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alstry (35.36)

The Answer Is Right Behind You

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August 06, 2010 – Comments (2)

It was clear to Alstry that the entire housing industry in America was based on massive borrowing and spending.....and without reckless lending.....housing would collapse.  At the peak, we were borrowing about a trillion dollars per year just on home equity loans.....and building over 1.5 million units per year.

Once bankers started cutting off credit.....it was obvious housing and construction would collapse.....and it has, residential construction AND home equity borrowing is DOWN OVER 80%....and falling.

Today, Washington and Wall Street has picked up some the borrowing slack.....Washington alone is borrowing over $1.5 trillion (not including state and local government borrowing) plus Wall Street is borrowing a similar amount (not including the trillions provided to banks)....combined, the two are borrowing OVER 20% of the GDP.

With this kind of borrowing and spending......our economy should be booming....salaries should be rising, sales exploding, tax receipts growing etc........

Instead, in many segments our economy is continuing to contract and tax receipts are shrinking.....DESPITE MASSIVE GOVERNMENT/WALL STREET BORROWING AND SPENDING.

Now the only question is what would happen if government couldn't borrow and spend anymore?  My suggestion is look to housing.....it is right behind you....but this time, there will be no one to bail out government.

 

2 Comments – Post Your Own

#1) On August 06, 2010 at 10:53 AM, oridinaryaverage (< 20) wrote:

Look at the new headlines about China looking more to precious metals. 

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#2) On August 06, 2010 at 11:04 AM, alstry (35.36) wrote:

Everyone is looking everywhere...in the end it comes down to production of goods and services which is currently going through massive convulsions.

Just look at my last blog on how the sheep can't really focus on the issue....many think the issue is the Pension Plan with the post office......Pension Plan's are simply a collection of financial assets that are a derivitive of production.....

The problem with the Postal Service is that email and other technological advances are replacing traditional mail....so volume is collapsing......and 600,000 taxpaying and spending workers depend on that volume for their livlihood....

What so many are having a hard time with is we are going through a paradigm shift in the way production is allocated and compensated.......

Traditional production in America is collapsing on so many levels due to three primary reasons....credit being cut off to producers, outsourcing, and technological obsolence......

The only reason that Pension Funds have any value is that they are merely a collection of assets that are a derivitive or production........and if America is not producing, pension funds will be worthless in the end.....

and for what its worth, metal will be similarly impacted....to a greater or lesser degree.

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