Stockman Scott's Political Debate Porch Message Board

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Politics : Stockman Scott's Political Debate Porch

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To: Jim Willie CB who wrote (6414)	9/14/2002 11:08:07 AM
From: 4figureau	Read Replies (2) of 89467

Another work of art from Puplava: Storm Watch Update from Jim Puplava (Part1) September 13, 2002 Bubble Troubles >>At the moment American consumers are making the most of rising housing prices and falling interest rates to finance their monthly bills. The current trend in refis is coming from cash-strapped homeowners who need to borrow more money than their house is worth. Pressure is mounting on appraisers to come up with higher appraisal values now that home prices are starting to soften. We are now approaching the end of the line. When prices start to fall debt-trapped households will have nowhere else to go. The equity markets are doing the heavy lifting to replace savings and home prices will eventually turn down when a dollar crisis hits the bond markets. When this happens, interest rates will head up and the refi boom will go bust. The home equity well will run dry. When rates start to rise, variable-rate mortgages payments will go up. Limited-term fixed rate mortgages will have to be refinanced at higher rates when they mature. Home equity will start to disappear. The result will be a flood of bankruptcies that overwhelm the financial system as homeowners walk away from properties, leaving financial institutions and bondholders holding the bag. This will be a time of extreme social unrest. Homeowners just don’t see the storm clouds that are on the horizon. The rising tide of asset prices that have supported consumption this last decade is coming to an end. Like cargo ships overloaded with cargo in a violent storm, debt-laden balance sheets and no savings have left households ill prepared for the storm that lies directly in front of them. Instead of taking precautionary steps as the equity bubble burst, consumers have been led astray by the next bubble. Most investors follow whatever is hot. For the last three years, real estate has been "the place to be." But just as expanding credit helped to create the stock market bubble, it has also led to a mortgage bubble, which spilled over,into the housing market creating yet another asset bubble. The real estate and stock market bubble is the subject of next week's Part II of this Storm Watch Update. ~ JP<< financialsense.com

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