This quote from that post caught my eye:

So it is death to the old maxim that real estate values never go down. Once again, as with the equity market, the American consumer is going to wind up painfully disenchanted with an asset class as an investment and retirement safeguard.

No wonder these guys want to privatize Social Security.

Like the man said: "They call it an investment vehicle because it drives away with your money."

No authoritarians were tortured in the writing of this post.

and you must remember that ASSET is not the same as CASHFLOW GENERATOR.

Geez, people, didn't the 1929-1941 era teach us a bleeding dying thing about reality?

Basic NEEDS:
Water.
Food.
Fire.
Shelter.
Transportation.

Everything else is gravy, but, in order of importance:
Shelter you can't be thrown out of.
Transportation you can't be denied use of.
Water you won't die from drinking.
Food you won't die from eating.
Fire you can control, for cooking, heating and light.

Seriously, beyond this, it's all gravy.

and that's the important thing - for a lot of Americans, their house, their "asset" not only doesn't earn money, they are so heavily leveraged and have such high exenses, they don't even really own it.

But the key point that Numerian was making is that every time the Fed and other pundits make happy talk about how well off Americans are because the value of their assets has gone up - well higher value real estate assets that don't earn money are very insecure.

My father likes to laugh at his friencs with big houses, because as he says "I pay about 2k in property taxes a year, that's it."

Higher asset values in primary residences are almost pure inflation - they have not increased the security of Americans or their real usable money. They've actually made them less secure.

it's not just houses -- it's anything bought by borrowing beyond your means.

Might be yesterday's Happy Meal, if the credit card bill exceeds tomorrow's paycheck by that much.

people are so conditioned to respond to anything new and shiny. from poison plastic toys for their tots to mcmansions built by construction firms that disappear into the night when the last mortgage is sold, impulse buying has become such a way of life in this country it frightens me. of course it's a really stupid idea to take out an adjustable second mortgage on your home so you can buy a bunch of crap you don't really need and which has no actual value should you find yourself in a cash crunch.

yet you can see the signs of it everywhere- big trucks for sale in people's yards, last year's hot bling item selling for a fraction of its original price on ebay, etc. what bothers me is that most of my smarter econ friends (hi ian!) are telling me that "it's going to get worse, before it gets...worse."

Christ, WTF is wrong with you Sarah? Seriously, go around spouting this economist bullshit, see how popular you are. You may call this "gravy", but the Americans this is the shit they've worked their entire fucking life for. I'd suggest you pull your head out of your overly academic ass and realize that you aren't talking about some metaphysical concept here, and start realizing that you're talking about peoples fucking lives here.

You clearly get off on the notion that some adle-brained concept you've developed has been proven correct, but shut the fuck up. Obviously reveling in other peoples suffering isn't a very charming or likable trait. Perhaps you should criticize the culture that encourages people to go into debt to make rich men richer, instead of insulting the average American. Everyone laughs when the powerful stumble, only a real fucking scumbag laughs when the powerless do.

i don't think sarah is "laughing" at the poor or those who are losing their homes. it seems to me that she's trying to emphasize certain harsh realities about the difference between income and security, a lesson a lot of people are going to learn, like it or not.

i do blame unregulated lending environments and shady advertising, unscrupulous brokers, and the uber rich who play with the markets and destroy whole economies in the process. at the same time, as someone who learned the truth about credit the hard way, i think there is plenty of blame to go around.

no one is forced to buy a bigger car, a more expensive home, surplus toys and clothes they don't really need. no one is forced to take out an adjustable rate mortgage to have those things. the american consumer has allowed herself to live in a fantasy world for too long, and that's coming to an end. just as i don't excuse those who thought bush's war was a good idea at the start of it despite mountains of evidence to the contrary, i don't excuse those who have indebted themselves into the poorhouse so they could play 'keeping up with the mcmansion jonese.' if you find that overly harsh, i'm sorry. but i do not claim that any of it is "funny," and i don't think sarah is either.

Saw you tearing into Athenae at First Draft yesterday in basically the same frothing-at-the -mouth way, because Athenae had asked a question about consumerism.

Here's a tip for YOU, specifically.
STUPID is not a protected handicap, and nor should it be.

Harsh? No. Realistic. And trust me -- if you're mortgaging the roof over your head for temporary status in terms of cheap goodies and shiny toys, it's going to bite you.

Unless it has already and that's why you're so angry and bitter. If so, maybe you should see a credit counselor.

Sorry, Soullite, that must have stung. and as ChiDyke and Sarah said, no one is laughing at the unfortunate. We spend a lot of time on this blog trying to head off stupid decisions. When they happen, and disaster like the present lending/home construction/real estate plunge results, it's not laughter that results. Instead, we are inclined to point out what happened, and that it was brought on by the lack of regulation that the GoPerverts have been so adamant was in our best interests.

In my N.TX. area, there is a religious right wing element that is showing its faith by jumping in headfirst. That is meant to be rewarded by their concept of god, by supporting the 'faithful' beyond their own means. yes, Ooooops. But I'm not laughing. I'm really sorry for them, and hoping that bitterness isn't the result of this mindless leap.

Ruth

when you're trying to disinfect a wound.

And I'm allergic to iodine, so I'm stuck with things like isopropyl alcohol and vinegar for my disinfectants ... who can afford whiskey?

If you haven't read soullite's attack on Athenae, you should. It makes the rant at me look pale by comparison. But the two spitwad barrages together convinced me that soullite, at least, is too old to be handled like a pediatric patient.

And not being a nurse, I'm just doing a little field expedient first aid at triage and sending the patient on to better care at the credit counselor.

...combined with a Government and Corporate Media that do not inform or protect citizens from this type of stuff.

Why do megacorps invest billions in advertising and marketing? Because it works. You can't fool all the people, but you can fool enough of them to make a good profit margin.

The Persuasion Industry is perhaps the only field where the US is the world leader.

People can only make decisions based on the information they have.

Over the past ten years, I don't recall many instances of the US government, politicians or corporate media outlets pointing out to citizens that no-money-down adjustable rate mortgages are a really fucking bad idea and could make them homeless in a hurry.

Instead we got the happy narrative saying "the American dream of homeownership is now more accessible than ever thanks to low interest rates and generous loans". Whee!

Shystee, Atrios called his shot on this one back in 2004. From a guest post at C&L:

Classic blogging: The Man in the Grey Turtleneck calls his shot on Adjustable Rate Mortgages–back in 2004:

Has He Gone Insane?Has the entire country gone insane?

Now I’m starting to get a little scared. More than a little scared, actually. First we have this little tidbit about Alan Greenspan recommending that consumers replace their fixed rate mortages with variable rate ones.

Then I look around and discover that quite a few people have been getting variable rate mortgages.

This is really scary. A lot of people have been concerned about a bursting housing bubble happening once interest rates start to rise. Even if that happens it wouldn’t necessarily be such a big deal. But, if a large chunk of our population got suckered into getting variable rate mortgages so they could go from buying a house the couldn’t afford to buying a house they REALLY REALLY couldn’t afford, the impact of an interest rate rise could be, uh, bad.

Here’s the deal. Interest rates go up. Your housing price falls. Your mortgage payment goes up substantially. You can no longer afford to make your mortgage payment. And, since the market value of your house is now less than the value of your outstanding loan, you can’t just sell and trade down. Default. Foreclosure. Cardboard box.

As long as most consumers have fixed rate loans, the consequences of increased interest rates and a sudden housing price downturn wouldn’t necessarily be so great. But, if people are drinking Greenspan’s kool-aid…

Serious!

Give the man credit.

No authoritarians were tortured in the writing of this post.

Having been put out on the streets for doing a great job getting the consumers in over their heads would certainly make a fella bitter.

Reminds me of a sales pitch I heard once (thankfully secondhand) for some one to sell barely occupiable vacation property; "Can you take some one who can't afford and doesn't want something and shove it down their throats?" There had to be those who answered Sure, lemme at em.

Ruth

... to soullite's rant, isn't there?

A-B-C. A-Always, B-Be, C-Closing. Always be closing, always be closing.

I'm actually in sympathy. You build "the good life" as it's defined by everyone around you, especially those who would take the coat off your back and leave you naked in a blizzard if they could eke out a tiny commission from that bad act, and what happens?

It all turns to debt and ashes. It can happen to anyone.

Let's have a little charity, please.

This is the "sheeple" discussion in another guise, and much as I agree with Sarah and Ruth on what's necessary and what isn't, not all do, have, or even can. The road to hell, and all that.

No authoritarians were tortured in the writing of this post.

I'm not advocating letting them all deal with the consequences of their mistakes without any help at all, thus the reference to credit counselors. In the spirit of public service I should probably note that some credit counselors, who do good work, don't charge exorbitant fees.
And it's right to note that for years now there's been a pressure to own the new hotness and discard the "old and busted" just because it's not the new hotness. Look at TLC's spinoff channels dedicated to propping up Home Depot credit card sales, for pity's sake.
We've lost a really important thread in this country, and the loss has been driven by the frenzy of marketing. But the point is you don't have to fall for marketing, or keep falling for it, all your life. And in the ashes, dust and bitterness of discovering you've been taken, the most constructive first step isn't to attack people who didn't fall for the con -- especially if you're one of the operators.
Savvy?
I don't consider soullite a member of the helpless class. In another rant soullite screamed that claiming Americans can have different values and judge status by different standards is the same as denying that classes exist in America. That's patently false and I took offense to it, because there are classes in America, and Corrente has been trying to point that out since it came into existence.
There's the hapless class -- people who, for whatever reason, don't live up to their full potential because some outside force (religion, politics, money, language barriers, lack of will, maybe foremost) persuades them not to put forth the effort.
There's the crass class -- people who, for whatever reason, don't care about people they see as 'lesser creatures' than themselves.
There's the helpless class -- people who, for whatever reasons, have done all they're able and still can't 'make it'.
I think you have to choose to be in the crass class, because you can be decent instead; I don't know that you have to choose to be in the hapless class, but certainly you can choose not to stay there. I don't think you can choose to be in the helpless class, and I think its very existence indicates how hard it is to ever succeed in leaving.

Or am I misidentifying "sheeple"?

We. Are. Going. To. Die. We must restore hope in the world. We must bring forth a new way of living that can sustain the world. Or else it is not just us who will die but everyone. What have we got to lose? Go forth and Fight!-- Xan

I laugh at the powerless, when they make a stupid decision that (a) they were not forced to make and (b) renders them even more powerless.

"Stupidity cannot be cured with money, or through education, or by legislation. Stupidity is not a sin, the victim can't help being stupid. But stupidity is the only universal capital crime; the sentence is death, there is no appeal, and execution is carried out automatically and without pity." - RobertA. Heinlein