The Dearing Dialogue

People making $250,000 or more don’t save as much because they face “many obstacles” (MSNBC.com).  I guess living large is considered an obstacle.  Paying everyday bills was the biggest reason. 

So says Senator Harry Reid, as quoted by the NY Times.  I agree with him.  Of course, it was lost years ago when we failed to take account of thousands of years of history and culture.  It is not an indictment on our servicemen and women who spill blood everyday, rather one on the incompent administration in Washington.  Dwelling on this matter is of little consequence.  What will come about with a collapsed state of Iraq?  That is more important. 

• A clash of cultures.  Shia and Sunnis will battle it out in the streets.  It does not help that both sides are funded by outside sources.  The Sunnis by America, Saudia Arabia, and Pakistan.  The Shia by Iran, Syria, and Hezbollah in Lebanon.  Iraq is thus a proxy war, much like Vietnam was between the Americans and Soviets.
• The inevitable rise of an Islamic state.  No matter which side wins out the bloodfest, an Islamic state will materialize.  That is what any democratic vote would bring today or any long-fought battle.  With Shiia representing the majority (60%) in Iraq, and making up the vast majority in Iran - the dawning of a Shiia empire has already shown its light.
• The Fall of Saudi Arabia.  The Saudi regime has called for the war in Iraq since the 90s since it provides their Wahhabi extremists an outlet.  The regime is corrupt to the bone and every Saudi outside the regime knows it and despises it.  A Shiia Iraq will likely bring strength to the Shiia minority in Saudi Arabia.  All of those weapons the Saud family purchases from Boeing for its personal protection would not likely stop an all out rebellion. 
• Worldwide Recession.  Robert Baer in the first chapter of Sleeping with the Devil  paints a picture of a virtual plug to the oil spigots if the Al Jubayl oil field were taken out.  A rebellion in Saudi Arabia would send oil prices through the roof and cut-off supplies to world markets in a way that would send us into one of the deepest recessions we’d ever see.  The US economy thrives due to a constant and steady flow of Saudi crude.  If that were suddenly stopped due to instability in Saudi Arabia, I can only imagine what would happen.

Of course all of this could have been prevented if Americans actually paid more attention and were more active in the administration of their government.  Instead we were governed by fear, and like sheep, led over the cliff. 

Why sub-prime mortgages may have impact on the whole economy

Exactly how far could this cotagion go?  I suspect it has alot to do with expectations.  Right now, the public can not stop talking about the sub-prime mortage fiasco, which I think should have been picked apart a long time ago.  This “adjustment” is long overdue.  Maybe society is just coming to that realization and going overboard, however, the Fed is remaining extremely calm.  Tomorrow will tell us a lot on just how calm they are.  If they raise interest rates, its likely to fight inflation and likely to create even a greater and quicker demise to borrowers and lenders in the sub-prime market.  This can have a ripple effect over the next few months on consumer spending in the economy.  Given the fact that much of the spending over the last 5 years has been fueled by home equity loans, a rise in interest rates will likely curtail the behavior of home owners to spend - thus shrinking the prime mover of our economy, asset allocation. 

The Global Urban Real Estate Boom

With the end of ARMs, Interest Only Loans, and other conveniant gimmicks thought up by unregulated mortgage brokers, borrowers will be forced to put down anywhere from 5 - 20% on loans for new homes.  But how many in our debt-laden economy are going to be able to come up with 20k or 40k on a 400k home?  The inevitable conclusion is a decline in home prices.

Now the other option for Chairman Bernanke is to lower interest rates in order to spur consumer spending.  But that will tank the US dollar and only make a bad, inevitable conclusion, much worse.

It’s gonna be a wild ride down!

Here we are, another blog.  Like a piece of clothing that excites the hell out of you when you buy it, you wear it once and it seemingly loses about 90% of its value.  Well, blogs can only be that way if there not kept up-to-date.  This one will provide me a bit more independence than the others have and so here we go.  Enjoy, I know I will!