The big dive - deflation

We are not at the beginning of a recovery!

It is OK that we say we are recovering and speak positively - but make no mistake - the crust of the country has only just begun its adjustment. (The crust is defined as all areas within 100 miles of the coasts and 100 miles of any major waterway - this area contains 96% of the countries wealth, all the best colleges and the vast majority of intellectual property)
Real Estate has barely started to adjust and credit card debt and negative savings rates have yet to take their bite.

In the Great Depression we saw a huge market crash followed by a recovery of 50% in relatively short order followed by an 85% drop. Then and only then did the Kool-Aid wear off.

Nothing points to really significant health in our system at the present time and home values in the crust have barely adjusted if we consider historic ratios of income to average cost of a home.
Incomes are falling in the crust areas - they are near 1998 averages and still going down, yet home prices are no where near 1998 levels.

We are entering a deflationary period. If you still own a home that is underwater in these areas, it will just get deeper - hand back the keys - grow your cash - rents will fall along with home prices.

If you are making monthly payments of lets say $8,000 per month (mortgage and credit cards) and you walk out on them, you can easily rent a nice home for 2500 a month or less and put $5,500 in the bank. If walking out on you debts leaves you with no car - the $5,500 per month in savings will buy you a good used one quickly.

If you feel ashamed for walking out on your debts - look at it another way - you were swimming around in the big pond and suddenly you found a hook in your mouth - and while you were the one that bit the hook, you were also the one who was pulled out into the air and put on the plate and you were the one they put up on the plaque. The home sellers got 6% for doing next to nothing and the mortgage brokers another 1.5 - 2% for the financing. On a $600,000 home that comes to $48,000. Not even a high school diploma was required. You were chopped up and fried and should feel proud to unhook yourself and get back to swimming again!

Now for gods sake - don't come up with the Republican knee jerk - "but what if everyone did that" - they won't! Get the hell out of the pot - and back on to firm ground. Reduce you debts to nothing, save money and by the way - you can repair your credit in no time - (be sure to keep all the credit cards you have that you owe the least on, and if you don't have a credit card problem, then just walk away from your mortgage - you can have great credit within a couple of years and a whole lot of cash and peace of mind in no time at all).


It is not an opinion that home prices will continue to fall in the crust areas - on average they will fall for some time. Home prices always have a relationship with rental rates and the ratios are way off.

You have to be very unclear in the head in order to be wanting to purchase a home at this time in the crust areas. Rental of the same property is typically 1/2 the cost. The chance of the home going up in value in the next 5 years is almost zero and your down payment of lets say $100,000 has a VERY good chance of appreciation - even if you don't do anything with it!

US Dollars will rise over the next few years as deflation deepens. Your cash will buy more and more. If you had bought a home in October of last year you would have lost value. If you had invested say $100,000 in Ford you would have about $3 - $400,000 as of this date.

Panic will bring a short term rise in Gold but it will fade - we are broke - let me repeat - we are broke, and deflation will be the rule for several years. When people have little money and large assets are losing value, they do not go spending on Gold. It will probably not crash from todays levels but it will end up lower by double digit percentages.


Why all this fiscal information?

Because Democrats just sit there and don't frame the issue of our current economic situation as being the advent of the "self-regulation" God of Bush and his treasonous cronies. Democrats will take the blame for this mess as they refuse to educate the population on the fact that no one spends more money than Republicans, that the massive debt was brought to us by the Republicans and that accepting fear and lies was a road map of destruction and stupidity. Republicans also ran the most inept war in the History of the United States and they continue to be the worst leaders on foreign policy.

We are in a train wreck - brought to you by George Bush Jr.!

Enjoying the Bush Hangover?