rostenko on the housing market - and more

  1. dub
    30,737 Posts.
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    ......The Fed’s “solution”, which is in fact a recipe for long-term disaster, (as are ALL solutions created by the same dingbats who create the problems that eventually need solutions) is to keep propping up assets and imbue the consumer with the illusion of increasing wealth. Stephen Roach of Morgan Stanley calls us “asset-dependent American consumers.”

    And that’s precisely what we are. Saving is at an all-time low. Debt is at an all-time high. The only thing keeping this gig afloat is asset inflation. Artificially-induced increases in home values and a liquidity-driven stock market: the inevitable result of artificially low interest rates, not genuine increases in value.

    The Fed’s strategy is to engage in “serial bubble blowing”, pushing up asset class after asset class in hopes that the consumer will feel rich enough to BORROW more and thereby spend more. Spend more money he doesn’t have, that is.

    Look at the psychology out there, folks. The typical American homeowner truly believes that when his home is appraised at a higher value and he’s able to borrow against it, that he is somehow wealthier! The fact that he has to start paying back those borrowings beginning ONE MONTH LATER, and that he will continue paying them back for 15-30 years, escapes him. It escapes him that by the time he’s paid back his borrowings, he will have spent 2-1/2 to 3 times as much as he borrowed initially.

    This is wealth? I don’t think so. If it’s YOUR wealth, how come you’re PAYING interest on it? Duuuuuuuh.

    Sure, if you sell your house at the higher price you have in fact increased your wealth. But unless you plan to live on the street, YOU’LL HAVE TO BUY ANOTHER HOUSE, ONE THAT HAS ALSO INFLATED IN PRICE. Newsflash: You don’t get to sell at 2005 prices and buy back at 1995 prices! Where’s your “increased wealth” now? In the hands of your mortgage banker, that’s where.

    IT’S NOT WEALTH, FOLKS! IT’S INFLATION. It’s the polar opposite of wealth. It is the very stuff that corrodes, sullies and diminishes wealth but somehow the average American has been led to believe that the two are one and the same.
    (By a brilliant and obviously effective long-term program of brainwashing by the Fed, the same folks who brought you the idea that unbacked pieces of colored paper are “money”.) ....


    This is an axtract from Rostenko's latest "The New Asset Dependent Economy" which can be read at http://www.financialsense.com/editorials/rostenko/2005/0131.html .

    bye.dub
 
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