But Countrywide might be saved from experiencing the new bankruptcy laws if, in order to avoid huge write-downs of investment value, Merrill Lynch touts nearly $1 billion in subprime lender assets it bought just eight months ago. They aren't alone, with Lehman Brothers Holdings and Morgan Stanley are rowing that same leaky reed boat in the stormy Red Ink Sea.
Nah! This approach won't work, as the Texas Trailer Trogs don't do negativity. Let's try something else.
How about all those low-wage service jobs lifting the economy? Nah, I doubt it will work to enhance economic confidence much. When the August employment report gets released on September 7, all those 40,000+ mortgage brokers let go by Bear Stearns, Countrywide Financial and Capital One Financial will affect the numbers, along with lower numbers of transportation workers and retail sales personnel. Global Insight predicts unemployment is likely to rise to 5.1 percent by the second half of 2008, with over 1 million construction jobs lost if Angelo Mozilo is right about a looming recession. Retailers are already planning on a weak holiday sales season. A study released by the Federal Reserve itself says that homeowners are broke. [PDF]
William H. Gross, chief investment officer of PIMCO, the world's largest bond mutual fund, says that the housing price decline could result in asset depreciation of as much as 10% - an amount not experienced since the Great Depression.
So much for all those optimistic orders for durable goods! Funding for such massive projects is likely to be cut, as even Chinese banks are announcing that the subprime mortgage collapse is affecting them.
Why is it that economically tiny Jamaica can learn from our woes while our Texas Trailer Trogs and Wall Street investors cannot? Maybe cartoonist Martha Rosenberg understands the reason. Her image might become even more common on street corners than it now is, as Accredited Home Lenders Holding Co. announced it is cutting hundreds of jobs the week. They won't be the last, either.
And so it goes.
Article comments
1 - Dave Nalle
Realist, I have to say that I admire your persistence in the face of reality, and your stylish presentation of your lunatic propaganda. Way to go!
Nothing you say makes any sense at all, but you say it with such gusto that I have to admire you.
BTW, not that I want to afflict you with an understanding of the housing market, or anything, but at the same time we see this slowdown in home sales and reduction in home prices we see a parallell and even larger increase in rental construction and rise in rental prices.
The people who lose jobs in building houses will just move to jobs building apartments and office parks.
This isn't a real estate crisis, it's a problem with a few irresponsible banks getting what they deserve.
Dave
2 - Ruvy in Jerusalem
At some point, Dave, innocent people minding their own business get the shaft up the rear end. Wow, that can hurt, too!! Uff da!!
So, is it the employee of the loan company that gets the shaft? Or is it the employee of the bank? Or is it the employee of the insurance company that sold housing insurance on the housing developments? Or is it the employee of the distressed merchandise shop that attracted all the folks working at the bank, the loan company and insurance firm? Or is it the employee of the fast food joint that made its money off of the employees of the bank, loan company, insurance company and distressed merchandise store that all closed?
And so it goes - and goes - and goes...
Yeah, dumb kikes like me don't understand economics at all.
Heh...
3 - Dave Nalle
Actually, based on what the congress is trying to do with a proposed mortgage bailout it may be - as usual - the taxpayers who get the shaft.
Dave
4 - Baronius
I'm worried about the Bubble bubble.
We've had the S&L bubble, the dotcom bubble, now the housing bubble. There's a whole industry of doomsayers who live off the promise of future bubbles. What happens when everything goes well? There'll be a lot of experts without bubbles. The bubble industry and affiliated industries (wolfcrying and chicken-littling) will go into a tailspin.
I wonder, will they see it coming?
5 - Dr Dreadful
Bubble bubble, toil and trouble.
6 - Clavos
"Bubble bubble."
Heh. I like that, Baronius.
Very funny.
7 - Dave Nalle
Baronius, if everything went well it wouldn't be a real economy, it would be a command and control system where the state just made up how things were and told us.
Which, btw, is what I believe Realist is in favor of. There will be no good news until the state takes over the media if he has his way.
Dave
8 - Baronius
Exactly, Dave. The economy looks like a 5-year-old running, where every motion could topple him, but he somehow gets it done. There is no such thing as a market in equilibrium. (George Gilder wrote about this in Wealth and Poverty.) Look at how far the economy has run, despite the occasional burst bubble. You could never plan the successes we've had, because no one person would guess where they'd come from.
9 - bliffle
Actually, we do have an administered economy. When the president tells the head of the Fed Reserve to reduce interest rates he does it. Makes the pres look better in the polls and it's a big boon to payday for bankers.
Every tax break, every earmark, is The Hand Of the Government tilting the economic system one way or the other.
10 - Dave Nalle
True, Bliffle, but for now the government can't really come out and declare that stocks must go up and set wages and prices to a strict arbitrary standard. In fact, a lot of what the government does is incredibly ineffective. Raising and lowering rates has some impact, but not nearly as much as people sometimes make out. And government attempts to regulate the economy in any more detailed ways almost never work out well.
Dave
11 - bliffle
But such government actions ALWAYS benefit a small number of businesses and people who are In The Know.
12 - Clavos
Yep, and the do so everywhere and always will.
It pays to be in the know as much as your resources permit.
From the tone of many of your comments I infer that at some time you were stung pretty badly???
13 - bliffle
Anyone with a taste for honey is going to get stung, it's not surprising that it happens, only whence those stings come from. It makes one wary.
And right now what should make one wary is the highly leveraged nature of the US economy. The USA has about $550trillion of extrinsic paper value riding on $45trillion of intrinsic net assets, thus making it very unstable. Paul Volkers nightmare scenario of a relatively small rejection of, say, a $100million US bond issue by a junior asset manager in a minor nation could start a worldwide run on the dollar that would escalate precipitously. Our economic welfare depends mightily on foreigners continuing to drink the Koolaid.
Meanwhile, the administration, having no real faith in the idea of Free Markets that they always blither about, attempts to exercise tight control through the Fed and the Plunge Protection Team, but really all they do is store up more water behind a dam that will eventually collapse.