HousingPANIC Stupid Question of the Day

You do realize that some will blame us for this financial collapse underway, and their own deteriorating situation, right?

I'll remind people again that we simply reported the truth, and what was to come. Somebody had to do it. Take the threats and aggression to where it belongs - that would be the bankers, the politicians and the REIC of course.

And you should have known too. It hath been foretold.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

The Wall Street Journal says we're now in "Panic Stage", warns of crash

It's kinda weird when reading the WSJ is like reading HP, complete with references to our bible "Manias, Panics and Crashes". First time I've seen the book cited in the MSM. Too bad, people could have really benefited if they had just known, like HP'ers.

Man, this is getting really scary really quick now. Feels like everything HP'ers have predicted is happening, and it's all coming to a boil in real time.

So, are you all ready? Time is running out.

The Panic Stage

In his book "Manias, Panics and Crashes," the economic historian Charles Kindleberger describes the stages of financial boom and bust. Students of the good professor will recognize where we now are in the current credit crisis: the panic stage.

It isn't a pretty sight, but a crash is far from inevitable if political and economic leaders keep their wits about them and focus on the proper remedies.

Amid the daily market turmoil, and to help prevent a crash, it helps to step back and remember how we got here. With the benefit of hindsight, everyone can see that the U.S. economy built up an enormous credit bubble that has now popped. Our own view -- which we warned about going back to 2003 -- is that this bubble was created principally by a Federal Reserve that kept real interest rates too low for too long.

Enter the panic stage. The desire for debt has turned into a stampede to quality, especially Treasury bills.

The danger now is that this panic becomes a self-fulfilling prophesy and talks us into a crash.

HP'ers, I can't believe I'm saying this, but even we may be shocked at how bad this crash is gonna get: Economist predicts 50% drop in home prices

Close your eyes and think of what a 50% drop in home prices looks like.

AAAAAAAAAAAAAAUUUUUUUUUGGGGGGGGGGGGHHHHHH!!!!!!!!!!!!!!!

Phoenix, Vegas, Miami, Sacramento, LA, Tucson, Naples, Tampa, .... there's gonna be some bubble cities, those whose economies were based on housing speculation, mortgage fraud, REIC jobs and homebuilding, that are gonna see economic collapses straight out of '29.

Even if (and when) the Fed lowers rates to 0% (hello, Japan!), it won't matter. When home prices soared 100% for ABSOLUTELY NO REASON in these cities (as incomes and rents remained flat), well, it takes a 50% haircut to get us back to reality. And look over there, right on schedule, here comes reality, and it's cold, and it's hard.

Two top US economists present scary scenarios for US economy; House prices in some areas may fall as much as 50% - Housing contraction threatens a broader recession

US homes may lose as much as half their value in some US cities as the housing bust deepens, according to Yale University professor Robert Shiller. Meanwhile, Martin Feldstein of Harvard University says that experience suggests that the dramatic decline in residential construction provides an early warning of a coming recession. The likelihood of a recession is increased by what is happening in credit markets and in mortgage borrowing. Feldstein says that most of these forces are inadequately captured by the formal macroeconomic models used by the Federal Reserve and other macro forecasters.

“The examples we have of past cycles indicate that major declines in real home prices — even 50 percent declines in some places — are entirely possible going forward from today or from the not too distant future,” Shiller said in a paper presented last Friday at the Federal Reserve Economic Symposium in Jackson Hole, Wyoming.

I'll leave you this week with two quotes from the person most responsible for the housing bubble, and eventual crash - Mr. Alan Greenspan

"Don't allow money-supply growth to spiral out of hand.”

- Alan Greenspan, 1977

But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums

- Alan Greenspan, 2005

We knew what was going to happen. And now it's here. This liquidity crush is simply "revulsion" and "discredit". Housing panic is here.

It's panic folks, and it is here. Panic. In all your lives, you'll never see such a thing again. After the biggest financial bubble in the history of humanity, the biggest crash follows. It hath been foretold.

It's time to head to the cellar. Right on schedule, housing panic is now here.

Again, from the textbook:

Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And just one of the headlines from reality today:

ECB injects €98bn but markets are gripped by panic

The European Central Bank released nearly €100bn (£68bn) in emergency funds into the banking system yesterday in an effort to kick-start the crippled credit markets, but its move only sparked panic selling on stock markets across the world.

The sudden cash injection was the largest since 12 September 2001, when the central bank released billions to stabilise the market after the terrorist attacks in New York.

The trigger for the €98bn package was a major overnight spike in inter-bank lending rates that if unremedied threatened to disrupt the normal functioning and stability of Europe's financial system.

As with the other market upheavals in the last month, the root cause was traced to America where the fallout from the meltdown of the market for risky, or sub-prime, loans continues to widen.

Go back to the height of housing bubble frenzy in 2004 - 2006: do you rememember what housing panic looked like (on the buying side)?

Remember the people camping outside of new home developments?

Remember all the people taking real estate license classes?

Remember HP'ers being called brown shirts, flying monkeys, bitter renters, bubble heads, pollyannas, chicken littles and worse?

Remember being told "they're not making any more land" and "if you don't buy now you may be priced out of the market forever"?

Remember all the flipper and home improvement shows on A&E?

Remember George Bush calling for everyone to own a home (regardless of the ability to pay or price)?

Remember David Lereah and his "Why the Real Estate Boom Will Not Bust" book?

Do you remember? Good. Because next time the madness of crowds takes over, run the other way.

Housing Speculation - it happened around the world. Now we pay the price.

The US housing market is crashing in such a fantastic and historic way, you'd think nobody could top it.

Just wait. The Brits ("get on the housing ladder!") were even more housing-speculation obsessed than the Americans. And they polluted all of Western and Eastern Europe with their get-rich-quick schemes.

But now, the Great European Housing Crash begins.

It's strange moving from US-housing-bubble-central Arizona to Worldwide-housing-bubble-central England. If only you could see what I've seen.

You live in historic times HP'ers. Tulip Bubble, South Sea Bubble, NASDAQ Bubble, Worldwide Housing Bubble. This one will be studied for thousands of years.

Oh, the folly of man. Will we never learn?

And today was the day when denial ended, and fear set in

Yes, many Americans are so dumb they could sit on an OJ Simpson jury, but for those of us who know that the TV comes with an off button, and who make an effort to follow and understand the news, today was the day HP'ers.

Today was the day.

And Fear is now here.

Thank you Countrywide for showing us the way.

Donna Summer, take us out...