How to get the economy going.....

I agree, we need to get those two industries going again and then other things (renewables, etc) will follow.

BTW Malorn you've been hyping GM products here for awhile, and due to your obvious bias I wasn't paying much attention. Last week I rented a Pontiac G6 while on vacation. That was a very nice car! Fit, finish, and materials were all great for the class. But what really stood out was how quiet it was on the road. When I got back to driving my Prius it made me realize how much road noise I have to put up with on a daily basis.

So, to tie this back to the topic, maybe there's some hope for GM and the other domestics.

 

What O and his cronies are failing to understand is how the economy rolls.

Business's hire people, people make money, people use that money to buy goods, businesses that made those goods receive orders to make more goods, making more goods requires more people, more people working means more money being spent on other goods. It really isn't that hard to understand. What is hard to understand is how this so called stimulus bill is going to get business's out there to hire people so the ball could start rolling. Looking at the Dow Jones Average, I noticed something about it that said hey, I see what is happening. From 1944 - 1980, the highest the DJIA reached was 1051 points. From 1980 - 1990, it doubled, From 1990 to 2000, it didn't double, it increased 10 fold from the 1980 high. A lot of that was greed and bogus corporations, AKA DotCommers. That bubble burst, dow fell a few thousand points. It made a turn around and climbed again up until mid 2007, then started falling. What I see now is not so much of a recession, but more of a correction of what the dow should really be at. Take 1980, high 1051, double it in 1990, 2102, double again, 4204, then 2000 double again, and it should be right about where it is now. I feel that the Dow was over inflated, and is just now starting to correct itself. the problem is the politicians are too busy crying wolf and running around like chicken little, wasting tax payer dollars trying to correct something that they have no clue on how to even do so. I say that businesses need to fail, it is what having a business is all about, either you succeed, or you fail. Would you go eat at a restaraunt that served horrible food, and should have closed long ago, but is being kept open with federal money, just because the fed doesnt want it to close? That is pretty much what is happening with the bailouts. GM and Chrysler NEED to fail, they NEED to file bankruptcy, then they can restructure and rebuild their systems and become profitable again, if you need an example, check out the airlines and see how many of them filed bankruptcy, and have made a come back. You dont keep throwing patches on a rusted out hulk of a ship, you let it sink and become a reef.

We need new business, to hire people, so they can earn money to spend, that is what drives the economy.

 

I like the idea of legalizing pot. At the very least, it'll save a lot of money if they don't have to spend it on enforcing, indicting, incarcerating people for just smoking a plant.

 

we can churn out all kinds of houses and cars, but until there is a demand for them, there is no point. what can we do to create demand? people are feeling really burned by homeownership right now thanks to the market contraction. they don't want to buy new cars either.

 

Jeff, better buy that G6 soon as GM pulled the plug on Pontiac. If they follow the Olds model GM will extend the warranty when the official closing is announced.

 

Another idea to support that would be to promote easy approvals for mortgages and car loans. That would really get the money flowing.

 

Hi All,

The reason homebuilding was such a cash cow, and probably also why it crashed, was the illusion that the homes were worth what they cost. I think this was a game played by those in the housing industry. How can you judge the cost of a house? Apparently that is the the problem. People pay far too much for a house, then can never keep up with the mortgage.

Housing Buisness people are in the buisness of getting money for nothing. A house costs so much to build, and then they go around flipping these properties artificially inflating the market (not just the house they are trying to sell!) until its value is horendously low. But the real estate person comes along and cons somebody to buy it. But the value they get out of the house is insufficient, and they cannot keep the house because they spend too much money to have it. Money the local economy cannot supply.

And its a viscious circle. Because the economy cannot supply the money to keep these people in houses, because somewhere else houses are sold for what they are worth, and thus people need less money from a job. And the companies they work for underbid work away from the expensive real estate locations.

The housing industry cannot come back till houses are on par with the value one gets from housing in foriegn countries, and wages needed to pay for that housing is on par with the productivity. Now at one time that was one person in the US, with his machinery doing the work of three people in China, who did it more manually, but more and more the Chinese have machines, and know how to use them too.

The use of mortgage securities and default swaps kept this con game going. Now, people have to have a high probability of paying the loan. Which brings the true state of the economy to bear on housing prices.

The problem now is, will all those people who paid, and can pay, let housing values rebound, ie let the market cost of their properties fall. This is really the only way the US can become economically competitive in the world again.

If the governement makes legal reducing a house's monetary cost to its market value for those who cannot pay, what will the people who do not qualify do? One can hear the yelps already that it is not fair.

The only thing that will make it happen is when these people sell their houses, and get much less than they paid. Because the market readjusted to a closer money for benefit value, not a money for ownership status cost.


Anyway. That is how I see it. There is no quick-fix that a president can just wave his majic wand and keep the good times rolling. One might argue that Clinton did this, actually by allowing the unregulated sale of mortgage insurances, we now know as default swaps. Its not just problems within the US that are the problem. Its getting work back here in the US, because its the cheapest place for the work to be done that is the only solution. And that means all real estate values have to go down, as well as energy costs, and medical expenses.

 

Malorn is nothing if not predictable. Imagine a car dealer, sure that car sales are the linchpin of the economy.

Who wudda thunk ?

 

Umm correct me if I'm wrong, but isn't that what started this whole mess? Or were you just being sarcastic?

People were getting approved for 100% loans on a house, something previously unheard of. Not just that, but they were approved for ARM's with a low starting rate, without realizing that rate can double or triple of the years prior to the lock. This is the main reason the housing market fell, once those ARM's kicked in, people found they couldnt afford the payments, and add onto that the skyrocketing cost of driving to and from work, and down comes the market.

 

there are small builders around here (estimated to be AS MUCH AS 40%) that will go out of business this year because they cannot hold the loans on houses that are built and sitting empty. also in jeopardy, over 2700 units in our area that are in various stages of the building process that will be halted if the builders dont sell something to get the money to complete construction.

granted, our housing market was one of the fastest growing (in volume AND price) in the country and an adjustment is sorely needed. the situation sucks, but i am sitting on my money until summer 2010... which is about the time i feel the market will have hit bottom.

 

The tight credit market - as it is right now - is exactly where it should be! At one time you needed to plunk down 20-25% to even have a hope in hell of *asking* for a mortgage

Or do you want to go back to the "good 'ole days" of illiterate hillbillies buying new pick em up trucks and new homes on a 7 Eleven salary? Because I do NOT want to go back to that crap

Folks like me, who are dumb enough to have ZERO debt and play by the rules, got burned by all this bulls***. I had a minority of my retirement savings in higher return stocks and mutuals, and those are pretty much wiped out

I have the choice of putting the money in a bank at an earth shaking 3-4%, or stuffing it into a mattress. Yep, Happy Days!

No doubt a handful of folks, eg car dealerships, really cleaned up when any homeless meth-mouth drug addict could walk into a dealership and drive off in a new car.

Now folks like me get to pay for all those problems. And quite frankly, I am sick and f***ing tired of paying for it

 

No sympathy from me. A lot of those smaller builders, and plenty of big ones, were fly-by-night crooks who slapped together McMansion garbage so poorly, that my shed would be better built and last longer

They deserve to go under. A lot of folks have really gotten burned by shoddily built homes, and the fact that the various local permit offices could really give one rat's a** the home was shoddily built but somehow magically passed all the "inspections"

 

i dont mind putting the 20% down, but would like to have some extra money just in case. what i do mind is paying $50-100,000 more for a house than what its worth which is what is going in my area right now.

now, housing prices have dropped an average of $25,000 over last year, but most houses still have at least another 50,000 to go to get to a fair market value.

 

well that is true. a huge portion of the new houses being built today could easily be marketed by Walmart. they are cheap, most advertise $500 move in costs, have no yards or parking to speak of and are zoned 10 houses per acre

 

The UK housing market is running at 4.5x mean male full-time salaried employees' gross salary, which is the conventional measure of affordability. True affordability is 3x. At peak, it was running at 5.4x.

Personally I think we should use median weekly earnings of all employees as the measure; on that basis the 'average' house price is currently 7.9x. In 2001, the official affordability value was about 3.1x, the median/all employees multiple was 5.5x. The mean full-time male salaried employee's gross earnings were nearly 1.8 times the median of all employees; this is now nearer 1.9x.

I stayed out of the housing market, like Jayman; it was already close to overpriced (and I had no money) after I left university and got my first job in 2001, where my personal multiple was 4.6x; it is now only marginally better at 4.0x and I'm earning twice as much. At peak it was 5.3x (I've had a pay rise since then, but only approximately inflationary - 4%). I didn't think it was right to effectively bankrupt myself - bearing in mind I'm in the top 30% of male full-time salaried employees, and top 20% of all employees if you figure in weekly wages, not counting vacation time - to buy a house. That, of course, means I had fairly substantial surpluses; I bought my Prius initially on credit for fear of losing the saved housing deposit, but worked out that it would cost nearly one third more to do so and paid off the loan early.

Governments are screwing savers, with low interest rates, to try to stimulate the larger number of debtors into economic activity; unfortunately the vast number of debtors are scared of spending right now, because they're worried about their job security.

 

Actually, I have two homes: the "hobby farm" I'm at right now, and a conventional suburb home in a smaller community.

I used to live in Winnipeg, had a large house in a subdivision known as Tuxedo, later a high-rise condo in the same area.

I skimped and saved for a long time to be able to get a home that didn't require a mortgage. I much preferred building new, as I can do a lot of the framing, drywalling, wiring, plumbing, etc myself. That saves a *huge* amount of money

I was able to sell my house in Tuxudo when the market was very good, paying cash for the condo. Home prices really went wild here and I cashed out again around 1.5 years ago, moving to a smaller community

The hobby farm was a very long term build for me, as I did almost all of it myself. I purchased the property around 12 years ago, it had been an old farm that was in receivership. Had to knock down the old home, it was barely good enough for firewood

The best way to afford something is to save up for it. If you *really* want something - say a home - then you skimp and save elsewhere. The big problem over the past 10 years is that credit became so easy to get that any derelict could get into a decent home

This not only caused a housing bubble to form, it set in motion the creation of a lot of fly-by-night shoddy builders. A lot of so-called "builders" I wouldn't let build a scratching post for my cats