I'd suggest that you can't point to the GDP as anything more than a clue about what the economy is doing. It's probably the best clue even... but it's just a piece of the puzzle. You often declare GDP=Economy. It's not. That's all.
Please understand that bigtexxx only pretends to know what he is talking about. Better to just shake your head and move on.
Only when used on the $ menu. Otherwise you can spend amazingly about as much as you would at a low priced restaurant.
my thoughts exactly. create another artificial sense of "growth" and prosperity so next time it falls even further. Since when did normal economic downturns become so horrible that a little correction creates panic to rush and "fix" it?
Because it is coming at a time where it will make a bad situation in the real estate market even worse. Really what makes this different can be summarized in two points. 1. The price of real estate is already taking a hit. If there is a recession right now, more people will not be able to keep up with their ARM notes, and some will not be able to keep up their fixed rate mortgages. More foreclosures will make a bad real estate market worse and will result in more short sales and further problems in the banking industry. This will shake consumer confidence even further. It becomes a problem that compounds upon itself. 2. The price of fuel and (as a result) food are spiralling upward. A recession right now will make many families be unable to maintain themselves. In short, with the external forces already in motion, a recession at this point would result in a cluster****.
Economic fundementals cannot be tricked by another rate cut. Eventually there will be a correction and the longer it is postponed the harder it will fall because it is a debt correction. First of all home prices are going to go down regardless because people are not going to be able to keep buying overpriced homes. Without buyers the prices will drop. Second, if the price of fuel and food are spiralling upward then it is a recession plain and simple. Cheap credit/debt is the root cause of all inflation, it is a credit bubble that pushes the money supply to the point of a devaluation of the dollar. Third the reason consumer confidence is shaken is because reality is setting in, the reality that most consumers are overburdened with debt, have very little personal savings and prices are pressured upwards. This tightening in the economy will come. The only question is how hard it comes. They might as well lower rates to 0% like Japan did in the 90's because the fate of the dollar rests with how much more credit bubbles can be produced to make a short term infusion of liquidity for consumers. As the consumer slows down on the debt binge the economy will tighen up even further prompting more pressure on companies to lower costs. At some point either everyone has to stop borrowing or you just can't pay the bills. So lowering rates does nothing to solve anything except make the problem worse... more people borrow (hopefully) when rates go lower. It's like lending the drunk another $100.00 to go buy wine- it's doubtful he is going to be able to pay it back but at least he can buy more wine- he'll feel better about the situation and the liquor store won't have to lay anyone off.
Not entirely true. There are many economic forces at work that have little or nothing to do with debtload. The price of fuel is (I believe) higher than normal now because of unrest in the Middle East (which should subside some after the Iraq war is over). Once the price of fuel normalizes some, then the stretch on people's budget will be less. Also, what I have noticed over and over in my practice is that while people who were liad off a couple of years ago have gone back to work, it is at a wage that is significantly lower than what they were making before. You add these two things together, and it is a recipe for disaster. A recession is a contraction of economic activity. Prices of goods and services can either go up or down in a recession. When prices go up during a recession, stagflation occurs. The two do not necessarily have to coexist. Human beings generally have as much debt as they can service. If you make $30,000 a year, you make financial commitments accordingly (hopefully with some savings). Since many people have their savings set up through payroll deduction into a 401k, their entire check becomes disposable income. When the price of fuel more than doubles over a 2 1/2 year period, it is a significant change in budget dynamics even for the most cautious persons. Sure...that's part of it. Those prople with ARMs that are actually tied to the prime rate will not escalate if rates have decreased. In fact, they may even have their payments drop in the short term. Once the other odd things in the economy subside, rates can go back up, and ARMs will adjust to what they really should be. I think that you are overstating the role of consumer debt in this equation. As a consumer bankruptcy attorney, I can tell you that the vast majority of my clients that are in foreclosure have very little unsecured debt. Those that do have significant unsecured debt have a large percentage of it in the form of medical bills.
We are going to start seeing defaults on auto loans and credit cards in the upcoming year. American consumers really stretched themselves to the hilt. They did so partly because their home values were rising so fast. Now home prices are correcting and no amount of rate cuts will reverse that. Housing demand will be weak- no more suprime customers bidding up the value of your house. There will be another round writedowns at the banks as the bond insurers go under because they have nowhere near the amount of cash to insure banks on these defaults. Oh, and rate cuts help fuel inflation.
Secured or unsecured? Debt is debt. I am sure that those with mostly secured debt are finding it difficult to turn their securities into liquidity. I definately want to keep you as a resource. It's not like I feel all that safe in todays economic climate. Thanks for the good information.
how long do you think the rates will drop? i want to refinance some loans but i'm waiting for it to drop a little lower.
