Common Sense Isn't All Too Common:
How can someone be brilliant enough to teach themselves calculus and at the same time be foolish enough to continue pumping capital into a ripped bubble, trying to re-inflate it? This is beyond comprehension. It defies logic, especially when the capital/"air" going in is borrowed money and puts the value of our currency (or what is left of it) in harms way.
If I had to pick the single most important law of economics to focus on I'd choose the law of supply and demand.
Back of the envelope figures on housing demand:
- The ,500,000,000,000.00 (1.5 trillion dollar) subprime market was comprised of 7-10 million buyers.
- About 73 million American's own a home.
- In 2006 TWENTY EIGHT PERCENT of originations WERE SUBPRIME!
Emphasis: Toss 30% more buyers into any market and you will have a serious bubble form. Before subprime lending came about, people who couldn't afford homes rented. What a lot of economist miss is the fact that subprime buyers added a massive amount of demand to a market.
Blowouts In The Bubble: Bernanke miscalculated when he said that the subprime mess was contained, or that the fundamentals of the housing market were sound and that there was no housing bubble.
A patch for the bubble would have been locking subprime mortgage rates at or below their existing rate. About 93% of subprime loans made from 2004-2006 had exploding interest rates. If this was done in 2007(or sooner) it would have reduced the amount of capital needed. It would have allowed renters who bought to remain homeowners, not all, but many. It would have reduced the number of responsible innocent people who got hit by the collateral damage.
We All Know The Story: The bubble popped. 1 in 6 jobs were housing related. There was a tremendous amount of collateral damage as responsible borrowers and hard working innocent Americans lost their jobs, homes and businesses - all as a direct result of this stupidity crisis (as featured in my last write). Around 2008 prime foreclosures began outnumbering subprime foreclosures. Pension funds purchased this trash, countries invested in these turds, all of which was peddled as an investment.
John Williams of Shadow Statistics can count, unlike the BLS which I'm convinced stands for BS Labor Statistics. Shadow Statistics calculated the unemployment rate to be 22% --- not this 9.7% drivel that you hear on CNBS or MSNBS. 22% unemployment is another housing demand killjoy. The housing market needs buyers, buyers need jobs. This entire CNBS "Jobless Recovery" is a pathetic misnomer.
Bubbles: Pop ANY balloon, tire or financial bubble -- if you don't patch the hole(s) before you re-inflate them you will waste massive amounts of capital trying to keep it inflated. Case in point, 1.5 trillion dollars of stupid lending caused a bubble, which, in actuality cost taxpayers 10.4 trillion dollars. And we are on the hook for well over 17 trillion more. Link to outlays.
The Severity Of The Situation:
Our deficit: The difference between what we take in with revenues/taxes + what we borrow against verses what we owe out is well north of 1.6 trillion a year.
Anything that is added to that deficit only solidifies our fate with an ugly date AKA Currency Crisis.
It is as if Bernanke is blowing fire onto our currency.
This is what will kill our currency. Bernanke may have had great intentions when he intervened to prevent a credit crisis and a banking crisis but, blowing up a popped bubble is NOT possible. No matter how much housing sector deflation there is the Fiat currencies will continue their slide to their intrinsic value of 0. When the value of Fiat currencies get destroyed we are in for the worst trouble of our life.
The barbaric time tested metal has moved from the commodity to currency classification.
I've concluded that 1 measure of commonsense is the equivalent of an IQ of 120. So, a genius with an IQ of 140, and NO common would subtract the 120 penalty and fall into the lowest category.
IQ Ratings Over 140 - Genius
IQ Ratings 120 to 140 Highly intelligent
IQ Ratings 110 to 119 Very intelligent
IQ Rating 90 to 109 Average intelligence
IQ Ratings 80 to 89 Deficient
IQ Rating 70-79 Very deficiency
IQ Ratings Under 70 Moron
In Summary: My faith in the 5Gs: (G*(religious edit)d, Gold, Guns, Grub & The Government Will Continue to Screw It Up) remains strong.
