Federal Reserve Chairman Ben S. Bernanke rendered his most positive assessment of the economy yet in a speech Friday and gave credit in part to his own institution's handling of the worst economic crisis in decades. He claimed that the so-called "Great Recession" is over and things are turning around as we speak.
On paper, one may think so. Home sales have jumped a whopping 27 percent (some say 33 percent, or 17 percent, but either way its a jump). Job loss claims were lower than expected last month (even though they did jump this month to over 500,000). So one might think things are easing up... Well, that is simply not true.
According to Ray Jones, CEO of Farmworth Capital LLC. the majority of home sales were done by corporations who were looking to get a steal from buying foreclosed and decrepid homes. That is where the sales increased. These werent sales from people who were looking to buy a great home at a great price. The latest scheme going on these days, according to Jones is that corporations are getting together and buying homes that once cost $400,000 for less than $150,000 dollars... in bulk, that is all that is happening. And that's not all..
The commercial real estate bubble hasnt even burst yet. There are some companies that overpaid for buildings in Manhattan by hundreds of millions and have no way to coming up with their payments.
One building bought in Times Square for almost a billion dollars, has not only gone down in value by nearly half since the "Great Recession" started, but the company that bought it, TL Gerban, a Dutch corporation, has no way of coming up with the payments because theyre about to go bankrupt. It is one example of perhaps thousands of companies that have no way of coming up with rent payments.
When the foreclosures start in the commercial real estate market, that is truly when the "Great Recession" will have bottomed out. So until then, Mr. Bernake can keep doing the drugs he is doing, he is stepping down in January anyway. Sorry everyone, the "Great Recession" is here to stay for another few years.
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Sunday, August 23, 2009
Wednesday, March 4, 2009
It's the Maginot line all over again!
It's the Maginot line all over again!
I want you to really quickly click on this link.
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260
Now the thing I want you to notice is that this article is from 10 years ago. It talks about how the Clinton Administration put all of this pressure on the republican congress to pass housing reform in order to make it easier for the banks to approve mortgages. The roots of the mess we are all in today.
I have always blamed both parties. I blamed President Bush and the democratic controlled congress for approving disasterous bail out packages that, for some reason, noone can figure out where the money went. And I blame the Clinton Administration and the republican controlled congress back then for giving banks the power to give mortgages to anyone and anything that happened to be capable of picking up a pen and signing their name. To make a long story short. It is 1990s Japan all over again.
Let's make some analogies. The Maginot line, a supposedly well thought of defensive barrier built by the French before World War 2 was supposed to stop the Germans from invading France. The Germans simply went around it and the Maginot line was useless. The Israelis repeated that same mistake all those years later in थे 1973 वर with the Bar Lev line when the Egyptians simply went around and over the line, consequently making it useless. The Israelis simply failed to learn from past mistakes.
So here we are in 2009, repeating the same economic mistakes Japan made in the 1990s. It is truly incredible. Japan was suffering from a huge contraction in their economy. So in order to fix it, the economists over there decided the government should pump billions into Japan, nationalize a whole bunch of institutions and well.... fast forward to 2009 and they are still suffering. WHY did we not learn from their example???
Why are we giving billions of dollars to companies that screwed up??? Why are we giving billions to CEOs who destroyed their company??
The obvious solution would be to buy up the mortgages, make them into 30 year FHA loans and, yes, MAYBEEEE, we should give money to companies in order to cover their losses, but they should fill some prerequisites first. They should fire the people who screwed up the company instead of giving them bonuses and they should change their business model before getting a dime.
Once upon a time in the late 70s, Lee Iococca, who was in charge of Chrysler, asked the government for a billion dollar loan. There was a great debate about it. They agreed to change their business model, fire some people, and eventually the company got its money and paid the American people back. This is how it shouldve been done all these years later. Instead we are giving pointless amounts of blind dollars to companies that will die eventually.
GM should just declare bankruptcy so that they can renegotiate the union contracts because if they dont, then no matter what happens, they will always be behind the 8ball and die as well because their profits just cannot cover the money they owe to people in the union, whether its to retirees or people who were laid off. The contracts are just too unrealistic and need to be renegotiated, and this can only happen if they declare bankruptcy.
It's time to get some economists who know what they are doing. Its too soon to tell if Obama will be great, but if he keeps repeating the same past mistakes, then I can guarantee we will still be in the same mess 4 years from now, with little chance of a swift recovery.
I want you to really quickly click on this link.
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260
Now the thing I want you to notice is that this article is from 10 years ago. It talks about how the Clinton Administration put all of this pressure on the republican congress to pass housing reform in order to make it easier for the banks to approve mortgages. The roots of the mess we are all in today.
I have always blamed both parties. I blamed President Bush and the democratic controlled congress for approving disasterous bail out packages that, for some reason, noone can figure out where the money went. And I blame the Clinton Administration and the republican controlled congress back then for giving banks the power to give mortgages to anyone and anything that happened to be capable of picking up a pen and signing their name. To make a long story short. It is 1990s Japan all over again.
Let's make some analogies. The Maginot line, a supposedly well thought of defensive barrier built by the French before World War 2 was supposed to stop the Germans from invading France. The Germans simply went around it and the Maginot line was useless. The Israelis repeated that same mistake all those years later in थे 1973 वर with the Bar Lev line when the Egyptians simply went around and over the line, consequently making it useless. The Israelis simply failed to learn from past mistakes.
So here we are in 2009, repeating the same economic mistakes Japan made in the 1990s. It is truly incredible. Japan was suffering from a huge contraction in their economy. So in order to fix it, the economists over there decided the government should pump billions into Japan, nationalize a whole bunch of institutions and well.... fast forward to 2009 and they are still suffering. WHY did we not learn from their example???
Why are we giving billions of dollars to companies that screwed up??? Why are we giving billions to CEOs who destroyed their company??
The obvious solution would be to buy up the mortgages, make them into 30 year FHA loans and, yes, MAYBEEEE, we should give money to companies in order to cover their losses, but they should fill some prerequisites first. They should fire the people who screwed up the company instead of giving them bonuses and they should change their business model before getting a dime.
Once upon a time in the late 70s, Lee Iococca, who was in charge of Chrysler, asked the government for a billion dollar loan. There was a great debate about it. They agreed to change their business model, fire some people, and eventually the company got its money and paid the American people back. This is how it shouldve been done all these years later. Instead we are giving pointless amounts of blind dollars to companies that will die eventually.
GM should just declare bankruptcy so that they can renegotiate the union contracts because if they dont, then no matter what happens, they will always be behind the 8ball and die as well because their profits just cannot cover the money they owe to people in the union, whether its to retirees or people who were laid off. The contracts are just too unrealistic and need to be renegotiated, and this can only happen if they declare bankruptcy.
It's time to get some economists who know what they are doing. Its too soon to tell if Obama will be great, but if he keeps repeating the same past mistakes, then I can guarantee we will still be in the same mess 4 years from now, with little chance of a swift recovery.
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