Deflation! Us & Europe 2006 Ending 2009!

[Jim 50]

That's my long-term call!  .....  made today, June 22nd, 2005 !

For further understanding of the effects of a deflationary crisis refer to historical evidence relating to the 1929 stock market crash and the deflationary period that occurred thereafter.

No technical analysis for this subject, just obsevations about the structural defects of the World Economy -- so all can participate.

I think I'm the only fella here at TV who has mentioned Deflation is a few posts in the recent past but don't believe that a single other poy-son has even responded --neither have they raised the issue.

Easy Al and rest of the gang and the followers are too busy worrying about Inflation and/or Disinflation.

At least one of the requirements for Deflation is currently RIPE -- and that is?

Nobody (almost) is expecting it !   

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

<{POST_SNAPBACK}>

Look for increasing inflation as the effects of commodity shortages drive up prices. China will be a lead indicatior.

No deflation this decade, none even thinkable.

Check back next decade.

[beammeup]

Harmonica,

Thanks for your insight. I've got a few bob Offshore collecting 5% interest but sounds like you guys are having way more fun. Can a guy trade offshore from Thailand? or do you need to open an account with a broker, bring your money into the country and pay the local income tax on any profits? I live here (10 years) but am a non-resident so I dont want to open a can of worms.

Would commodities be a safer place if this crash happens?

[Harmonica]

Harmonica,

Thanks for your insight. I've got a few bob Offshore collecting 5% interest but sounds like you guys are having way more fun. Can a guy trade offshore from Thailand? or do you need to open an account with a broker, bring your money into the country and pay the local income tax on any profits? I live here (10 years) but am a non-resident so I dont want to open a can of worms.

Would commodities be a safer place if this crash happens?

You're welcome!

Commodities would be the last place you'd want to be if such a scenario plays out. Ditto for property.

Trade offshore? Yes, you can; your funds don't enter Thailand so it is not their concern. Open an account stateside, or in England or Australia.

CMS in England is good; in America there are 100s -- stay away from RefcoFX, FXCM and ACM.

[chownah]

I'm aware of the economic dislocation that happened in Thailand in 1998 and I'm aware that some prices for some real estate dropped by 80% and I'm aware that many banks still have lots of non performing loans that originated in that period. The drop in the property market in and of itself does not make a deflating economy...it takes price drops across the economy, not in one sector alone...you have not shown evidence of deflation in that period...I don't think there was any...do you have any data showing a drop in prices across the economy...I don't think so......

And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

[Harmonica]

I'm aware of the economic dislocation that happened in Thailand in 1998 and I'm aware that some prices for some real estate dropped by 80% and I'm aware that many banks still have lots of non performing loans that originated in that period.  The drop in the property market in and of itself does not make a deflating economy...it takes price drops across the economy, not in one sector alone...you have not shown evidence of deflation in that period...I don't think there was any...do you have any data showing a drop in prices across the economy...I don't think so......

And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

Revisit post #85 on page 6.

The was NO Deflationary period in Thailand in 1998. My call is for the future, not the past. Were it for the past and it came true, I would be living on another planet and probably have it for myself entirely!

[expatinasia]

The rate of inflation in the US is at a 15-year high. So, your prediction of deflation is humorously wrong.

[chownah]

I'm aware of the economic dislocation that happened in Thailand in 1998 and I'm aware that some prices for some real estate dropped by 80% and I'm aware that many banks still have lots of non performing loans that originated in that period.  The drop in the property market in and of itself does not make a deflating economy...it takes price drops across the economy, not in one sector alone...you have not shown evidence of deflation in that period...I don't think there was any...do you have any data showing a drop in prices across the economy...I don't think so......

And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

<{POST_SNAPBACK}>

Revisit post #85 on page 6.

The was NO Deflationary period in Thailand in 1998. My call is for the future, not the past. Were it for the past and it came true, I would be living on another planet and probably have it for myself entirely!

<{POST_SNAPBACK}>

Thanks for your reply. And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

This is about the third or fourth time I've asked this and for some reason you haven't verified that this is your prediction. I got this prediction from a post you made awhile back but it seems incorrect to me so I'm asking to verify if this is correct.

Also, no offense but it seems like I alway have to ask you at least two or three times before you will give me a direct answer to my questions. Have you noticed this? Do you know why? or is it just my imagination?

[Harmonica]

The rate of inflation in the US is at a 15-year high.  So, your prediction of deflation is humorously wrong.

Same place, different day, another Idiot. Heck, I'm used to it by now.

A 15-yr high?

Take out the housing bubble from the graph and clearly visible is lower lows since 1976

[cclub75]

Also, no offense but it seems like I alway have to ask you at least two or three times before you will give me a direct answer to my questions.  Have you noticed this?  Do you know why? or is it just my imagination?

<{POST_SNAPBACK}>

I agree. Harmonica has definitly its own style. Special : technical and a bit lyrical, mixed.

It is sometimes difficult to follow him. But, interesting.

Come on Harmonica, like Mister Cadburry, make it longer and easier to read.

[Harmonica]

I'm aware of the economic dislocation that happened in Thailand in 1998 and I'm aware that some prices for some real estate dropped by 80% and I'm aware that many banks still have lots of non performing loans that originated in that period.  The drop in the property market in and of itself does not make a deflating economy...it takes price drops across the economy, not in one sector alone...you have not shown evidence of deflation in that period...I don't think there was any...do you have any data showing a drop in prices across the economy...I don't think so......

And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

Revisit post #85 on page 6.

The was NO Deflationary period in Thailand in 1998. My call is for the future, not the past. Were it for the past and it came true, I would be living on another planet and probably have it for myself entirely!

Thanks for your reply. And, I want to be sure I understand your prediction. You are predicting a stateside-originated-Deflation tidalwave and the result will be that the US dollar will rise in value with all/most currencies and specifically against the baht.....is this correct? I guess also you are predicting that prices of consumer goods will also drop across the board....this is a necessary part of deflation, right?

This is about the third or fourth time I've asked this and for some reason you haven't verified that this is your prediction. I got this prediction from a post you made awhile back but it seems incorrect to me so I'm asking to verify if this is correct.

Also, no offense but it seems like I alway have to ask you at least two or three times before you will give me a direct answer to my questions. Have you noticed this? Do you know why? or is it just my imagination?

No offense here either, but it does appear you're too lazy to read. Even here, in the paras above, you're asking me for definition-type clarifications on DEFLATION, when there are substantial clarifications & definitions right at the start of the thread.

I don't have a problem with taking the time to explain something to anybody, but one's got to read the thread in its entirety first; that is "thread etiquette" -- I would do the same for you, had you started one that I was interested in participating.

Revisit post #85, where your theme question is answered by inference!

No hard feelings

The remaining answers to your questions (in bold) are Yes, yes, yes & yes.

[Harmonica]

Also, no offense but it seems like I alway have to ask you at least two or three times before you will give me a direct answer to my questions.  Have you noticed this?  Do you know why? or is it just my imagination?

I agree. Harmonica has definitly its own style. Special : technical and a bit lyrical, mixed.

It is sometimes difficult to follow him. But, interesting.

Come on Harmonica, like Mister Cadburry, make it longer and easier to read.

OK, I know the subject is a difficult one, but the real test of whether one understands it well, is when one has to explain it to another in terms that the recipient can EASILY understand.

I shall try the Cadbury approach, then.

[Harmonica]

For Chownah:

"The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain – in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans – that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed, and creditors refuse to underwrite the interest payments with more credit."

I've brought this up because in my previous response I stated in bold letters that Thailand experienced NO deflation. That is only partially correct. It is fully correct in that you will not get a single Thai to agree with that premise -- and possibly no farang here might agree either.

But to me, there were definitely deflationary signs during the debacle and that is why I stated that 1998 was a WARNING.

The most insidious aspect of DEFLATION is that it occurs when NOBODY expects it.

Now look at the current situation w.r.t. Thailand's free and easy credit and compare it to that of 1996 -- seems to me that the tiger is already in the backdoor, but he is fully fed and resting. When this changes, yeah, you get the picture.

[TRIPxCORE]

Right now the US Dollar holds the hammer and continues to strengthen but alas, this is only a temporary situation. The US Federal Reserve is way behind the inflation bubble. Their "measured" rate hikes are not going to cut it. I think Greenspan will eventually figure out that he is behind and start getting more aggressive with his rate increases. That will in turn hurt the US economy and possibly push us into a recession. That would end this temporary reign of USD.

[Harmonica]

Right now the US Dollar holds the hammer and continues to strengthen but alas, this is only a temporary situation.  The US Federal Reserve is way behind the inflation bubble.  Their "measured" rate hikes are not going to cut it.  I think Greenspan will eventually figure out that he is behind and start getting more aggressive with his rate increases.  That will in turn hurt the US economy and possibly push us into a recession.  That would end this temporary reign of USD.

Chief, do you ever pause to consider, evaluate carefully what you say?

You've been on the wrong side of the Dollar for 10 months now and are still in denial.

Its not higher Math or esoteric analysis that's necessary here.

With reference to your own statement above (text in bold), let me explain your folly:

If, as you say, Easy Al gets more aggressive and raises Rates with escalating gusto, then this can only be good for the Dollar, bad for the Euro and every other major currency.

This is the fundamental of fundamentals! Harmonica 101, so to speak!

Why?

Because in the final analysis nobody gives a rat's ass about esoteric economics or technical analysis when it comes to RETURNS on one's investment.

What does this mean?

Capital will ALWAYS seek out a higer paying destination! And when the destination is the greatest, most stable country in the world, it provides even more of an impetus for the mass exodus of funds from countries around the world towards the USA!

The Interest Rate Differential between countries IS the driver of Capital!

Long live the Dollar!

You don't believe me? Just study how the greatest play in the world for the last several months has been the British Pound versus the Japanese Yen -- Rate differential = 5.50% in England versus 0% in Japan. Capital flocked to England versus Japan.

And so it is, my friend.

Just simple, simple stuff, no esoterics required.

Thai women know this instictively, the only difference being, that after finding one sugar-daddy, their mission is accomplished, hehehehe! They stop there and look no further. The same cannot be said about western women. Study them and you'll have a clue as to how finicky Capital really is, hehehehe.

[TRIPxCORE]

I think Greenspan will be so far behind inflation that he will get reckless with his hikes and then take them too far. The aggressive hikes will be like sticking a knife into the side of an expanding economy and begin to guide us backwards. Ultimately dollar negative. IMO of course. Time will tell. I always said USD strength was temporary. Temporary could be 1-2 years but USD will find its way back to depreciation again because the twin defecits are too large to be ignored like traders have been doing.

[~G~]

If, as you say, Easy Al gets more aggressive and raises Rates with escalating gusto,  then  this can only be good for the Dollar, bad for the Euro and every other major currency...

...The Interest Rate Differential between countries IS the driver of Capital!

Agreed - but the question is what will stop other economies to follow his footsteps and raise their interest rates as well.

In Israel, for example, after 8 months in which the rates stayed stable, there has been two raises of 0.25% each, the second one being a preemptive step toward the expected raise in US next week, to keep the rates in Israel higher, taking in consideration the greater risk of investing in Israel.

But.. Israel is by no means a major economy

[The_Moog]

The Interest Rate Differential between countries IS the driver of Capital!

Up to a point, but if the country is also suffering inflation, then the real returns are less and capital flows will take account of this.

A country suffering structural deficits or say, the Asian countries - post crisis, can experience both high interest rates and weak currencies.

....if high yield was the sole determinant, we'd all be investing in Indonesian Rupiah, which has a high yield, and that currency would be far stronger.

[samran]

The Interest Rate Differential between countries IS the driver of Capital!

Up to a point, but if the country is also suffering inflation, then the real returns are less and capital flows will take account of this.

A country suffering structural deficits or say, the Asian countries - post crisis, can experience both high interest rates and weak currencies.

....if high yield was the sole determinant, we'd all be investing in Indonesian Rupiah, which has a high yield, and that currency would be far stronger.

<{POST_SNAPBACK}>

don't forget about currency risk as well.

[palm]

Comparing the Japanese economy to that of Thailand, and then extrapolating the Japanese deflation onto Thailand is wrong wrong wrong.  It's wrong on so many levels it's like shadowboxing.  If you alter your investment program now because of your anticipation of deflation, you will miss many opportunities, including living well for the next decade.

<{POST_SNAPBACK}>

Absolutely 100% correct

[Harmonica]

That's my long-term call! ..... made today, June 22nd, 2005 !

For further understanding of the effects of a deflationary crisis refer to historical evidence relating to the 1929 stock market crash and the deflationary period that occurred thereafter.

No technical analysis for this subject, just obsevations about the structural defects of the World Economy -- so all can participate.

I think I'm the only fella here at TV who has mentioned Deflation is a few posts in the recent past but don't believe that a single other poy-son has even responded --neither have they raised the issue.

Easy Al and rest of the gang and the followers are too busy worrying about Inflation and/or Disinflation.

At least one of the requirements for Deflation is currently RIPE -- and that is?

Nobody (almost) is expecting it !

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

------------------------------------------------------

Amen! DEFLATION is here.

My call was 2 years too early but given that "experts" NOW say that this is a once in a century anomaly, a 2% margin of error is not bad.

When will the BEAR end?

Let's see if personal technique improvements I've made in the realm of timing can serve me far, far better this time?

-------------------------------

[lannarebirth]

That's my long-term call! ..... made today, June 22nd, 2005 !

For further understanding of the effects of a deflationary crisis refer to historical evidence relating to the 1929 stock market crash and the deflationary period that occurred thereafter.

No technical analysis for this subject, just obsevations about the structural defects of the World Economy -- so all can participate.

I think I'm the only fella here at TV who has mentioned Deflation is a few posts in the recent past but don't believe that a single other poy-son has even responded --neither have they raised the issue.

Easy Al and rest of the gang and the followers are too busy worrying about Inflation and/or Disinflation.

At least one of the requirements for Deflation is currently RIPE -- and that is?

Nobody (almost) is expecting it !

Want to prepare for this so that you and your family can be on the right side of the avalanche?

Start by offering some definitions for Deflation.

------------------------------------------------------

Amen! DEFLATION is here.

My call was 2 years too early but given that "experts" NOW say that this is a once in a century anomaly, a 2% margin of error is not bad.

When will the BEAR end?

Let's see if personal technique improvements I've made in the realm of timing can serve me far, far better this time?

-------------------------------

Amen, deflation IS here. Prices have fallen almost to the point they were 6 months ago.

When will the Bear end? In the short term, probably yesterday.

[Harmonica]

Did I personally escape the ravages of the BEAR thus far?

Yes and No.

The YES part:

A truly stunning 2008. I'm loaded to the hilt with US dollars and even more so with Japanese Yen. Third currency holding is Thai Baht but will switch to $ or Yen in a heartbeat if a powerful breakout of Dollar/Baht occurs beyond 35.68 - 36.00. A power cross of 36 will be the ultimate trigger for me to totally switch out of Baht. The main reason I have not done so already is that there is formidable resistance facing the US Dollar at 35-36. So I just wait for confirmation. Don't want to jump the gun here because since 1998 the Baht has literally crushed ALL currencies and nobody, not even the Yen has yet succeeded in taking out the 1998 top.

I had already unloaded all real estate quite a while back, no stamps, coins, art, fancy cars and NO DEBT. So very happy here.

So far so good - just following proper DEFLATION etiquette.

The No part:

Timing was WRONG on Crude Oil, Euro's demise, Gold and Baht's reversal from 42, so encountered trading losses, neutralizing gains from equities. Had a net loss for 2007.

But it gets worse in a different way now. This is also in line with my thinking that nobody totally escapes the BEAR.

In my case, Why?

My trading capital is NOT safe with ANY brokerage. They could go bellyup anytime and then its adios to my capital.

Therefore I've stopped all trading and now only have my currency gains.

This is a whoppingly smart curveball by the BEAR because the worldwide markets are a shortsellers paradise. I'm tempted, but what's the point if you can't get paid.

So I too am waiting/watching for signs of the BEAR going back into another 100-yr hibernation so I can get back to work.

[midas]

Amen, deflation IS here. Prices have fallen almost to the point they were 6 months ago.

When will the Bear end? In the short term, probably yesterday.

But in the long term surely it has a long way to go yet ?

[lannarebirth]

Amen, deflation IS here. Prices have fallen almost to the point they were 6 months ago.

When will the Bear end? In the short term, probably yesterday.

But in the long term surely it has a long way to go yet ?

What has a long way to go yet? the stock market? Currency "revaluation"? Home prices?

Look, this is a big machine with a lot of moving pieces. In the US the currency is valued lower than it was 10 years ago. The stock market is in the same place it was 12 years ago. Save for the last few months inflation has been going on all the while. That's a hel_l of a bear market.

Will it get worse? Maybe, but more likely through time than price. Most people don't take time into consideration, but it is every bit as important, or more so than price. Time is the primary focus of the work I do. From yesterday into next week is major time window for me. Markets moved down into it, so my initial reasoning is they shall move up out of it. I could be proven wrong as early as next week, but it wouldn't be the first time. I have 3 more significant time windows later in the year. We'll see.

[Harmonica]

...and what are your views on existing pensions - getting out early is penalised pretty heavily, is it worth putting 'good money after bad' under your predicted scenario?

on existing pensions ... I am well aware of the penalties. What can I say?

You yourself stated that you are mulling over these pieces of info. As time progresses and you yourself determine and confirm that the probability of the depicted scenario is rising due to occurrences in real-time, then that will be the time for YOU to make that decision ....

Fair enough....I guess my actual question was, if the sh1t hits the fan and deflation occurs on the scale you are suggesting, are the losses on a pension plan likely to be so great as to make the current penalties for early withdrawal seem insignificant...?

....Crystal ball anyone...?

Rags, my apologies; the last thing I want to be is "evasive" ..... so here then is a direct answer to your question (in bold print above) ...... YES !

Bankruptcies will the order of the day and large orgs will be going bellyup by the thousands. Expect the worst, not Armageddon but just shy of it, hehehehe.

That is MY opinion!

------------------------------------------------

just catching up on replies, querries/conversations from the past, then we get to the future.

Amen! some examples, ...... Fannie, Freddie, Citicorp, Bank of America, etc. The only yet to occur experience is when the US Govt. calls American Express to inform them that their payments are coming in very late and that their credit line will be shut down unless they can come up with additional, alternative collateral.

As for pensions? .... if world markets do NOT recover at the current support and the downtswing resumes, this will be when farangs here will have to leave as many if not all of these pensions worldwide will fail - there will be no money left.

Pray!

[Harmonica]

I believe in america.

[Harmonica]

Deflation....not in a serious way and only short term if at all....certainly not catastrophic. As China's economy matures and hundreds of millions of consumers are born the increased pressures on almost all material sources will keep inflation moving right along....sometimes in a problematic way and sometimes as a benign constant. The tech boom/bust cycle that just occured in the US (and elsewhere) did not create disasterous deflation as might be expected...perhaps because.....I would only be guessing if I tried to tell you why the deflation didn't happen...after all I'm just a rice farmer.

[Harmonica]

I personally read the signs in a completely different way.

I think we will get chronic inflation.

Driven by:-

-  the oil price fuelling higher general prices, leading to wage pressures

- a low interest rate environment due to a a political need to keep asset and property prices afloat.

- High personal debt burdens which can only be repayable if the real level of those debts is eroded by inflation.

-Greater Government spending to pump-prime economies.

I do not believe that PRC's cheap manufacturing base will export enough deflation to counter.

Those who think that we will be getting more Inflation ought to take a close look at the following chart (below)

The only real growth sectors of the economy have been in financial activities, and, especially, in construction. Consider what this chart -- which appeared in The Economist magazine earlier this year -- says about housing and inflation.

Notice most of all the true direction of the longer-term trend in core inflation , namely downward . As for the rate that includes house prices, the influence of the real estate bubble speaks for itself.

[Harmonica]

Read several times if necessary -- powerful concepts here and very well explained. Many thanks to Robert Prechter for this outstanding work!

What is the primary precondition of deflation?

A major societal build-up in the extension of credit (and its flip side, the assumption of debt). Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation, because almost no one expects deflation before it starts.

------------------------------------------------------------

What triggers the change to deflation?

A trend of credit expansion has two components: the general willingness to lend and borrow and the general ability of borrowers to pay interest and principal. These components depend respectively upon:

(1) the trend of people's confidence, i.e., whether both creditors and debtors think that debtors will be able to pay, and

(2) the trend of production, which makes it either easier or harder in actuality for debtors to pay.

So as long as confidence and production increase, the supply of credit tends to expand. The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and production decrease, the supply of credit contracts.

------------------------------------------------------------

How much does psychology have to do with the change to deflation?

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation:

As creditors become more conservative, they slow their lending.

As debtors and potential debtors become more conservative, they borrow less or not at all.

As producers become more conservative, they reduce expansion plans.

As consumers become more conservative, they save more and spend less.

These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.

-------------------------------------------------------------

What else triggers the change to deflation?

The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain – in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans – that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed, and creditors refuse to underwrite the interest payments with more credit.

------------------------------------------------------------------

And then it all comes crashing down?

Right. When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, spending and production cause debtors to earn less money with which to pay off their debts, so defaults rise. Default and fear of default exacerbate the new trend in psychology, which in turn causes creditors to reduce lending further. A downward "spiral" begins, feeding on pessimism just as the previous boom fed on optimism.

The resulting cascade of debt liquidation is a deflationary crash. Debts are retired by paying them off, "restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet. The process ends only after the supply of credit falls to a level at which it is collateralized acceptably to the surviving creditors.

Don't blame me! I urged you to study up on these sub-definitions.

What's occurring now is textbook stuff.

Once again thanks to Robert Prechter for the lucid definitions, but it was our job to study and asimilate them and then apply to real life.

[Harmonica]

For G:

Many moons ago we were in a discussion about the property bubble -- more interesting data presented here:

60% of MLs last year had adjustable interest rates, many with artificially low teaser rates that expire after the first few years."

> 25 percent of all new mortgages in the last year have been interest-only loans, which allow buyers to postpone principal payments for three to five years but which become much more expensive afterward.

The hottest new loan, the option adjustable-rate mortgage, or option ARM, which gives borrowers the choice of paying interest and principal, interest only, or even less than the normal interest. If the home buyer picks the lowest possible payment, the mortgage debt goes up rather than down.

Lending practices such as granting loans equal to 100 percent of the value of the homes; granting large loans without due attention to the likelihood of higher monthly payments in the future; and granting "no-doc" (no documentation) or "low-doc" loans that require little or no proof of income or assets."

If the boom in home prices ends, instead of paying for equity, they hope to get it by fiat; worst-case scenario, if they really can't afford the payments, they'll "flip" the house in a year or two for a profit, hehehehe

madness, madnes, madness.