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Home Values Built on Rotten Foundations
by Richard Benson
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EDITOR'S COMMENTS
by Ole Bear

The Shifting Sands of Real Estate Debt

No, I am not going to spend a lot of time citing or analyzing Author Benson's great piece. I cannot find any fault with it. Here are some select quotes from the essay that should make y'all want to print this puppy and hang it on the Refrigerator in the kitchen!

• While the Federal Reserve is slowly raising interest rates, it is our observation that the housing price bubble is already bursting of its own accord.
• The size of the housing bubble should not be underestimated.
• new mortgage products
• lenders are offering various types of mortgages to keep mortgage volume and quick origination profits up
• "American Dream Down Payment Act of 2003"
• your neighbor - the US taxpayer - will give you the greater of $10,000, or 6% of the cost of the home to buy it!
• sobering facts about sub-prime borrowers. They are twice as likely to pick an ARM mortgage
• sub-prime borrowers frequently refinance
• These sub-prime mortgages have a terrible record.
• "the easy money free for all".
• Fraud hot spots include the usual suspect states such as Florida, California, and Nevada with honorable mention to Michigan, Illinois and Missouri.
• Most mortgages written today have a bit of a fudge factor in the total honesty of income and net worth.
• At the high end of the housing market, there are reports of "Yuppie Fatigue".
• Currently, wages and salaries have not kept up with inflation despite "economic recovery"; bankruptcies will hit another all time record of over 1.6 million in 2004. Forty five percent of workers have total net assets of less than $25,000 (including the value of their house) and less than 4 of 10 workers save anything.
• Does housing always go up forever?
• In Las Vegas there is an unfolding house price debacle.
• If home lenders would only read history

Folks need to get real and understand that real estate is currently increasing in market prices paid because the Federal Reserve is destroying our monetary system by the printing press. Mr. Bernanke, methinks you doth obfuscate [lie] too much! -- You, Sir, are a monetary thief with your hand in everyone's pocket stealing the value of their money by your printing press, and encouraging [with your Compadres in Monetary Crime at the FED] that the consumer take on more debt through the mortgage process of real estate equity extraction! After all, you Boys at the FED understand what Richard Russell means when he says inflate, or die! What the heck is "forecast-based approach" to monetary policy anyway, Ben? [Hint: Inflation [destruction] of our money through the printing press and real estate asset bubbles!]

Here's your homework, Folks! Free e-books on-line!

See: Fiat Money Inflation in France -- Andrew Dickson White, c. 1876 
See: Extraordinary Popular Delusions and the Madness of Crowds -- Charles MacKay, c. 1841

Rotten Foundations? We observe that most American home foundations are concrete. Concrete has two properties: it does get hard, and it does crack. We suspect a lot of the foundations are sitting on the shifting sands of debt, and no matter how strong the concrete is...without good soil to support the weight of the foundation, a lot of folks are going to be in a Tale of Woe when the sucker cracks big time! Get real, Ben!

Ole Bear, Editor

© 2004 Realty Reality