[SGVLUG] OT: housing and bear stearns

[David Lawyer]

On Mon, Mar 17, 2008 at 01:45:08PM -0700, matti wrote:
> Hi,
> 
> this is off topic...
[snip]
> I'm guessing we will see what some people like to politely call a
> "market adjustment" is coming to the socal housing prices as credit
> tightens and some more banks fail
> 
> glad I didn't buy a house in the last year or 2...

This is part of a much larger problem: possible financial collapse of
the U.S. gov't but it may be years away.  With the gov't bailing out
companies who took undue risk, it may wind up that the gov't itself
can't keep going into debt anymore and has to go thru default itself.
No country has every gone into debt as much as the US (including all
forms of debt such as private debt) and not suffered financial
collapse.  It used to be that a way to default was via hyperinflation
so as to make the real value of debts nearly worthless.  Old postage
stamps of Russia and Germany illustrate hyperinflation.  In Germany in
the 1920's it took billions of Marks to buy some of the postage stamps
(in my stamp collection) when inflation hit it's peak.  But now the
U.S gov't has issued a lot of debt in "inflation protected securities"
that can't be made to go away via hyperinflation.  The only way to
default on this debt is just to not pay it back.

So while house prices in real terms may drop, in term of dollars they
may hyperinflate along with hyperinflation of everything else.  If you
would like to read some hyperbole (that is often humorous) on these
and related problems  see Kunstler's (author of "The Long Emergency")
site:
http://jameshowardkunstler.typepad.com/clusterfuck_nation/2007/12/forecast-for-20.html

Linux both helps and hurts our current account balance of trade.  It
hurts since it reduces the monopoly profits that MS can bring into the
U.S. from other countries.  But at the same time, the fact that Linux
was mainly a U.S. phenomena helps improve the public opinion the U.S.
worldwide and this may help the U.S. get more sympathetic treatment in
economic matters.  For example, will the oil trade switch to euros
from dollars?  Iran has already switched and wants others to do so
also.  Iran may win this since outside of Linux (and some other
things), world public opinion of the US is pretty low, and the Bear
Stearns bailout (and related gov't loans of "liquidity" to Wall
Street, etc.) makes it worse resulting in a falling value of dollar
which leads to inflation as the prices of imported goods rise.

I wrote about the problem of free trade years ago and did
nothing for years with what I wrote.  It's now on my website and while
I've added to it but it's not up-to-date.  Many of the things I
predicted are happening now, but others predicted the same (see
the list of books on the subject).
http://www.lafn.org/~dave/gov/collapse.html 
			David Lawyer