A long time member of the crew over at our favorite message board, the Stool Pigeons Wire at Capitalstool.com, took the Wall Street Journal to task today for its “happy talk” coverage of the problems in the financial world and the economy. I thought that he summarized the issues so well that I am reposting his thoughts here. Thanks to MDPorter for his thoughts.
Read a wall street journal yesterday that was filled with articles on the credit crunch. Not one of them got it right.
The lies being told in the mainstream and financial press are reaching ludicrous levels. The articles cherry pick one subject to feel good about and then act like the rest, taken as a whole, do not matter.
Not once have I read about the following things:
- elimination of cash out mortgage equity withdrawal and the effect on consumption
- as real estate contracts, the service and construction jobs that surround it vanish raising unemployment levels
- ARM resets that last through 2012 forcing people to pay more for their loan every month, leading to less cash for spending
- the expense of loan bailout programs and their inability to help everyone who is over extended unless they throw trillions at the problem.
- food inflation (meats, dairy, produce).. unless prices fall, this will cut into discretionary spending.
- the complete breakdown of ratings agencies, and the unreliability of “credit reports”. Just because a person previously paid their bills on time doesn’t mean they won’t default on their $800k mortgage when they have to make the full PITI (principle, interest, taxes, insurance) payment on their $120k or less family income.
Then there is the trickle down economic aspect. So much money was flowing from the home ATM, and the home lending business commissions (RE agent, brokers, etc). This money flow is rapidly stopping. From all the stories I’ve read the people in these industries were spending tons of money on cars, homes, shopping, etc. What is there to replace their money?
The New York Times today posted an article saying that incomes are still below the 2000 peak. That was seven years ago!
To top it off, the largest job gains over the last five years have been in real estate, construction, and local/state/federal government jobs! Nearly all of these jobs have been made possible by the willingness of everyone to go into deep debt. Now the debt can’t be paid back unless the states and Feds go into more debt in order to bailout the debtors. Who is going to buy that debt, and at what rate of return?
The Russ Winter Hyper-reality and Brazil Amercan spinjob is shifting into overdrive. All is well. Stay calm. We’ll take care of you!
Well said MD!
“The New York Times today posted an article saying that incomes are still below the 2000 peak. That was seven years ago!”
So much for “the best economy ever”. Well, I guess it was if you were a stock-dumping CEO, real estate parasite, or (other) white collar criminal. The whole looting operation could be carried out in plain sight simply by giving J6P a couple hundred Gs in additional debt so he thought he was living the pimp life right along with the robber barons.