What scares you most about the current economy?

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No_Such_Reality_IHB

No_Such_Reality_IHB

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There seems to be bad news all around. IS FDIC fluid enough. How's SiPC really work. Can the Fed hold it together. The stock market. Oil. Inflation. Not to mention the mini-apocolypse shaping up in housing in California, let only any real catastrophes with fire or hurricanes or floods.



Of it all, what's your biggest scare?



For me, it's probably the volatility in the market. Two fold on the reasons, I'm exposed to it and I keep getting a nagging feeling about it's exposure. My fear is because basically, I'm an IT guy. I know how companies put technical applications together. Cobbled, bandaided, you name it. Then the fear creeps in. The market's funky products, CDOs, MBSs, option-ARMs, CDSs, they're all financial 'technical' applications. I see how Option-ARMs worked once they got exposed to general use. The other stuff is just more complex versions of the same kind of thing.
 
The scariest part of this market to me is that the US is completely broke. When the rest of the world figures this out and more financial institutions go under, our credit rating as a nation will drop and all hell will break loose. On a more immediate level, when people get desperate, crime will increase greatly and this could be even scarier. I hate the bearish attitude but many of the bears more dire predictions are coming true as we speak.
 
Again, i'm also scared that we cannot fund ourselves. We are broke.



The technical innovation engine has been shipped overseas and mismanaged so that we are no better than the rest of the world (maybe worse -as I see it). Why again would people go to the US? We need to buckle down and start working HARD, get these LOUSY leaders out of office and have the general public take back control. No more "Shrub" like leaders for a long, long, long, long time.



Anyway, I guess I should stop ranting... this post is probably not making any sense.

-bix
 
I'm in manufacturing and understand what you're saying bix, part of my job involves procurement of special materials such as Plastics, Tool Steel and other exotic materials...not ony are prices escalating but special Steel is getting harder to get, why? Because it's all going to Asia and this has been the case for the last 10 years...

This is a BAD thing because this material is used for Tooling and Tooling is used to manufacture almost everything we use in our daily lives including the Cars we drive, the Computers we use, the TV's we watch, everything comes out of a Tool and this is something that most People not involved in manufacturing don't realize...



So having said that, the scariest thing for me in this economy is that the US has no manufacturing to fall back on, the false wealth we have all been enjoying in recent times has been created by non-productive, short sighted ,destructive middle men/women and number crunchers...



Even scarier than that, I have a lot of contacts in industry who deal with overseas Manufacturers on a daily basis, originaly, Corporations were exploiting Countries for their cheap labor and these countries are now saying "Screw you, we're not making that for this price anymore, as of today you either pay us $xxx or you can come and pick up your tooling and take it elsewhere...no wait, we made the Tooling too, it's ours, we also have your Blueprints and material specs...."
 
[quote author="awgee" date=1216429082]I am afraid of two things: politicians and bankers.</blockquote>


+1000 awgee, but you forgot to mention the religious cults :-)
 
The scariest things to me is the pain we're going to have to experience to turn this ship around and whether we have the fortitude to actually start making those changes. We need to consume less, spend and invest more. One of the scariest headlines to me a few years back was when the national savings rate went to zero. This combined with the deficit seriously limits our ability to borrow for investment. I'm just stunned at how money we have squandered.



Our infrastructure is heading towards that of a developing country. Where are we going to get the money? The cost of borrowing is going to go way up. We need growth to come from technology, to produce things of value for export. Where are we going to get the engineers for this? We're not producing them at home and we're not attracting or letting enough in from abroad. Where is the capital investment going to go if we don't have leading edge industries?



Consumption is going to decline, but are we going to save and invest more? How much of a hit is the economy going to take if do actually get our act together and move to saving and investing more and consuming less?
 
Talk's about GP scares me...like from this thread <a href="http://www.irvinehousingblog.com/forums/viewthread/2669/">http://www.irvinehousingblog.com/forums/viewthread/2669/</a>
 
I'm worried about the potential damage that can stem from multiple bank runs, or reserve depletion at these banks. I'm planning to move my accounts away from WaMu myself. The last S&L;crisis brought the FDIC reserves to -0.5%. Many think this crisis is of a much greater magnitude, and I wonder how the general population will react if they lose faith in the FDIC itself. It's one thing to move your savings from one bank to another to preserve your capital, but it's entirely different if people start to pull out the money to put it under a mattress. It's also a problem if failed banks cause hiccups in payrolls - you would think most corporate accounts are barely insured by the FDIC; pretty soon we're talking real money being lost in the economy, not just money from house bubble paper profits.



I don't worry about gas. Who cares about 5$/gas when your mortgage is 1000-2000$ more per month because of the housing bubble? You can always minimize your gas usage by chaning your habits; you don't have nearly as many options for reducing your mortgage payments besides taking substantial risks or spending hours in long commutes. Besides, if peak oil is real, higher gas prices are a necessity for future production conservation, not just a bubble whim.



I don't worry about inflation either. Americans pay 15% of their income for food vs. 25% for Europe and 50%+ for emerging markets. We've got it good, even with a high inflation, and as the new economies emerge it's only fair that limited resources must be shared with a higher amount of disposable income in emerging countries, thus higher prices.



I worry about the manipulations that may be going on from the government, SEC, FDIC and so forth to try to save all these banks, by either arranging special deals or secretly buying their shares outright on the market with taxpayer money. Money doesn't come out of thin air, and any dollar that must be spent towards trying to prop up the banks is a dollar that could have been spent on productive enterprise or on services.
 
Manufacturing that went can come back again. Yes, there will be a learning

curve, but it can come back and will when overseas prices go up as they will.



I fear global financial meltdown. Or, systemic meltdown. I understand that people are

starting to move money around to get under 100k and that itself, if too many people

do it at the same time, can cause problems.



Also, I fear no mtges being available at all. If that happens, I estimate that house

prices will fall 75% off peak in bubblicious areas. This would not be a good thing.

(not speaking of the towers; they are hopeless).



What happens when FDIC uses up all its money? Well, you can let all the

rest of the banks that are failures fail. Or, you can print money. 50% a year

inflation for a while anyone? or even 25%? Actually, I see this as the most

likely and least harmful of the various horrible scenarios. The value of the debt

will go down. People will be mad at us for a while and then they will forget.



I am not saying this type of inflation is good, merely that it is least bad.



Any ideas other than letting inflation roil??
 
[quote author="lawyerliz" date=1216450743]

Also, I fear no mtges being available at all. If that happens, I estimate that house

prices will fall 75% off peak in bubblicious areas. This would not be a good thing.

(not speaking of the towers; they are hopeless).</blockquote>




I keep hearing inklings that this is already starting to be a problem. No jumbos, 20% down, 3x income.



Does anyone in the biz actually have any info on the availablilty of mortgages these days??
 
[quote author="freedomCM" date=1216454854][quote author="lawyerliz" date=1216450743]

Also, I fear no mtges being available at all. If that happens, I estimate that house

prices will fall 75% off peak in bubblicious areas. This would not be a good thing.

(not speaking of the towers; they are hopeless).</blockquote>




I keep hearing inklings that this is already starting to be a problem. No jumbos, 20% down, 3x income.



Does anyone in the biz actually have any info on the availablilty of mortgages these days??</blockquote>


Lendingmaestro... Calling Lendingmaestro...... Please enlighten us....
 
In Miami, I haven't closed a loan in months now.



I open files, people tell me they're approved. . . and then nothing happens.



Again, I have some hard equity loans pending to get some people out of

foreclosure. But nothing ever happens. At least with actual people, you

do find out sooner rather than never that they changed their minds. And

sometimes, why.



With institutional lenders, you haven't a clue what is going on.
 
<span style="font-size: 15px;"><strong>Paulson braces public for months of tough times</strong></span>



WASHINGTON (AP) -- Treasury Secretary Henry Paulson sought to reassure an anxious public Sunday that the banking system is sound, while also bracing people for more troubled times ahead.

"I think it's going to be months that we're working our way through this period - clearly months," he said.



<a href="http://money.cnn.com/2008/07/20/news/economy/paulson_economy.ap/index.htm?cnn=yes">Paulson Story CNN</a>
 
[quote author="Astute Observer" date=1216675593]Google says our good old TJ said that.



(thomas jefferson).</blockquote>


Yup
 
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