In summary, the worst in CA is absolutely still to come for housing. And everyone is too busy trying to figure out how to bail people out and focusing on subprime to realize that WE HAVE NO JUMBO LOAN PROGRAMS. The Fannie/Freddie 'conforming/Jumbo' programs stink, as they have very few programs available and nobody wants a 7% 30-yr fixed rate loan. Why, when they have an exotic currently and their payment is one-third of a 30-yr fixed. It is all about the monthly payment, remember. For purchases, a 7% 30-yr fixed with a large down payment does not buy the average household much home.

Given this, the worst is yet to come for the financial markets because until real estate quits crashing and goes through a long period of stabilization there can be no basing and subsequent recovery. Either that or bring back all the exotic loan programs and the problems end tomorrow. - Best, Mr Mortgage

This report compliments of data provided by ForeclosureRadar...nobody compares to their accuracy, timliness or depth. You can sign up for your free monthly report by going to the site link above.

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#3) On April 18, 2008 at 12:20 AM, abitare (35.12) wrote:

alstry,

We are aligned in thinking. Take a look at Sinchiruna video

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