reply to post by GreenBicMan
No I do not agree.
People used homes as piggy banks for the last ten years. Buying up whatever they wanted. Useing home equity as a down payment on another house, or
using it to remodel the home they currently reside in.
They paid contractors to remodel those homes with that equity. That created jobs. The country needed more contractors. The contractors needed more
wood, more wire, more appliances, etc. The Lumber yards responded, so did the people making stainless steel appliances.
But that wasn't enough, people wanted bigger, flatter TV's, faster computers, and gimmicky cell phones. And there where 1 billion Chinese people
waiting in the wings to make it for them. All paid for, by a house they didn't even own.
The Real Estate boom created booms in other sectors. Massive job growth and massive expansion. And now that those homes have lost value, and people
are getting foreclosed on en-masse. All the money to by the new TV, or pay the Contractor, is gone. Which all the money going to purchase timber is
gone, all the money to purchase automobiles is gone.
I agree that this is a good thing. But not for the reasons you do. You seem to think that out of the mountain of debt these people have incurred, that
somehow, the American Consumer is going to come back like Lazarus and save the corporations that are hemorrhaging money right now. They won't, they
can't. The American consumer is going to fade away, because suddenly, when everyone is loosing jobs, brand new sparkling crap made in China doesn't
matter so much.
You would argue that as long as the FED keeps rate as low as possible, that money would be cheap enough for people already drowning in debt to get
even more credit cards or loans than they already have to deal with. That kind of logic is severely flawed. Everyone has limits, especially societies
driven by consumption.
Things you should consider. People have lost jobs. That means a lot of families are operating on one income. They have no savings, and if they are not
maxed out on credit, they will be after Christmas. There is no equity left in the house they bought at an inflated price, and because of the FED and
it's policy of Currency destruction, things are about to get more expensive.
Not a good environment for making money in a market rigged by artificially low interest rates.
But it needs to happen. Because the idea that an economy can be driven by a consumer is a failure. The only way for a system like that to continue is
for debt to never have to be paid back, and for everyone to have infinite amounts of credit. Otherwise debt will catch up with you and squeeze you out
of the rat race. Which it already has done to a huge portion of America.
[edit on 30-11-2009 by aravoth]