bet money

it's looking bad.Posted in National storiesI am not an economist or even a CPA. In fact, I can’t even balance my check book accurately, but I have read a bit of history and I am listening to the news and at this point I am not sure what to do to position my family and myself so as not to suffer too badly when the bottom falls out of the US economy. They look to me to make the decisions on investments and such and I don’t know what to tell them to do with their savings. Perhaps cash them all in and stick the greenbacks under the mattress? This is what my grandparents did with the little savings they were able to get their hands on right before all the banks closed their doors at the beginning of the Great Depression. I just plain don’t know. But when I saw people standing in line outside of a bank last week trying to get in to draw out their money as in the pictures I had seen of the beginning of America’s worse nightmare the Great Depression it sent a chill up my back and I knew I was witnessing the first scene in the fall of this Fools Paradise we Americans have been living in.
Why do I think this is about to happen? Because the housing busts precipitated the Panic of 1837, the Panic of 1893-97, the Great Depression of the 1930’s and the long recession Japan has struggled with since the late 1980’s.
Why does housing have so much effect on the money market? Housing is the measurement of the wealth a person has. It reflects how much they can spend and how much they can borrow. It is the single most reliable measurement of a person’s wealth because it is the single most expensive investment they will probably ever make. So when the housing market does a nose dive as is happening right now in the United States then the value of the homes people own goes down therefore their wealth goes down. Their ability to buy and borrow goes down. The result is inflation, or higher prices for the goods we need..This of course leads to unemployment employers are unable to sell their product and therefore unable to pay their workers. Unemployement in all housing related products, furniture, appliances, etc is especially hard hit.
Well if you haven’t notice the housing market is in a real nose dive into deep deep water with nothing to stop it from going down even further. Foreclosures are htting an all time high and builders are selling their new homes at bargains prices. The foreclosures came about because of the low interest rates to borrow money so people over estended buying homes thinking the boom would continue and they would make their fortune on the equity built up in their homes. amost are now caught with huge outstanding debt, higher interest rates as their low cost Adjustible Rate Mortgage rates increase to reflect market conditions and home values so low that even if they are able to sell their homes the chances are they will not realize enough profit to pay off the mortgage leaving tthem with no home but still a huge monthly payment to make.
In the Great Depression the government was able to bail the economy out by creating jobs. You might have heard of the WPA and the CCC and a few more such programs. Then WWII created more need and much more government spending to finally pull the country out of the hole the people’s mindless euphoric spending of the 1920's had gotten them into. The government was able to do this because the government was not in debt; the people and businesses were in debt.
After WWII the US economy continued to boom as the countries in the rest of the world had to rebuild their cities and factories and infrastructure that had been destroy in the war. The only problem with that was that we Americans got used to the good life and just plain didn’t know when to stop buying and borrowing and buying more and more. And where did we get all this money to buy with? Well, we got the money from those same countries we had helped rebuild as they sent us their money in the form of goods and investments for them and mortgages (debts) for us.
Now with this massive housing bust in the United States the people are losing their wealth, the foreign investors are calling the debt and our government is the most indebted nation in the world and unable to pay it’s debts let alone create jobs to stabilize the economy.
The US government:
1) U.S. Treasury Secretary Henry Paulson told Congress last week that as of October 1, 2007 America's IOUs will surpass the current debt cap of US$8.9 trillion. So unless Congress jacks up the limit yet again and piles on even more debt, the government of the world's largest economy will cease to function. If you weren't listening real hard you would have missed this dire warning because the MSM didn't make a whole lot out of it.
2) Just since 2000 America's national debt has ballooned by more than 50 per cent. Congress has already hiked its limit on how much the U.S. can borrow four times in the last five years.Foreign countries have been backing this flagrant borrowing by our government with the approval of our elected officials by lending us their money by investing in our country. Our Congress has of course been borrowing hand over fist to give the American people all the bells and whistles they have demanded as their right just for being Americans. Some will naturally start shouting it is the war in Iraq or Bush’s War that is causing all the problems, but a quick look at the actual budget will show that it is domestic programs that are getting the bulk of the money. Domestic programs like Social Security, Medicare and the Senior Drug Program cost a full 40 per cent of our federal budget!
Here is Presidents Bush’s 2007 budget which Congress has been increasing steadily since it was submitted to them. Take a very close look at just where the money is going.