Is US entering Japan's nightmare?
...... And like the U.S. real-estate boom, the Japanese boom was fueled by cheap money. The Bank of Japan, that country's Federal Reserve, had lowered the discount rate -- the rate it charges other banks -- to a post-World War II low of 2.5% from 5% in 1984-87. In those same years, the money supply grew by better than 10% a year.
http://articles.moneycentral.msn.com/Investing/JubaksJournal/IsUSEnteringJapansNightmare.aspx
This article is quite right. Although the American economists do not agree yet, the US situation is exactly the same as 1989-90 era of Japan. After all, USA lived on only bubble economy for the past years, and the economy is entering into lost decade or endless depression until house price recovery.
When Japan warned USA, they didn't hear us, saying US economy is strong and US-led Global Capitalism is Global Standard. But in fact, is was Global Casino Economy.
Japan needs to develop BRICS markets as an alternative of US market.
The US's public debt is 65% of GDP. Sizable to be sure, but not much different than most countries. The economy itself is just much larger.
Japan, on the other hand, has one of the biggest public debt's of any industrialized country in the world, hovering at around 176% of GDP.
Perception is a bit different from reality here.
june26th 2006
Ministry of Finance of japan anounced that japan's debt became $8trillion in 2005.
it is debt that is $60,000/preson in japan(GDP $5trillion, 156%debt/GDP)
it seems a big bloblem for japanese bacause it is so much debt.
everybody said " japan is going to ruin"
however japan is still getting better condition
in USA GDP $13 trillion, debt is 830 billionin a year
6.4% debt/GDP in a year.
it means it takes 15 years until 100%
If I compare with USA, japanese debt is too big.
and everybody is worry about that.
However in case of japan , all creditor of japan's debt is the japanese citizen.
there is no foreign creditor at all.
50% crediter of USA's debt is foreigner.
the japanese ppl's financial asset is $13 trillion.
it means a limit of japan's debt is $13 trillion.
that is ,japan's debt is still little
An increase in the debt of the United States is limited to an increase in the
rating to another country.
that is , incresing of net worth(total assets) in a year
american net worth is incersing $3 trillion in a year since 1955
so i can say 830 billionin is little.
recentry ,0 interest rates was ended.
japan's interest payment is increased.
japanese citizen can get more interest payment
incresing of USA's debt means increasing of japan's net worth because japan is creditor of USA
Japan also has increased net worth several times the increase rate of the debt of the country every year.
even now japanese citizen is richest in the world.
If the debt of the country of japan becomes $13 trillion, the people in
Japan monopolize money in the world.
Inside and outside net worth of Japan will become threats in the world.
the truth is.......
As for the child in Japan, it can be a property person of 6.48 million yen
(creditor) at the same time as giving birth.
The US Senate has approved a rescue bill designed to prop up America's battered housing market.
The housing crisis is causing serious problems for the wider US economy.
Almost 740,000 US homes entered the foreclosure process in the second quarter of 2008, according to research firm RealtyTrac. The worst-hit areas were Nevada, California, Florida and Arizona, which had seen the biggest house price rises during the boom years, and the largest volume of sub-prime lending.
The bill's Republican critics say it will cost US taxpayers billions, and query the wisdom of bailing out irresponsible homeowners or unscrupulous lenders.
President Bush had initially threatened to veto the bill over a provision for $3.9bn (£1.95bn) in community grants to buy up and repair repossessed homes.
http://news.bbc.co.uk/2/hi/americas/7527108.stm
I remember that the Japanese government had decided to inject capital to "Jyusen" (Japan's housing-loan specialist banks) in 1995 in order to maintain Japanese banking system, which struggled with bad loan problems after bubble economy burst in early 90s. Needless to say, Japanese taxpayers had to bear the cost.
Assuming that US economy follows Japan's path, 2-5 large US financial institutions will disappear over the next few years. Plus hundreds of enterprises will go bankrupt because of credit crunch - banks' reluctance to lend money to corporations.
I think that US economy is now reaching half-way mark, but not passed yet.
Now that Fannie Mae and Freddie Mac, the two biggest suppliers of mortgages in the US, have been taken over, and nationalized, by the US government, over 90% of mortgages for US purchasers of homes in the future will now have to be approved by the US government!
The banks will be saved and their fradulant loans will be reimbursed, the stockholders will lose everything as fannie's shares are now going for $0.83 and the American people will pay for it through their taxes for many years to come. Some say it is $1 Trillion while others say it is close to $3Trillion. Foreigner countries, including Japan hold a total of about $1 Trillion of these bonds. Therefore, to stem the sell-off of US treasuries by foreign countries and the bankruptcy of the USA, the US government had no choice but to bail them out and the US taxpayer will get to pay for it.
Therefore, if you desire to purchase a home in the future, the US government will have to approve you based on your credit rating. Many people will not be receiving mortgages.
And this is just the beginning of the end of the USofA. How long will it before the major car companies go begging the government for a bailout and then they too will be nationalized? Then you will need government approval to buy a car!
Then, next will come the airlines! They too will come with hands out begging for relief and they too will be nationalized! Then you will need government approval to fly!
The list can go on and on.
Does anyone see a pattern of socialism or corporate facism here? or am I just being paranoid?
This is bad, very bad and spells the beginning of the end of free market capitalism in the US. No longer can the US shake a finger at Venezuela or any other country that decides to nationalize major corporations and call them socialist because they just did the same thing.
The government says it will be only for a short time, but does anyone even think for a moment that that is true? When has the government ever given up something they control?
Somehow I feel the average American will not even care or even understand just what has happened to their country and will never know what hit them. Exactly as planned.
This may mean you will end-up having an emirati or chinese boss.
And you are quite correct as it is happening. The iconic Chrysler Building, as well as the General Motors Building, both located in New York City were recently sold by German investors to investors from Abu Dabi. The dismanteling and selling off of America continues. The funny thing is there is no outcry from the population as was so prevalent in the 1980's when the Japanese were buying up New York and the Pebble Beach golf course with the sledge hammering of Japanese autos and such.
In short, no there are few parallels. As the head of the US Federal bank in Dallas noted (http://www.ft.com/cms/s/0/484d1786-043a-11dd-b28b-000077b07658.html)(who was in Japan in the early 90s) the US and Japanese economies are far far different. He noted the U.S. economy is far more flexible than the Japanese economy was, which he called command oriented. Growth was largely directed by large industries, where consumer growth in the United States is the main driver of the economy. A critical difference is that the United States also maintains robust population growth, which gives it a foundation for future economic prosperity.
The United States Government has moved quickly to deal with the crisis, unlike Japan. IT took twelve years for the Japanese government to effectively address the banking sector. On average one major bank failed a year between 1990 and 2002. While one major bank has failed in the United States, and one or two more are tottering, that seems to be the extent of it.
The situation in the US, I believe will be far worse regardless of what the Fedhead says. And the "bank" you mentioned (Bear Sterns?) is not even a bank. It is an Investment House/bank and is not subject to the rules of chartered banks.
The problem is that the government will not step in this time. Look around! GM is teetering on bankruptcy and is now worth less than McDonalds! Citigroup is broke and may go under. Lehman Brothers investment firm may fold as well as Merrill Lynch. I believe you will see many bank failures within the coming year.
The US only has 16% of it's manufacturing base left as everything else has been offshored toi China and elsewhere. Where will all these people work? In Wal-Mart? And what will they produce? The US has moved nowhere close to solving the problem other than to save and bail out their cronies on Wall Street.
75% of the US economy depends on consumer consumption and with gas prices in outer space, inflation going crazy, home prices declining, the average American is now not spending any money other than food, mortgage and gas.
The U.S. economy shed 62,000 jobs in June while the unemployment rate unexpectedly remained at a four-year high of 5.5%, the Labor Department reported Thursday. Payrolls have now fallen in all six months this year for a total job loss of 438,000, the strongest evidence that the economy fell into a recession. Job losses in June were worse than the 40,000 expected by economists surveyed by MarketWatch.
Non-manufacturing sectors of the U.S. economy contracted in June, the Institute for Supply Management reported Thursday. The ISM non-manufacturing index fell to 48.2% from 51.7% in May. The decrease was below forecasts. Economists were looking the index to inch lower to 51.0%. Inflation pressures intensified. The price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.
Delinquency rates for home equity lines of credit and bankcards rose in the first quarter to 1.1% up 0.14%, the highest rate since 1997. Bank credit card delinquencies rose .13% to 4.51% versus the four-year average of 4.40%. These are accounts 30-days or more overdue.
Home equity delinquencies fell to 2.34% from 2.39%, as auto delinquencies fell to 3.09% from 3.13% and property improvement delinquencies fell to 1.78% from 1.81%. Marine delinquencies rose to 1.7% from 1.57%. Recreational vehicles increased to 1.11% from 1.08% while mobile homes rose to 3.22% from 2.92%. Direct auto delinquencies increased to 1.92% from 1.9% and personal climbed to 2.55% from 2.48%.
Home equity lines of credit at least 30-days past due rose 14 bps to 1.1% of accounts for the quarter. Delinquent credit card accounts increased 13 bps to 4.51%, the highest rate in two years.
American Airlines will cut close to 7,000 employees by the end of the year, or about 8% of its worldwide workforce, as it reduces flights and grounds aircraft due to high fuel costs.
United has laid off 1,100 and Continental 3,000. AirTrans will cut wages 10% to 15%.
New foreclosures almost quadrupled in Los Angeles and doubled in Miami in the second quarter, with as much as $5 billion worth of losses going bad in L.A. alone. The number of homes up for auction in LA rose to 14,505 compared to 3,797 yoy. Miami-Dade was 2,677 versus 1,282.
Nationwide the figure doubled since 12/06 to about 2.5% this March. New Yorkfs foreclosures climbed 49% for $424 million. LA had about 15 times as many to be sold. Seattle was even up 48%.
Lou Dobbs reported yesterday that 1.5 million homeowners lost their homes in 2007 and 2.5 million will lose their homes this year and, by next year up to 6 million homeowners may lose their homes by next year. Home prices will fall as much as 30% or more in areas like LA, Miami, etc before this is all over.
Fed foreign holdings of Treasuries and Agency debt jumped another $23.3 billion to a record $2.346 trillion. Custody holdings for foreign central banks rose $289 billion ytd, or 27.1% annualized and 18.3% yoy.
Do you need more info to realize that this will be worse than what Japan experienced? It is already being said that this is the worst recession/depression/fall in home values/bankruptcies, etc since 1929.
Just keep your eye on the dollar as, when the dollar falls (as it will continue to do) is what will drive oil higher, the markets lower, commodities like gold/silver, food and foreign currencies higher depleting the savings of, and destroying the middle class of the US.
What you will witness will be the largest transfer of wealth from the working middle class to the pockets of the elitist corporations through high energy prices, out of control inflation (estimated at 12.5%) a falling stock market, further lowering 401k's, massive layoffs and continued off shoring of jobs, and the continued depriciation of homes.
Remember, Japan is and was a creditor nation and the people saved more than 10% of their income and where many did not live above their means. Therefore, they were able to withstand the crisis that has lasted 20 years.
America, on the other hand has no savings, is $9.5 Trillion in debt, lived above their means and will have no high paying jobs before too long. 7 out of 10 Americans are ONE paycheck away from bankruptcy.
Sorry, but I do think the US will come out of this without major scars.
The above statistics were compiled from newsletters and internet sources.
Both major domestic US automakers Ford and GM now trade at multi-year lows.
F @ below $5
GM @ below $10
Over 2 decades ago,Chrysler stock crashed to $2 a share then came the government bail-out package.
BUT IMO, the U.S. will not go down the toilet bowl because it plays such a key, central role in the global economy. If the U.S. goes down then everyone goes down with it. So it's in everyone's interest to try to make this fall from the top as painless as possible. A heavyweight such as Paulson was especially picked for this exact reason. Other countries will believe him. The G8 summit will play a role in coordinating major economies' efforts. I can only wish them good luck. There will be pain to share by a lot of countries.
However, as the Chinese saying goes, "Crisis means trouble and opportunities."
Just this morning, as you already know, Fannie and Freddie, the two largest mortgage institutions have plunged more than 50% in 35 min of trading! "Hanky Panky" Paulson (former CEO of Goldman Sachs! wink wink) will speak today concerning these two and I believe it will be a bailout at the expense of the US taxpayer or the Chinese or Middle Eastern Soverign Wealth Funds.
Remember, we still have the credit crisis looming after this which will further bring the market down along with the dollar. If one is wise, one would get out of the US$ and invest in yen, swiss francs, Australian Dollars, Brazilian Real, Chinese Renimbi or the Euro as they will all increase against the $ as they have done this year to date. Also Gold and Silver will be a good investment and have been soaring as of late.
As I mentioned in another post, keep an eye on Lehman Brothers, Citibank, and Merrill Lynch as one of them, or all at one time or another, will fail I believe as people do not have any confidence left anymore and they have to much of the bad mortgages on their books as well as bad credit that wii raise it head next.
America's nightmare will be far, far worse than what Japan experienced.
youtube.com/view_play_list?p=C9A41FCF41056879
Moreover the timing of what has happened is completely different. "Japan's Mess" really was an avoidance for over a decade of what is going on right now in the United States. Japanese banks refused to acknowledge that much of the collateral their loans were based on were in effect worthless. You had a "bad loans crisis" which stalked the banking sector for much of the decade. Only in 1997 was preliminary steps taken by the Ministry of Finance, and It still took another five years for it to correct itself. Only in the Japanese economy could such a state of affairs exist.
The United States is the complete opposite. The loans crisis is exactly what the painful situation the Japanese tried to avoid for so long. Banks and other companies have immediately sought to write down the bad loans and move themselves back into a firmer financial position.
Finally there is significant difference in other areas of the economy. For much of the 1990s, consumer spending fell flat in Japan, and deflation was the major worry. Interest rates were at near zero to encourage spending, while the high Yen preventing a major increase in exports. Today the US economy is facing stagflation, like in the 1970s, due to high commodities prices. Unlike Japan however, it has a low dollar, which allows it to increase exports (which has been occurring but has been overshadowed by high oil prices, which has offset much of these gains.)
So they aren't the same at all.
U.S. house prices overvalued by up to 20 percent: IMF paper
The downward spiral of U.S. housing prices still has a way to go and homes were overvalued by between 8 percent to 20 percent in the first quarter of this year, according to research by an International Monetary Fund economist published on Friday.
In his report "What goes up must come down? House price dynamics in the United States," IMF economist Vladimir Klyuev used several economic techniques to determine by how much U.S. home prices are overvalued.
Klyuev drew from a government study of single-family home prices to conclude that values were "around 14 percent above equilibrium in the first quarter of 2008, with a plausible range of 8 to 20 percent."
His research showed that home prices became considerably overvalued from 2001 and while the housing market has started to correct itself, there is still a long way to go.
U.S. policy-makers are now trying to guide the housing market into a soft-landing after a five-year run-up in home values that ended in 2006.
http://www.reuters.com/article/newsOne/idUSN2542244220080726
This means that US house price crash will not stop soon, but continue, and no sign of recovery about subprime loan mess. US economy falls into the same rut as Japan.
GOOD Luck.
Consumers account for 3/4 of US economy.China now holds over 1 trillion " I owe you " in USA funds for manufactured goods exported to US.
If you're still looking for the cause of the stock market's decline, consider the real estate market. From its peak in June 2006, to June 2008, two years later, the S&P/Case-Shiller Home Price Index shows that the median price of a house has dropped from about $226,000 to about $180,000. That's roughly a 20% loss in nominal value. But that does not take into account inflation, which has run at about 11% on average over that period in real percentage terms, as opposed to official percentage terms which we all know are totally bogus. So that means, in terms of 2006 purchasing power, that $180,000 can only purchase what $143,000 could purchase in 2006, and the total loss in real estate purchasing power value, ala 2006 dollars, has been almost 37%! You don't hear that from the fane-stream media!
Since the total value of the real estate market in 2006, based on Fed figures, was $19.8 trillion, we have a total loss of real estate purchasing power over two years of roughly seven and a quarter trillion dollars, or if you prefer, $7,250,000,000,000!
That's over half of our freaking GDP as estimated for our current fiscal year!!! And, we are only halfway to the bottom of this crisis.
The resets on the mortgage market for subprime mortgages will persist until the end of next June. Resets on ALT-A loans will carry on for two more years and Option ARM "pick and pay loans" will affect the market for the next 3-1/2 years. Late payments and defaults on the latter are already running as high as 24%. The potential average payment increase on resets was 63%. In cash terms this amounted to a loan average of $1,053 extra due each month. The payment shock, declining home prices and restricted ability of mortgage credit leaves most Option ARM borrowers unwilling to continue paying their mortgage.
The ARM market has had the highest proportion of borrowers with limited proof of income at more than 80% of loans. This has increased the likelihood of default. This, needless to say, increases the likelihood of default. This was due to so-called NINJA loans (No Income, No Job, No Assets) as all that was needed was a decent credit score and no proof of income an/or job. Hard to believe, but it is true as the giovernment did not want to let on that a recession was in place. Therefore, these loans were given to give the false impression that the US economy was strong and robust. Not the chickens have come home to roost!
There are more than $200 billion outstanding Option ARMfs that will not have to be reset until after 2010, and is the bulk of the problem. Many are facing a limit on negative amortization, typically between 110% and 125% of the original loan amount.
And, from the Mortgage Bankers Association:
"Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates (http://www.bloomberg.com/apps/quote?ticker=NMCMFUS%3AIND) increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.
"New foreclosures (http://www.bloomberg.com/apps/quote?ticker=FORLTOST%3AIND) increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory (http://www.bloomberg.com/apps/quote?ticker=FORLTOTL%3AIND) of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue (http://www.bloomberg.com/apps/quote?ticker=DLQTDLQT%3AIND) rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.
"Tumbling home prices are making it difficult for even the most creditworthy owners with adjustable-rate mortgages (http://www.bloomberg.com/apps/quote?ticker=NMCMAUS%3AIND) to sell or get a new loan as their financing costs rise, said Jay Brinkmann (http://search.bloomberg.com/search?q=Jay+Brinkmann&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), MBA's chief economist. Prime ARMs accounted for 23 percent of new foreclosures and subprime (http://www.bloomberg.com/apps/quote?ticker=FORLSUBP%3AIND) ARMs were 36 percent, he said.
"``People chose the lowest payment option to get into some of the very expensive housing markets and now that prices are coming way down, they can't sell and they can't afford the higher payments,'' Brinkmann said in an interview."
Nine percent of homeowners with a mortgage were either behind on their payments or in foreclosure at the end of June.
The percentage of loans at least 30 days past due or in foreclosure was up from 8.1% in the 1st quarter.
New foreclosures were concentrated in eight states: Florida, Nevada, California, Arizona, Michigan, Rhode Island, Indiana and Ohio.
Delinquencies on subprime ARMs declined and will do so until next July. More than 20% of subprime ARMs are still in default. That is off 1% from the first quarter.
More than 10% of prime ARMs are delinquent or in foreclosure, that portion, 11.3%, was up from 9.7% in the first quarter and is expected to continue to rise as more homeowners see their monthly payments spike.
Sorry, but I believe the US will be in a far worse situation than Japan faced and forced me to leave. With no savings and many walking away from their mortgages and obligations, the US economy will suffer greatly.
This is just the beginning of the end.
This country will tough it out :relief:
This may mean you will end-up having an emirati or chinese boss.
However, as the Chinese saying goes, "Crisis means trouble and opportunities."
Yen has gained almost 2 yen and the Euro near it's record high of 1.60/$. Gold and silver soaring!
I think that today, 711, could be Wall Streets 911. Still too early to tell though.
Does anyone actually believe the US will come out of this unscathed and the US economy and US$ not torn to shreds? Although it may be too early yet this year, I still think we will hear talk of a new currency and union to save the USA.
But it's interesting that Bank of America is buying Merrill. Since Merril and Mizuho are working together in Japan, does this mean that BOA & Mizuho are partners? Didn't Mizuho just invest a couple of billion $ in Merrill this year? How will this play out?
How will this affect the global economy, which is already heading into a recession? Not a soft landing, at all.
Is time to try a new economic model, one not based on greed and desire?
How about Buddhist Economics? See this article http://www.thehindubusinessline.com/2008/09/15/stories/2008091551160800.htm
But if the U.S. economy tanks and the U.S.$ goes down the toilet, I have dibs on Google, Apple, and the NY Mets. :p
Bernanke .... he studied a lot of Japan's lost decade, but so far US economy is likely to follow J-path exactly.... It is the time for USA to implment what it learned from Japan, not just learning ! Otherwise, Japan and rest of the world will be affected again !
Or Shall we despatch Mr Heizo Takenaka to undertake it? :relief:
The 1982-84 financial crises of Latin America caused substantial losses and write-offs for major multi-national banks ( mainly US finanacial institutions ) and the closure of several smaller banks primarily involved in international loan syndications.The impact was so severe that many of these major banks stopped lending to developing countries until the early1990’s - a period of almost 10 years.
I think this can be a parallel to present time America's sub-prime mess.
As my folks recall back then,Bank of America ( ticker: BAC ) stock fell to historic low of $10.00/share.And,a Saudi Prince purchased 35% stock ownership of Citicorp ( ticker: C ,now trades at multi-year LOW of $16 ) on the cheap.
************************************************** *********
By MADLEN READ, AP Business Writer
Wed Jul 9, 6:18 PM ET
NEW YORK - Wall Street tumbled Wednesday as investors grappled with renewed worries about the soundness of the financial sector. The major indexes fell more than 2 percent, including the Dow Jones industrial average, which lost more than 230 points.
While many financial services companies logged steep declines during the session, government-sponsored lenders Freddie Mac and Fannie Mae were among those hardest hit. Investors are worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump.
Source: http://news.yahoo.com/s/ap/20080709/ap_on_bi_st_ma_re/wall_street;_ylt=AiF1dpyi6E6kJ2j1CzLsj_Zu24cA
Economics 101,recession comes and goes.I wouldn't sell America short.
The ' housing bubble " gradually unravels into a full-blown financial crisis in America.
Freddie & Fannie shares plummet premarket
Friday July 11, 8:05 am ET
NEW YORK (AP) -- Shares of Freddie Mac dropped 35 percent and shares of Fannie Mae tumbled 27 percent in premarket trading Friday as Wall Street continued to worry about the health of the mortgage companies and the potential for a government takeover.
Source: http://biz.yahoo.com/ap/080711/fannie_mae_freddie_mac.html
Government mulls Fannie Mae, Freddie Mac takeover: report
Fri Jul 11, 2008 8:02am EDT
HONG KONG (Reuters) - The U.S. government is considering taking over Fannie Mae and Freddie Mac if their funding problems worsen, the New York Times said on Friday, causing shares of the mortgage finance companies to plunge.
Fannie and Freddie are government-sponsored entities generally viewed as having the implicit backing of Washington, and considered the last bastions of support for a U.S. housing market in its worst downturn since the Great Depression.
Source: http://www.reuters.com/article/hotStocksNews/idUSN1018418020080711
U.S. Stocks Fall Most Since 9/11 as Lehman, AIG Stoke Global Credit Crisis (http://www.bloomberg.com/apps/news?pid=20601103&sid=adqUm6TXLRZk&refer=news)
Goldman, JPMorgan Are Seeking to Arrange $75 Billion in Financing for AIG (http://www.bloomberg.com/apps/news?pid=20601103&sid=a8IBBQJiLJag&refer=news)
Lehman Files for Record Bankruptcy, Victim of Meltdown Firm Helped Create (http://www.bloomberg.com/apps/news?pid=20601103&sid=aJbuy7XDg1Is&refer=news) and this is not good because many banks have alot of exposure in Lehman. Therefore, expect more than a handful of banks to fail within the coming months.
Bank of America Agrees to Buy Merrill for $50 Billion After Shares Plunge (http://www.bloomberg.com/apps/news?pid=20601103&sid=aqX1Pi9vkUbA&refer=news)
Today, the face of Wall Street has been changed forever. And this is just the beginning of the bloodshed as it will get much worse before it all settles down in a year or so. It will be a very rocky road in the months ahead. Things will seem to calm down a bit as we are heading for a presidential election, but
1. First National Bank of Nevada, Reno, NV
2. First Heritage Bank, N.A., Newport Beach, CA
making total number of failed banks to SEVEN with regard to sub-prime related failure of US financial institutions. US economy has continued to take the same path as the Japanese bubble burst.
The situation is exactly the same as I was in Japan when it occurred and I left because of the high housing prices. The only difference is that Japan was able to survive because it is a creditor nation and the Japanese people are savers. America, on the other hand is a debtor nation who has exported their inflation these many years by "forcing" other countries to buy up their T-Bills, and the nation, as a whole has a negative saving rate and is severely in debt to the tyune of $9 trillion dollars! ($9,000,000,000,000) That amount can never be repaid.
The "designed" housing bubble has collapsed and the next shoe to drop will be the credit card and debt bubble which I do not believe the nation can survive.
If one looks back, the Japanese stock market was hovering around 44,000 and homes were out of reach of the average Japanese. Today, almost 20 years later, housing prices still have not even come close to their 1989 peak and the market has also never fully recovered and is still less than half of what it was 20 years ago. I fear the same will hold true for the US only it will be much, much worse as 85% of our manufacturing has been off-shored and the US depends on foreign nations for their very survival. Watch the dollar as it will continue to nose dive and the stock market will fall below 10,000 and even lower.
Huh .. characteristics of economic crisis may look similiar but USA is a heavy weight technological front-runner 900-lb gorilla has political clout and military muscle globally.In other words,America has more " cards in the deck " for any kind of financial manuveuring to put its economy back on track.
Economics 101,recession comes and goes.I wouldn't sell America short.
True, but there will be no "financial manuvering" as it is a designed crash and fall from grace. The economy will not be put on track for many years to come.
How did this turn into a discussion of Nuclear War. We were talking just the economy.
Their is a famous American saying;
- -> We have met the enemy and he is us.
We are living in the most reckless financial environment in recent history. Arcane credit derivative bets are now well into the tens of trillions. According to Charles R. Morris, the astronomical leverage at investment banks and their hedge fund and private equity clients virtually guarantees massive disruption in global markets. The crash, when it comes, will have no firebreaks. A quarter century of free-market zealotry that extolled asset stripping, abusive lending, and hedge fund secrecy will come crashing down with it. http://www.amazon.com/exec/obidos/ASIN/1586485636/ref=nosim/accessuporg-20
Americans spent money "more than you can chew". There are more than enough US dollar currency in the global market. And Thus, the value continues to drop. I suggest Americans to follow Japanese life style:
1. Develop public transportation system like Shinkansen instead of automobile only.
2. Seek cheaper grain-based dietary life instead of big portion of beef.
3. Sleep in a smaller bed or Tatami instead of King size bed, and then you don't need big sized house.
4. Abandon American Express credit card, but instead cash only. Then you can become more cost-conscious.
:p
Either way, don't be too pessimistic. Pachipro. Life is long. Nobody will be killed by banks even though they fail to repay the morgage.
http://www.nytimes.com/2008/09/08/opinion/08krugman.html?_r=2&hp&oref=slogin&oref=slogin
Wefve come a long way from the days when Alan Greenspan declared a national housing bubble gmost unlikely.h There was indeed a bubble, and since it popped two years ago home prices have fallen faster than they did during the Great Depression.
Falling home prices, in turn, have led to the much-feared phenomenon of gdebt deflation.h Yes, deflation: prices are going up at the checkout counter, but the prices of assets, which are what matter for balance sheets, are dropping fast.
Fannie and Freddie had to be rescued — otherwise debt deflation would have gotten much worse. Indeed, their financial troubles have already caused problems for would-be home buyers: mortgage rates are up sharply since earlier this year. With the federal takeover, which removes the pressure on the lendersf balance sheets, we should see mortgage rates drop again — which is definitely good news.
The current U.S. financial crisis bears a strong resemblance to the crisis that hit Japan at the end of the 1980s, and led to a decade-long slump that worried many American economists, including both Mr. Bernanke and yours truly. We wondered whether the same thing could take place here — and economists at the Fed devised strategies that were supposed to prevent that from happening. Above all, the response to a Japan-type financial crisis was supposed to involve a very aggressive combination of interest-rate cuts and fiscal stimulus, designed to prevent the crisis from spilling over into a major slump in the real economy.
When the current crisis hit, Mr. Bernanke was indeed very aggressive about cutting interest rates and pushing funds into the private sector. But despite his cuts, credit became tighter, not easier. And the fiscal stimulus was both too small and poorly targeted, largely because the Bush administration refused to consider any measure that couldnft be labeled a tax cut.
As a result, as I suggested, the effort to contain the financial crisis seems to be failing. Asset prices are still falling, losses are still mounting, and the unemployment rate has just hit a five-year high. With each passing month, America is looking more and more Japanese.
So.... we are still friend, arn't we? :wave:
Good understanding.
But Key is "continuously declining house price". When house price continues to fall, the bad loan will continue to increase. I remember that US economists urged Japan to dispose bad loan asap, but the reality was that bad loan appreared one after another as house price continued to fall.
So, unless US house price stop to fall or begin to go up again, US subprime mess become bigger & bigger. That's it. And unless many US citizens begin to purchase house on cash now, US house price fall never stop.....
This means that US economy take the same path as Japanese financial crisis. There is no instant magic in the financial business.
Hollywood .... :relief:
* " There is no business like show business " starred Marilyn Monroe
http://www.youtube.com/watch?v=d1KQAHPsAdY&feature=related
Thursday July 10, 8:58 am ET
(Reuters) - Mortgage lenders Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg.
http://biz.yahoo.com/rb/080710/fanniemae_freediemac_poole.html
IT and the housing industry are the service-producing industries.
They are not industries that make value.
The United States lost by burst of the economic bubble of the service-producing industry.
It compensates in the capital from another country to bury the loss or value (wealth) is only voluntarily created.
Attractive industry that can introduce the capital from another country is not found in the United States any longer.
The United States should switch to the economic policy of the own creation of value, that is, "making things" emphasis.
can USA make things,machine and manufacture ?.....
I think USA depends on this matter
I think it was natural to adjust for long time
1949(nikkei started) and top of nikkei 225 was 1990.
Japan spent 39years to top. and adjustmen was 15 years.
54 years is very long term of business cycle
it seems normal adjustment or correction waves againt impulse wave
Nikolai D. Kondratiev
http://en.wikipedia.org/wiki/Nikolai_Kondratiev
54 year cycle...
http://cepa.newschool.edu/~het/schools/business.htm
If economic growth is rapid, the adjustment is also rapid.
the ajustment is also time included
japan spended 15 years ajustment.
The revival of the Japanese economy started in 1949(nikkei index) started again) at the bottom.
that is,japan spended one cycle as bottom to bottom for 54 yeasr
Everyone was convinced of the end of one cycle in 2003. (54years)
it means japan started the begining of new 54years cycle.
I dont khow when the top comes...
1929 The world great depression
and bottom was 193?.....
1987 black monday....
1886( the japanese diet was found) japanese economy was bottomed after civil war.
maybe at age of Taisho democracy was the TOP
then 1941~1945 was at the bottom
funny how they say the Fed and US government has to bail them out, when actually what they really mean is the US taxpayer has to bail out fannie, freddy, bear, the US government, AND themselves out! while repaying their debt to fannie, feeding their families, and working an $9 dollar an hour job!
Ain't going to happen. These people are tapped out.
The US government secures the 9 trillion US dollars they owe internationally, with what, or how, THAT is the question everyone is starting to ask here.
What do they have up as collateral? Our property?
When you stop trading product for product, and start trading product for unbacked, unsecured paper...something bad is going to happen.
Will Japan save and help the US through this crisis, as the US helped it?
I have the impression that American companies are in better shape than Japanese ones were during the bubble. However, American households and the government are probably in worst shape. I am not sure what the result will be.
Then, the question is how the politicians in the west will react. Basically, you can either feel the pain now, or try to "protect" your economy (by keeping bad companies alive, protectionism...). In that case, you escape a short term shock and replace it with a decade long agony. Not all the noise we heard during the American presidential campaign is economically sound.
On a different note, with China and India rising, and Europe organizing itself better, America will be less and less the "city on the hill" and more and more a major economic player amongst others, competing for talent, natural ressources...
雨過天晴 ( every cloud has a silver lining ) :relief:
- there are a few major countries with nuclear bomb that could retaliate to an American attack on themselves or their allies (certainly at least Russia, China and France have the capability)
- even if the US would probably win many conventional wars with its high-tech weapons, there would be a quite efficient counter-strategy to let them enter one country, and then use guerilla techniques against them;
- I am not sure the American population would be ready for the sacrifices of war (extremely expensive petrol, numerous human losses (not 1000s but 100.000s)).
it might be a just Prelude
however, USA has ultimate means. that is to make a WAR
Yes, you are right because US market provides us with more yields than other markets. But if US market is not profitable, the money will not head for USA. Because US current account remains chronicle deficit, US financial market will fall into credit crunch as the money flow to the USA will stop.
And such situation is now happening..... It is likely that USA cannot continue to print Dollar Note anymore as people don't trust US economy anymore. So American's choice is now being limited.
Considering the latest development of credit crunch across the world, it is likely that my commnet was wrong ... and the fact is worse than Japan's nightmare.
Chairman of HSBC (also Chairman of British Bankers' Association) says .... "Banks need to return to more basic business plans as the model based on the excessive leverage of recent years is "bankrupt".
"The huge build up of leverage in the system over the last five years where profit depended on high and ever increasing leverage, that model is gone, and that model is gone because it is bankrupt" Green said at a British Bankers' Association conference. "This isn't just the end of a bubble, it's the end of the business model," he added.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSL1014625020080610
He understands that Anglo-American-led global capitalism has fallen.
Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said – at least US$1 trillion and more likely US$2 trillion.
The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their subprime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported.
http://www.stuff.co.nz/4642707a6026.html
As I said, until house price recovery, US subprime mess will not stop as new bad loans come up one after another.... It is not a question of "prompt compliance" or not, but a question of when house price decline will stop to fall. Probably nobody know. Until early August 2008, US economy follows exactly the same path Japan took, I think.
Like OLD EUROPE, these OLD economic powers are fading.
The only credible european nation that can stand up by itself is Germany.
None of the other European countries can stand alone as a top five economic power in the world!!!
The current top three are US, Japan and China (no European country). Very soon, India, Brazil, Russia will creep up the world economy rankings and Europe will soon even lose its representative in the top 5, or even be represented by Russia.
I come from Asia and am happy that Asia will soon boast of two or even three countries in the top five economies of the world. Future generations, please study English, Chinese, Spanish (or Portuguese), Hindi and Japanese. Forget German and French and do not waste time with Italian, those economies will no longer feature in the top five. Adios
The US's public debt is 65% of GDP. Sizable to be sure, but not much different than most countries. The economy itself is just much larger.
Japan, on the other hand, has one of the biggest public debt's of any industrialized country in the world, hovering at around 176% of GDP.
Perception is a bit different from reality here.
I think US subprime mess has nothing to do with US goverment debt.
US house price crash => US subprime mess => US & world credit crunch => failure of financial institutions => failure of ordinary business => more unemployment => sluggish economy ......:blush:
I fear the same will hold true for the US only it will be much, much worse as 85% of our manufacturing has been off-shored and the US depends on foreign nations for their very survival. Watch the dollar as it will continue to nose dive and the stock market will fall below 10,000 and even lower.
Jul.11 8:14 AM ET
Dow 9,500 and Waiting for Capitulation
Posted By:Allen Wastler
Topics:Stock Market
It came from Ben Lichtenstein, president of TradersAudio.com, on "Squawk Box" this morning. I listen to it on my satellite radio as I drive in. He suggested if the Dow trips through 11,000 or lower, then 9,500 is possibility too.
But I think in the near future we definitely will. And how those hold up is really going to determine what we see at the lower levels, about 10,000 (or) 10,500 right now. If those give way look out, we're talking about 9,500. And I know people really kind of laugh at that number when I throw it out there, but it's realistic."
Source: http://www.cnbc.com/id/25634971
European recession looms as Spain crumbles.
The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/15/ccspain115.xml&CMP=ILC-mostviewedbox
Japan is always sluggish. So recession is not novelty to us.
Don't worry. You can get used to it soon.
The US's public debt is 65% of GDP. Sizable to be sure, but not much different than most countries. The economy itself is just much larger.
Japan, on the other hand, has one of the biggest public debt's of any industrialized country in the world, hovering at around 176% of GDP.
Perception is a bit different from reality here.
But it's interesting that Bank of America is buying Merrill. Since Merril and Mizuho are working together in Japan, does this mean that BOA & Mizuho are partners? Didn't Mizuho just invest a couple of billion $ in Merrill this year? How will this play out?
How will this affect the global economy, which is already heading into a recession? Not a soft landing, at all.
Is time to try a new economic model, one not based on greed and desire?
How about Buddhist Economics? See this article http://www.thehindubusinessline.com/2008/09/15/stories/2008091551160800.htm
But if the U.S. economy tanks and the U.S.$ goes down the toilet, I have dibs on Google, Apple, and the NY Mets. :p
Things will get worse, much worse.
Fannie, Freddie Downgraded by Derivatives Traders on Concerns Over Capital (http://www.bloomberg.com/apps/news?pid=20601087&sid=aH32O9bJZSlw&refer=home)
New York's Chrysler Building Is Sold to Abu Dhabi's Sovereign Wealth Fund (http://www.bloomberg.com/apps/news?pid=20601087&sid=aACZuFPo8cf8&refer=home)
Progressive Advances as Record Gasoline Curbs Driving, Accidents, in U.S. (http://www.bloomberg.com/apps/news?pid=20601087&sid=a6Dr_8OS5cfQ&refer=home)
Hedge Funds Fell 0.75%, Worst First-Half Performance (http://www.bloomberg.com/apps/news?pid=20601110&sid=aK0fb78QwWvc)
GM Europe June Sales Drop 5.5%, Led by Opel, Vauxhall (http://www.bloomberg.com/apps/news?pid=20601110&sid=arnTU7pupqJU)
Crisis wipes $1 trillion from financial stocks
Monday July 7, 4:57 pm ET
By Joe Bel Bruno, AP Business Writer
Concerns about credit, housing wipe $1.3 trillion from S&P 500's financial companies in 2008
NEW YORK -- U.S. financial companies have lost more than $1 trillion in value this year, and yet another decline on Monday shows concerns aren't going away soon.
Source: http://biz.yahoo.com/ap/080707/financial_losses.html
IF you believe USA or any other country helped Japan when it when Japan faced serious credit crunch, please let us know the case. Japan solved the problem by itself.
Contrary, when Japan was troubled, USA told that Japanese capitalism is far behind USA, Japanese banking sector should be more transparent, and do not postpone dealing with bad-loan problem.
SO.... What USA should do is What USA told us before. Don't rely on Japan.
1. Develop public transportation system like Shinkansen instead of automobile only.
2. Seek cheaper grain-based dietary life instead of big portion of beef.
3. Sleep in a smaller bed or Tatami instead of King size bed, and then you don't need big sized house.
4. Abandon American Express credit card, but instead cash only. Then you can become more cost-conscious.
:p
Most Americans are too individualistic to sacrifice for the greater good. Its how they're raised culturally. They would see it as not worth the tiny little sacrifices like Big Macs and Hummers to fix their economy.
1) I ride the public bus everywhere and don't plan on owning a car unless I absolutely need it for a job.
2) I eat rice, potatoes, and pasta mostly :]
3) I have a futon in my room which folds up for easy storage. I think Americans are selfish and their houses should be smaller, but Japanese houses should be bigger if there is a family living there. But I understand Japan has a lot less space.
4) I spend cash easier, actually. I think a lot of Americans do, just depends on the person. But, tons of Americans are not cost concious at all and rack up huge bills with credit cards.
http://www.reuters.com/resources/r/?m=02&d=20080914&t=2&i=5986899&w=192&r=2008-09-14T223014Z_01_N14392505_RTRUKOP_0_PICTURE0
As Lehman Brothers Holdings stared failure in the face on Sunday, anxiety intensified about the health of several other big U.S. financial institutions.
Merrill is in merger talks with Bank of America, the Wall Street Journal said on Sunday, citing people familiar with the matter.
Nouriel Roubini, a New York University economics professor who predicted the U.S. housing crisis, said the government lacks the wherewithal to step in every time a big financial firm fails. "I don't see any simple solution to this mess," he said.
One after another failure ..... The second stage of US subprime mess has just begun, I think. And I am experiencing Déjà vu in viewing this.
it might be a just Prelude
however, USA has ultimate means. that is to make a WAR
The only "nightmare" I saw was that Japan further came under the thumb of the international bankers/corporations and allowed their currency to become the carry trade currency that the world has used and profited by to this very day. They also allowed the postal savings system to become public, thereby eroding the security of that private system and putting it into the hands of international corporations. In other words, the savings of the Japanese people, via the postal system, became the property of international bankers to use a they wish and which the Japanese people could lose all or part of it.
It saddens me that Japan has become such a puppet of the international corporations and financial institutions in that, like the slaves of the past in the US, when they say, "Jump!", Japan says, "How high masser?"
But then again, Japan is under the false, naive assumption that when it comes time for the Asian Union to be formed and implimented, they wrongly believe that they will be at the head of it when, in reality, it will be China who will be in charge. For this naivety, Japan will pay dearly.
If you find this hard to believe, the former governer of the Bank of Japan was a former executive of Goldman-Sachs, Japan. Henry Paulson, the head of the Treasury Dept of the US was a former Goldman-Sachs CEO as was the former heads of the Bank of England and the European Central Bank.
Anyone see a thread here? Do a little research and the truth will set you free!
There is a deep adjustment of it if there is rapid growth.
In short, no there are few parallels. As the head of the US Federal bank in Dallas noted (http://www.ft.com/cms/s/0/484d1786-043a-11dd-b28b-000077b07658.html)(who was in Japan in the early 90s) the US and Japanese economies are far far different. He noted the U.S. economy is far more flexible than the Japanese economy was, which he called command oriented. Growth was largely directed by large industries, where consumer growth in the United States is the main driver of the economy. A critical difference is that the United States also maintains robust population growth, which gives it a foundation for future economic prosperity.
The United States Government has moved quickly to deal with the crisis, unlike Japan. IT took twelve years for the Japanese government to effectively address the banking sector. On average one major bank failed a year between 1990 and 2002. While one major bank has failed in the United States, and one or two more are tottering, that seems to be the extent of it.
Finally, the scale is far far different. Since the start of the subprime crisis, property values have dropped 10~15%. (http://www.ft.com/cms/s/0/37b6315a-2087-11dd-80b4-000077b07658.html)Yet Japanese property dropped almost 2/3rds of its original value from 1990. That was a real property bubble, which the United States is not really experiencing.
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