United States "Decoupling" From World Economy

[Junket]

This in reference to our recent economic issues, a very interesting article.

[url]http://www.newsweek.com/id/105558/page/1[/url]

[anachronistic]

Weekend reading material. But if the title is describing what I think it is, unfortunately the US is in fact facing an economic crisis. The Euro is more than 1.5 times as much as the USD. Other foreign currencies are building up to a greater worth, too.

It's not necessarily a bad thing, though; it could be the cheese that will get the fat lazy hamsters to fun a little faster on their hamsterwheels, if you know what I mean Plus, I think Americans in general need a big ****in' attitude fix. Many of us are full of pomp and arrogance.

[Junket]

They are saying that countries don't import our industrial products like they did before because they don't need to.

We've become a services industry.

India and China are more relied on domestic demand than foreign, of their products while the US has a higher foreign demand.

I hope we decouple, become more focused on our own country, start to develop more jobs in industry and construction, too many white collar jobs if you ask me.

[DoesntMatter]

We've become a services industry.

Exactly! I always make fun of my Long Island friends for being from Long Island because they have a large service sector economy

At least in Rochester, once you discount the inner city element and some of the ghetto or trashy suburbs, most people are doing real work for Kodak or Xerox developing imaging and optical products or Bausch and Lomb developing eyecare products

[misombra]

what gets me is that our government is throwing billions of dollars to bail out the enormous companies, the ones that got us into this bind!

lol oh well. that's what happens when you people don't vote and the evangelicals like in jesus camp get their way.

[anachronistic]

They are saying that countries don't import our industrial products like they did before because they don't need to.

We've become a services industry.

India and China are more relied on domestic demand than foreign, of their products while the US has a higher foreign demand.

I hope we decouple, become more focused on our own country, start to develop more jobs in industry and construction, too many white collar jobs if you ask me.

I agree, too many white-collar jobs.

[Junket]

It's funny, I didn't go to college, and I work for a living like any other white collar, though my work is more physical, and I still feel like I'm living a luxurious life.

My car gets me where I need to go.

I'm never hungry, and buy most any food I want. I cook at least once a week, and am guaranteed to get 3 other home cooked meals for me.

I play videogames and have cable.

We have A/C and heating.

I'm not in debt and have money set aside separate from what's in my checking account.

I can still buy tools for work, and be able to have fun in the evenings and on weekends.

Yes, we share an apartment with 2 other roommates, but it's beneficial for us all. It's a nice little community that shares chores, helps with cooking, is separate enough for privacy, and close enough for company. Plus having this kind of support system in a disaster allows us to pool resources, which is invaluable.

As my girlfriend said: "Too many people live outside of their means."

It takes an effort, but more people, especially the young ones need to be smart about their money.

[misombra]

that's true. people are starting to look for less expensive ways to do everything. eating out is becoming a luxury, lots of restaurants are closing down. sucks that the government isn't bailing out the chinese restaurant down the street from my house.

[IndiReloaded]

Its everywhere right now. Ppl are really scared about the stock markets & their retirement funds.

This kind of shift has happened before. The world is become flat, like it or not. Old methods are making way for new & there are those who don't like it, but that doesn't change a thing. Really, tho, ppl will just keep doing their thing. If it doesn't pay the bills, they will do something else.

[DoesntMatter]

The world isn't flattening anywhere near as much as you are hoping for it to Indi

[IndiReloaded]

The world isn't flattening anywhere near as much as you are hoping for it to Indi

I'm sure you are trying to say something, DM. But I'll give you a hint: net importers vs. net exporters.

[GrkScorp]

what gets me is that our government is throwing billions of dollars to bail out the enormous companies, the ones that got us into this bind!

lol oh well. that's what happens when you people don't vote and the evangelicals like in jesus camp get their way.

To move away from politics.., the macroeconomics behind this justify the Fed's choice in where to put their money..

Here's a snap-shot of the credit market:

Individual--> (mortgage)--> Bank--> (Mortgage-Backed-Securities)--> Investment Banks, Fannie Mae, Freddie Mac--> (Cash to banks) --> Banks issue more loans & process repeats..

What happens is that once the Real Estate bubble burst.., and house prices fell.., people were paying a loan amount that was higher than the value of their home.. Most of them couldn't make the payments.., some of them would rather it get foreclosed.., so these MBSs (Mortgage Backed Securities).., were worth sh*t..

The problem with that is.., they were already on the books of major Investment Banks.., along with Fannie & Freddie.. Not exactly the best time for economic humor.., but guess what they did? They stopped buying sub-prime bundles.., and placed stricter standards on the MBSs they actually did buy.. Result?

The banks rely on securitization of MBSs to issue loans at the rate they do.., when they're not able to sell these loans off and put cash back on their books.., they stop issuing loans.. Creating a credit crunch.., further reducing housing prices.., which causes more defaults.., which hits the portfolio of Investment banks.., Freddie & Fannie even harder than before..

But the irony behind it all is that the Fed prefers top-down rescues.. They ignore the fact that the entire process.., relies on one thing.., and it's not the Investment Banks or Fannie or Freddie.. It's the individual!

The individual stops making payments.., these MBSs are worthless.. If the MBSs are worthless.., banks can't securitize their loans.., if banks can't securitize their loans.., they don't issue new ones because they don't want them on their books.. If they don't issue new ones.., it's harder to get financing for real estate.., which creates a credit crunch.., the house prices fall.., which reduces the equity people have in their homes.., which reduces the overall wealth of each individual.., which reduces consumer consumption spending.., which adversely affects the economy..

It would be nice to bail out individuals.., but these are individuals that are fiscally irresponsible.. You have to factor in the risk of losing your job or a sluggish economy when buying a home with a 30-year loan attached to it.. There's very little guarantee that a significant sum of the money spent would translate to payments being made.., and then making the MBSs marketable and valuable again..

So you target the market for MBSs.. Investment Banks.., Freddie & Fannie.. These institutions didn't know banks were issuing loans with fraudulent supporting papers.., these institutions didn't know that part of the bundle of mortgages they were buying included loans that were "high risk".., so risky that they were not only not investment-grade.., but shouldn't have even been issued in the first place! These firms are actually the most financially efficient.. (except for Freddie & Fannie.., those guys suck big time).. anyway.., these are the ones you want to target..

The only problem is.., that it doesn't really help.. All you're going to be doing is bailing them out so that you don't see mass-scale unemployment.. They're not going to be buying MBSs the same way they used to.., banks aren't going to be able to get rid of their loans in return for cash and then re-issue new loans.., but more importantly.., who the fcuk is buying homes now? The individual has removed himself from the process.., effectively killing the entire process..

A sharp slow-down in economic activity has people thinking about how to get by.., not how to buy a home..

[starbuck]

Can I just say, I'm really freaking anxious about all of this stuff? Like more anxious than I've been in a long time.

People I know are already losing their jobs left and right and getting laid off.

Somebody pass the valium.

[Junket]

Can I just say, I'm really freaking anxious about all of this stuff? Like more anxious than I've been in a long time.

People I know are already losing their jobs left and right and getting laid off.

Somebody pass the valium.

I'd rather not be in a city when this shit hits the fan.

[misombra]

[url]http://news.yahoo.com/s/ap/20080925/ap_on_bi_ge/bush_markets;_ylt=AhIFsk_CDpXDYHsffg_Swaqs0NUE[/url]

they say if congress doesn't pass this bailout thing we're going to have another depression.

i would like to see the data that supports that logic, personally.