Can We Stop The Impending Financial Crisis?

[85 Cutlass Brougham]

I ask this as a serious question. Is it possible to stop the crisis we are about to experience? I tend to believe that what we are seeing now is only the birth pangs of a much greater problem. We are not spending $700 billion to try to avoid a total meltdown. Oh no. By many accounts it is between 4 and 8 trillion dollars. That is 80% of the old national debt that took us 50 years to accumulate. My problem is where is the money coming from, and what does that mean for the value of the Dollar? If the government is just printing money then would we not go into a period of high inflation or even hyperinflation? Can it be avoided, or do we already have too much debt to ever be able to repay it? Put the partisan politics aside and think about what we very well could face in the next 6-18 months if the wrong steps are taken. This is not a Republican or Democrat issue, it will greatly affect all of us no matter who we vote for. If the worst really is about to happen, we need to take steps now to prepare for it. I hope I am wrong and it all works out, but I just have this awful feeling that it won't. So, what do you think?

 

[TexasT]

I could be wrong, but I think the impending crisis is based on confidence. The normal working joes like you and me are holding on to our money. I know I haven't bought near the Christmas gifts I purchased in years past. I know I haven't been buying any extras.

I did buy my wife a new washing machine but it was because the existing one developed a leak. It was in the plans to purchase a front loader that had more capacity. This allowed us to get one that uses much less detergent and water and spins real fast so we don't have to run the dryer as long either. Got a deal and 0% interest fro 12 months so it was a plus to us.

I would like to purchase a large (37" or bigger) flat LCD television. It is not a need so I haven't. I'm pretty sure the prices will come down for superbowl television sales time so I will wait. If the price doesn't get where I want it I will continue to wait. We have several other "worthless" televisions to watch so I hold the cash instead of spending.

I'll bet there are thousands or millions of others that are thinking along those lines. Possibly even worse for them as they may be wondering where their next house payment will come from. Without the spending the economy goes into a tail spin. We are a consumer nation. Without consumption we fail.

Unfortunately for the chinese, their economy is also predicated on our(The U S) consumption. The rest of the world is also finding out that as the U S goes, so goes the world. Kinda funny really. They want to bring us down but by doing so they also bring themselves down. Karma I guess. It's all on the wheel and what comes around goes around.

As far as the question of what can we do, I would think that restoring some confidence in the average consumer would get them back to spending. Until then the tailspin just picks up speed.

 

[megaladon6]

a lot is confidence, but a lot is the fact that the greatest contributor to our gross national product is the financial district. we don't make products anymore, we just move money from point a to point b.

 

[85 Cutlass Brougham]

I think the bailouts will make things worse and prolong the agony. Part of it is confidence, true, but part of it is down to bad fundamentals which ate up a lot of money which is not coming back. My house has lost half it's value over the last year or two, but it had more than tripled it's value over about a 5 year period. It simply was not worth it's market value and the market readjusted. I paid $40,000 for it, at the peak it was worth $140,000, now it's probably worth $70,000. I still have equity, but many of the newer residents of my neighborhood do not. That equity will not return for a very long time, and how long will people continue to pay on a mortgage that is double the value of the property? That's not about confidence, it's about fundamentals.

 

[TexasT]

I think the bailouts will make things worse and prolong the agony. Part of it is confidence, true, but part of it is down to bad fundamentals which ate up a lot of money which is not coming back. My house has lost half it's value over the last year or two, but it had more than tripled it's value over about a 5 year period. It simply was not worth it's market value and the market readjusted. I paid $40,000 for it, at the peak it was worth $140,000, now it's probably worth $70,000. I still have equity, but many of the newer residents of my neighborhood do not. That equity will not return for a very long time, and how long will people continue to pay on a mortgage that is double the value of the property? That's not about confidence, it's about fundamentals.

Again, it is about confidence. People were confident that their house was a 'good investment'. It is only worth what another individual will pay for it. Terms like value and worth a relative to a place and time frame.

Bottom line is it cost something to support living somewhere weather you rent or pay the bank to 'own' it. It is being brought to light that 'building equity' is a relative term too. You can build equity for years and watch it disappear and a few hours/days and this rattles the consumer confidence. When they feel 'rich' and think they have equity they spend. When they don't the big consumption machine grinds to a halt.

I agree the 'bailouts' are a band aid to a much larger problem. BHO has a major crisis on the horizon.

As far as paying the debt service on the mortgage, I hope they do. The more foreclosures the worse the problem becomes.

 

[1986montecarlols]

I can easily answer this

one, read my other post as well. I dont see us getting out of this one anytime soon. Americans are too dumb we will have to fail like all other great nations before us have failed. We are fighting pointless expensive wars. Believe me from past evidence if we fall it may hurt other nations but it sure as hell is not going to bring them down with us. They will laugh and overjoy and take us over. I dont mean to sound sarcastic because its the overwelming truth. We keep up this debt to the Chinese and we dont pay it off. I dont think they will have a problem marching here and wiping us out. A lot of other nations will do it as well.

 

[85 Cutlass Brougham]

Well, it's now official: The bailout will be more expensive than ALL of the wars the US has fought in since the Revolution... COMBINED! I think failure would have been better than spending this much money to bail out failed business models. The way we are temporarily propping things up will inevitably end up killing the dollar and our whole economic system. The fixes are just short term without good fundamentals to drive them forward.

 

[1986montecarlols]

YAY

we suck again just like before Woodrow Wilson ahhahah.