http://www.cnbc.com/id/45219555
The economy will collapse again in 2012 or 2013 and it will be much worse than the 2008 collapse. This will send home prices down another 20-40%!!! Nope, the bottom is not in yet.
100% Chance of Crisis, Worse Than 2008: Jim Rogers
By HousingBoom Follow Mon, 21 Nov 2011, 11:04pm 3,778 views 29 comments
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In the Jim Rogers scenario... Another swift collapse would not be nearly as orderly as the first 2008 crisis.
What would happen is every homeowner would just simply stop paying their mortgages and taxes. And we'd have a big reset..kinda like a game of musical chairs, if you can manage to grab a seat (home/hard assets) before the music stops you win...whoever is left standing loses... renters and those without assets to be specific.
But renters would stop paying rent too and landlords would stop paying their mortgages as result. So you would just have a financial system come to a screeching halt.
If you think a lot of people are getting away with squatting now.... when we have a fairly orderly civilization and law enforcement team to enforce foreclosures. What would happen with a 2nd huge collapse in under 5 years?
Life would get pretty interesting fast!
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San Bruno, CA
I don't agree to this specific statement:
"But renters would stop paying rent too and landlords would stop paying their mortgages as result. So you would just have a financial system come to a screeching halt. "
I think homeowners will kick out/evict (by force) those who stop to pay rent. I know I would. So, renters lose, but homeowners win would stay true.
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Bellingham, WA
"The economy will collapse again in 2012 or 2013 and it will be much worse than the 2008 collapse"
yeah, I can see that.
The USG came in like the calvary with $3T or so of intervention, both fiscal and monetary.
http://research.stlouisfed.org/fred2/series/FGTCMDODNS
http://research.stlouisfed.org/fred2/series/FDHBFRBN
This arrested the fall:
http://research.stlouisfed.org/fred2/graph/?g=3tG
But we're still just treading water here, since we've done absolutely nothing to address the systemic imbalances in the system (the 'job creators' have all the money and opportunity).
As for the actual article, dunno about Europe at all. Mostly Germany, France's, and Norway's problem I think, they're the creditors here, but I don't know anything.
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HousingBoom says
HINT: Anyone who claims to be able to predict the future with 100% certainty is lying to you.
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Los Angeles Owner says
If every homeowner stopped paying their mortgage and taxes, that would be anarchy. No schools, no police force, etc. The "winners" would be the ones with guns and a supply of food.
Things are not bad now. They aren't even close to bad. There are still plenty of jobs out there, just not those bullshit "Assistant Vice President of Marketing" jobs that pay 100k a year.
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StoutFiles says
Exactly. So how is that going to help keep up the insane home prices?
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bubblesitter says
Most areas aren't insane anymore. You may not have noticed, but the bubble already burst..
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Corning, NY
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Eh, they'll just print more money to prop up the markets if there's another crisis.
That may very well have unintended consequences (inflation), but that's what they'll do.
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wthrfrk80 says
I'm sure they will. That's when inflation is out of control and rates head towards 20% like they did in 1981. Home prices are doomed to fall much more than anyone can fathom in my opinion
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Bellingham, WA
HousingBoom says
Ayup. Cost inflation w/o wage inflation has to come out of somewhere.
The cost of housing does not have any price inputs other than what we can afford to pay!
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HousingBoom says
I did some research awhile back and I don't think interest rates ever rose or fell more than 1% in any given year... 2% max and it only happened for a year or two in the last 70 years. So In order for you to reach 20% - 30 year fixed mortgage rates.. without total economic collapse.. It would take 17 years before we reached 20%.. give or take a few years.
So it would take until 2029 for rates to reach 20% on a 30 year fixed... (changes any faster than that in rates would cause anarchy and chaos). And at 20% interest rates a $150K mortgage would be $2500 a month in principal and interest. So even a humble mortgage would be impossible without massive wage inflation.
$800 more per month than my $360K mortgage now... at 4% rate
If we even came CLOSE to the scenario your suggesting... The dollar would have been used as toilet paper long before 2029. And anyone able to hold onto their homes would get to keep them free and clear. We would already be on a new currency and everyone would be looking back on these forums with 20/20 hindsight and see how foolishly we all quibbled over 10-30% price drops in a currency that no longer exists.
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Los Angeles, CA
How long have people been predicting hyperinflation? Where is it?!?!?!
All I can see is perpetual ZIRP destroying our country 4eva.
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PockyClipsNow says
I'm not predicting hyperinflation... But if we have 20% mortgage rates.. hell, if we have 10% mortgage rates in the next 10 years... then the only possible reason that CAN occur is with some sort of MASSIVE inflation.. otherwise rates are more likely to be 2% before 10%. And if rates are pushed down to 2%.. then yes, home prices will have been dropping quite a bit... But the monthly nut won't go dramatically lower for the majority of buyers from here on out...
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Bellingham, WA
PockyClipsNow says
ZIRP is the palliative. We destroyed this country 2001-2007:
http://research.stlouisfed.org/fred2/graph/?g=3u2
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I am hearing from some experts (including Peter Schiff and Bob Chapman) that rates should hit at least 10%. That is a 40% decline in home prices (compared to 5%). Who knows how high rates will go but if they came close to 20% in 1981, then we might see a repeat of that.
http://lansner.ocregister.com/2011/10/22/housing-market-will-get-much-worse/137313/
Us: How bad could it get … again?
Peter: Ultimately it will get very bad. The market is already on life support, even with mortgage rates at the lowest levels in nearly 70 years. But imagine if rates rose to the levels they were at just five years ago, to say six or seven per cent? What will that do to property values? I think ultimately mortgage rates will rise farther, maybe even above 10%. At the same time, I think the California unemployment rate will continue to rise and taxes in California, will continue to go up.
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South Pasadena, CA
Clara says
LOL, how will you evict a renter with a gun without courts working, without police and sheriffs? All this, while you default on your mortgage payments. You will loose your "property" much faster than you can evict your renters.
Anyway, small number of "owners" who will succeed evicting some renters won't find new ones, so they will default as well.
When the life support to housing market collapses we'll see very interesting things.
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Bellingham, WA
I'm more in iwog's camp than Schiff's here.
There's too much money in the system, but it has nowhere to go, and it's certainly not trickling down very well.
If we don't get bona-fide wage inflation, I don't think the Fed will have anything to fight, inflation-wise.
The Fed's not going to raise interest rates only to see housing tank 20% -- they'll raise rates AFTER housing goes up 20%, not before.
But there are exogenous forces here too, that I don't pretend to understand ("known unknowns" and "unknown unknowns").
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Peter Schiff also thinks we should abolish the income taxes completely... lower corporate taxes and HIS taxes immensely too.
All that would happen in Schiff's scenario is the middle class would all lose their homes... Schiff would swoop in and buy them all up for dirt cheap and rent them back out to us at a profit. The top 1% would get richer and the separation between lower class and upper class would increase dramatically...
He also said he'd get rid of income taxes... So wages would drop dramatically because the middle/lower class would like lemmings accept a huge pay cut to keep their jobs.. and as long as their take home pay remains the same they won't cry too much.
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Los Angeles, CA
Well for 12 years now all I have heard is 'rates are at historic lows and can only go up from here'.
Of course rates are lower every single year for the last 12 years! ha.
My friend is in escrow on a house - mortgage at 2.875% fixed for 7 years (i think its a 7/1 ARM)
What exactly happens to 'force rates higher' when the feds are printing the money and lending it at ZIRP to make sure we have super ez low rates for (2 more years according to them!)?
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Bellingham Billy says
All of that money is meant for housing? I doubt that has any bearing on home prices.
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bubblesitter says
Well, I'd have to do more research, but i think historically, no matter what your income is... housing costs always gravitated above 20% of your gross income.
Median income - in 1957 was like $5000 a year. I pulled the record on the house i purchased and it was built for $16K in 1957.
So... if the owner of my home bought in 1957 he paid 3x his income for that home.. pretty much the same as I paid in proportion to my income.
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I remember Jim Rodgers in 2008 claiming it would be the end of the world then. In fact it was his Analysis that Washington will hide behind for the excuse of Bailing out all of those banks.
I said he was full of it then and he's full of it now.
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HousingBoom says
Schiff? Really? That inflationista has been wrong about a lot of stuff so far. As Los Angeles Owner said, he's a crazy libertarian who is hoping for Armageddon so he can take advantage. In the meantime, he's just talking his book.
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Los Angeles, CA
Yeah its hard to imagine the 'bond market blowup' that would cause rates to hit 20% when the fed reserve would simply print money on a 5 year old DELL computer and buy another 12 trillion in garbage bonds every year if they have to. Isnt this the current playbook?
Letting rates rise would go against the never ending war on savers so we know that wont happen.
Lets look at the bright side, at least having and saving money won't land you in jail! (yet) they just take away your money thru taxes and paying 1% on deposits so they can put kids who smoke pot in jail and 'create prison guard jobs' which is stimulative to the economy! And most all cops vote for Dems so win-win for Obamabots
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Los Angeles Owner says
Squatting is acceptable only because bailouts are supporting the banks.
If the property tax flow is squeezed to a significant degree, today's ticket quota will become tomorrow's eviction/auction quota.
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47 male
Lafayette, CA
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I think because of Democrats capitulating to the Republicans on both budget cuts and tax increase, we're going into a cycle of perpetual depression marked by occasional short-term boom periods as bubbles form and self-destruct.
However we still have a substantial amount of money flowing to the bottom via welfare, food stamps, unemployment, medicare, social security, and other programs. These programs need to be eliminated before we see a catastrophic economic collapse like Jim Rogers is predicting.
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I don't know if the Jim Roger's doomsday prediction is reasonable or not. I suppose its as reasonable as anything.
I do agree completely that the system is unsustainable and only a full reset can be curative. All debts must be repudiated. Its not really so difficult. The government picks winners and losers for bankruptcies every day, in court. And even without any due process at all, by Executive Order (like the nationalizations of at least several companies that I can name off the top of my head, AIG, GM, Fannie, Freddie, etc). So they in essence repudiated debt and stole from one party to give it all to another party. Of course, the fairest thing to do is say "Nobody owes anyone else anything, we are starting over". That rewards big borrowers more than savers, yes, but the savers actually can win because nobody will lend out money or have any to lend, except a saver, and then they can demand high rates for doing so.
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Fantom says
If this jubilee happens on a Friday would I get paid for that week's work?
What would happen to such things as bank accounts and pensions?
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Victorville, CA
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No chance of JUBILEE. because this is debt that belongs to a pension fund and other things. you can not jest cancel it out like that. never going to work