Korean Job Discussion Forums

[Wangja]

Before we start let it be clearly understood that as a non-American I desire a strong and healthy US economy for the benefit of not only the US but also other countries, including my birthplace, UK, and my adoiptive home, RoK.

I am not, however, a fan of GWB and, even including his much-vaunted tax cuts for the rich, struggle to find one act to improve the economic climate. That is why I am worried, deeply worried.

Consider these factors present in the US economy:

* negative net savings rate
* housing bubble
* rising inflation - now 4%
* budget deficit
* trade deficit

Together with other issues such as over-valued currency (yes, really), personal debt levels, reduced immigration etc I'd say the outlook is gloomy. Deflating the hosuing bubble will cause far more pain than the stockmarket bubble. (The "smart money" was already out of course when that burst.)

In addition, the US image abroad has been severely damaged: once seen as Mr Clean, Mr Right, Mr Benign, Mr Moral-High-Ground, many now see the US far less favourably. That can and will have an effect, perhaps a lasting effect, on US trade and inward FDI. To balance that, the US is far less dependent on exports than most other developed countries - I believe only around 10% of GDP is export production.

If you are an American porperty owner, now might be a fine time to sell. Replace what you own with a foreclosure sale in about 12 months. There are going to be bargains around and I for one will probably buy one - San Diego probably.

Stromy times ahead: and please, it is 5 years since GWB became prezz and too late to blame the previous administration - which was fiscally very, very correct.

[Ya-ta Boy]

It's a mistake to over-emphasize how much influence a president has on the economy. But it is equally a mistake to deny presidents and their policies do have an influence on it. Presidents can ask for a tax increase or cut, but it is Congress that must legislate it, primarily the House.

But I agree with what I see as the main thrust of your post: the signs are not good for the long term--budget deficits, trade deficits, inflation, poor level of savings, the housing bubble. Prospects are gloomy.

[desultude]

Everyone seems to be praising this guy Bush has nominated to replace Greenspan at the Fed.- but he has been Bush's chief economic advisor. That should be enough alone to completely disqualify him.

[Kuros]

[Tiger Beer]

[Wangja]

When it comes, TB, as come it will, it will be far, far worse than the dotcom meltdown.

Property is a very illiquid asset. Shares can at least be sold instantly, there is always a buyer for cash. But in housing bubble deflations, there are no buyers: they dry up completely and a house cannot be sold and paid for in an instant - there is a long lead between deal and closure. It's not just a question of being unable to sell at 10% lower than the house next door, it's not being able to sell at all.

In the meantime, the interest payments are falling due - and do you all believe that interest rates will stay low? - and as that ticks away, there comes a time when the bak forcloses and sells the property at auction. People like you and I are waiting on the sidelines to buy an asset the woner thought was "worth" 750,000 for maybe a tenth of that. Banks will cut their losses and run as fast as they can.

Or, they will set up a property investment trust: oh yes, I have seen that happen. perfectly legal.

Edit: and didn't GWB just make it much harder for the "little guy" to get bankruptcy protection?

[Hater Depot]

Just in time for Katrina survivors. Who says Christmas never comes early?

[Tiger Beer]

[Wangja]

A property investment trust in this context means a private company set up and whilly owned by a bank, perhaps with a limited life, whose sole purpose is to buy at auction properties which the owning bank has foreclosed and repossessed. The proerty so purchased - some might say stolen - is typically rented out and later sold.

Property prices might be worth a separate thread: from today's Telegraph I see that foreclosures in UK have increased by 66% and in London by a staggering 81%. It's already happening in UK and US (esp hot spots like S California) can't be far behind.

[mithridates]

[bucheon bum]

[Wangja]

[Wangja]

Here's a nice take on inflation. http://www.financialsense.com/stormwatch/2005/1028.html

A super graph ....




What this shows is that if you take out all non-essential costs, such as food, heating, petrol (gasoline), power and housing costs, inflation in US is only 4%.

If they are included, as they used to be, then inflation is running at around 7%.

This is not a "bash USA" post - the EU governments are practising similar sleights of hand.

[hypnotist]