Fitts had the correct reply. The stock markets, interest rates, dollar index, and gold prices are all actively managed. The Fed (~JPMorgan) and Treasury (~GoldmanSachs) have all the tools required to prevent abrupt market discontinuities. The BOJ, BOE, and ECB are all partners in this process. There will only be a financial "crash" when and if the PTB want one.
In addition, for people who have significant investments, "crashes" can be immensely profitable. Selling some stock (even in Evergreen Solar) and buying some put options can put one in position to profit from a "crash".
As for real estate, the "crash" can't come soon enough for this renter. IMO, someone who bought their house or farmlet in 1977 should be very happy to sell it to me for a 1997 price and make a huge profit. But, they still are greedy enough to want a 2007 wishing price, which is at least twice a reasonable multiple of local income and no buyer will pay it. Bring on the "crash", please!
Everything MH said about the PTB and a crash are pretty much dead-on, however, if the PTB really had all the power they think they do, and all that we attribute to them, we wouldn't be in quite the level of sh!t we are in right now.
The best laid plans, and all that.
And a crash can also be profitable a little later on when large amounts of material resources can be had for fire sale prices, but one again needs significant resources to begin with.
If I have a 5% fixed 30 year mortgage, and the bank has a call provision that allows them to call the loan at any time, and they can get 7% on their money somewhere else, why don't they?
If S&Ls made 3% fixed 30 year mortgages in the 50s and 60s, and the prime interest rate went to 20% in 1980, and the S&Ls can call in the loan, why did they choose to go bankrupt instead?
If a BANK is actually solvent but having a liquidity crisis, can't they borrow money from the federal reserve? Bears Stern investment fund I dunno, but if it was solvent, and Bears wanted to, I presume they could borrow money from somebody.
If I have a 5% fixed 30 year mortgage, and the bank has a call provision that allows them to call the loan at any time, and they can get 7% on their money somewhere else, why don't they?
They would bite the golden goose that feeds them. As long as that mortgage is in their books, they can use it as collateral to go out and "fractionally invest" 10 times what the mortgage is worth. That pays far more than the 2% extra you mention. In fact, if they use your loan to raise 10 times what it's worth, and get 10% interest on that, their return is 100% of the loan, not some lousy 5-7%.
They'd be real dumb calling it in, it would kill the collateral, and hence the chance to invest.
What's more: it's not their money you borrowed for your home, they created it out of nowhere, it's not like they had it waiting in the safe when you walked in. They need just a few percent of it in their books, if that.
If a BANK is actually solvent but having a liquidity crisis, can't they borrow money from the federal reserve? Bears Stern investment fund I dunno, but if it was solvent, and Bears wanted to, I presume they could borrow money from somebody.
These funds consist of 95% borrowed money to begin with. They'd have to borrow money to save the money they borrowed to buy into vehicles that are now worthless. One of Bear's funds' big lenders is Merrill Lynch, and they got the ball rolling recently, by making a call on Bear. When they tried to auction off part of the funds' "assets", no-one offered more than pennies on the dollar, and the auction was halted.
So where could Bear borrow? Not at Merrill's. Other big banks? Not today, honey, I have a headache...
Goldman, JPMorgan Stuck With Debt They Can't Sell to Investors
Goldman Sachs Group Inc., JPMorgan Chase & Co. and the rest of Wall Street are stuck with at least $11 billion of loans and bonds they can't readily sell.
The banks have had to dig into their own pockets to finance parts of at least five leveraged buyouts over the past month because of the worst bear market in high-yield debt in more than two years, data compiled by Bloomberg show.
Goldman, JPMorgan Stuck With Debt They Can't Sell to Investors
Goldman Sachs Group Inc., JPMorgan Chase & Co. and the rest of Wall Street are stuck with at least $11 billion of loans and bonds they can't readily sell.
It strikes me that these big financial institutions have tons of money. So much money that they can hold $11BN of worthless bonds on their books pretending that it is still worth something. The tipping point will come when, in aggregate, the excess money sloshing around at these institutions dries up and they can't pretend any more. The only things we can be sure of are:
1. the real picture is highly likely to be worse, maybe much worse, than the publicly reported picture.
2. They will keep pretending as long as they aren't totally forced into some kind of liquidation
Hmmmm, sounds like other pictures, such as oil and energy and Global Warming.
CIT Group Inc., the largest independent commercial finance company in the U.S., reported an unexpected second-quarter loss and said it's getting out of home lending.
--snip--
``They're essentially taking about a 7 percent haircut on the value of those assets, meaning they think they're worth 93 cents on the dollar,'' said David Chiaverini, an analyst at Bank of Montreal's BMO Capital Markets division in New York. ``The way the housing market has deteriorated, it certainly wouldn't surprise me if they have to take an additional charge.''
They would bite the golden goose that feeds them. As long as that mortgage is in their books, they can use it as collateral to go out and "fractionally invest" 10 times what the mortgage is worth.
Damn, and just when I thought I understood banking! I always heard, from my economics teachers and other such no-nothings, that banks were allowed to loan out a given percentage of monies held on deposit. I believe it was 90% at the time but I would not swear to that.
But now I hear that this is not the case at all. That instead banks are allowed to loan out 10 times the money they already have out on loan. Well no, that's not really what you said is it? You say they can "fractionally invest" ten times the money they have out on loan.
Exactly what does "fractionally invest" mean anyway. Where would they get this money to "fractionally invest"?
I did a Google search on "Fractional Investment" and find it means to invest in a fraction of a property. For one million dollars you can buy a ten percent fraction of a ten million dollar property. http://www.rees1031.com/pdf/fractionals.pdf
Uhhhh....now I am really confused.
What am I missing here HeIsSoFly, somehow that just doesn't make any sense at all. I need you to explain what you mean and do banking laws really allow this sort of thing.
HeIsSoFly, thanks for the link. I watched all 47 minutes and 7 seconds of it. It was excellent and I would advise anyone to watch it. Although I do not see money as the bogeyman the creators of the film obviously did, it was nevertheless very good.
I found the explination of how the economy must grow exponentially as we use, then throw away, our natural resources very interesting.
That being said, the film cleared up for me where you got the idea that banks were allowed to loan out or "fractionally invest" ten times the amount of existing loans. You simply misunderstood what the film was saying.
Banks were allowed to loan out ten times the amount of moneys that were invested, by the bankers, in the original bank charter. After that, as the film clearly stated, banks were then allowed to loan out 9 dollars for every 10 dollars on deposit in the bank. And that is the way banks create money.
A bank will loan out 10,000 dollars. The borrower then deposits the 10,000 back into the bank. New deposits! Then the bank can loan out another 9,000 on these new deposits. The borrower then deposits the 9,000 back into the bank. The bank then lends out 8,100 on these new deposits and so on down the line.
That is exactly how I learned it in economics classes and that is exactly how it is explained in this film.
I'm glad you liked it, and yes, i agree, everyone should watch Money as Debt.
Your description of the process is exactly how I tried to describe it; the term "fractional investing" was half-jokingly used.
I was responding to the question why banks wouldn't call in loans if they could make more with "their money" elsewhere. As the film says: If there's no debt, there's no money. So that loan of yours is a prerequisite, and it's not so important how much the interest is. You are the vehicle that allows the bank to make money.
I like the following piece by Prof. Succo at Minyanville for describing the next phase in money for nothing and your chicks for free: derivatives.
FT's financial editor Gillian Tett wrote well on that topic too, see The Dream Machine, and estimated the trade at $470 trillion.
A $1 billion REPO by the Fed doesn’t seem like much until you check your premise. The Fed just did a $1.3 billion dollar coupon pass, which is like a permanent REPO. The Fed calls up JP Morgan (JPM) and purchases its bonds with credit, credit created from nothing. They just tell JP Morgan, "we owe you money."
JP Morgan now has funds (credit) it can lend out. But because of margin requirements it can lend out much more than $1.3 billion. In fact it lends out about twenty times that amount. So let’s say they call up 20 regional banks and let them borrow $1 billion each. In turn, each regional bank then lends out $5 billion to various mortgage borrowers. These borrowers refinance their house and spend the extra cash while the equity in their home drops.
The original $1.3 billion of credit the Fed created yesterday will in a few days turn into $100 billion of money borrowed by consumers. In fact these numbers are born out by the Fed’s activity over the last year. The Fed’s balance sheet has grown by about $30 billion over that time, while total credit market instruments outstanding grew by $3.5 trillion.
But that is just traditional pyramiding. Today we have the derivatives markets where JP Morgan can take some of that credit and lever it 100 to one by underwriting derivatives (I don’t mean to pick on JP Morgan, although it is by far the largest derivatives dealer in the world; others like AIG or other large Broker Dealers are doing the same). So of the $1.3 billion, let’s say JP Morgan keeps $300 million and then sells options to customers. It uses that credit as capital to support the trade; the trade itself is $150 billion in notional contingent liabilities. The notional amount of derivatives over the same period of time has grown by a scary $88 trillion. Derivatives are lending on steroids.
Besides, banks really do not need your savings. They don't need much in deposits because they can magnify money at least 10 times. If you put a single $1 note in the bank, by law, the bank can lend out $10 and, depending upon the reserve limits imposed by the central bank, possibly as much as $20. That means your single $1 suddenly becomes $10 or more. It's magic! When my 'rich dad' showed me that, I fell in love with the idea. At that point I knew I wanted to own a bank, and not go to school to become a banker.
Or just skip to the point where this point is explained. It begains at about 13:28 into the film.
The 9 to 1 reserve ratio applies only to the banks investors in a newely chartered bank! That is to the banks original investors, not deposits. After that the law kicks in that governs loans verses moneys on deposit. And that is 10 to 9, or 9 dollars can be loaned out for every 10 dollars on deposit.
It is al explained very well on the film. Just watch the part beginning at about 13:28 on the film and runs for three or four minutes. Just take the short time to do that and all this muddy water will be cleared up.
Banks rarely invest their own deposits in Mortgages these days. Banks usually off load Mortgage debt to the GSE or sell Mortgage backed bonds on the market (Syndication). They make money collecting service fees. This is why during the mortgage boom years banks were more than eager to loan money. They didn't own the debt, so if the borrower defaulted, they cared less. The more loans they made the more loan service fees they collected, but they don't make any direct money off the loan interest. Since the Banks don't own the debt the can issue as many billions or trillions they wish without violating federal (or state) banking laws. I believe HeIsSoFly doesn't quite understand how mortgage lending works.
Another common misunderstanding is how long term fixed rate mortages work. When a borrow gets a 30 yr fixed mortgage, the lender doesn't issue a 30 yr fixed bond to finance it. Generally a long term mortgage is financed with much shorter term bonds (2 yr, 5 yr and 10 yr). When the bond comes do, they re-issue a new set of bonds. They'll continue to do this until the mortgage is paid off. However, there is a risk factor. For instance lets say that a lender offers home owners 30 yr fixed at 6.00%. They calculate that the during the entire life of the loan, that they'll be able to issue bonds below 6.25%. Usually its a significantly lower since they make money off the difference. Now lets suppose that with in the next few years, the rates rise substantially, so that the Fed overnight rate is at 6.50% and the lender must sell a new set of bonds to finance a group of 30yr mortgages sold @ 6.00%. Can you see the lender's problem?
"World wealth isn't growing, world DEBTS are growing and the place they are growing the fastest is the US which is the sole terminus of world trade at this point. The biggest growth industry today is selling debt instruments. The entire existence of hedge funds, for example, is to funnel profits from uneven trade with the US back into the US via dumping debts onto the backs of any corporations that can run up more debts!"
Get it? It's all just recycled dollars — debt piled on debt piled on debt piled on debt — repeat ad infinitum. America's equities portfolio = 1% assets, 99% pure helium.
I thought that the news release from Southwest Airlines--probably the best, or at least one of the best, managed airlines in the world--was pretty interesting.
Southwest is offering buyout packages to about 9,000 of their highest paid employees--basically offering to pay them to go away.
The fundamental restructuring of the US economy from an economy focused on meeting wants into one focused on meeting needs has begun.
One of the many reasons that I recommended trying to live on half of your current income, as part of ELP, was that it would allow you to offer to take voluntary pay cuts in order to keep your job and benefits, at least for a little longer. You need to be thinking about how to become, or work for, a provider of essential goods and/or services.
This is an article from the EB, about a woman living in a 84 square foot space.
Recall our discussions about 100 square foot living spaces last year? I mentioned it in my August, 2006 net oil exports article: http://www.energybulletin.net/19420.html
WT: If you wanted to live that lifestyle, my estimate would be $7000 per annum in CR. Talking to expats in CR, it seems like the main obstacles to a really cheap existence in the USA are 1. health insurance (one woman alleges her bill for a family of 4 was $10000 per annum) 2.property taxes and 3. house insurance (for expats from Florida). The minimum charge to breathe the air in the USA seems to be increasing at a good clip.
JJ: Wow. I wasn't questioning her number, I just wasn't sure as I am in Canada and health care is almost free here. I think yours is the biggest bill I've heard.
You would think that if I cut the trees, mill the logs into lumber, and build the house on my own farm, I could make it however I wanted to. Think again. It's illegal to build a house less than 900 square feet. Period. Doesn't matter if I'm a hermit or the father of 20. The government agents have decreed, in their egocentric wisdom, that no human can live in anything less than 900 square feet.
Our son got married last year and wanted to build a small cottage on the farm, which he now oversees for the most part. Our new saying is, "He runs the farm, and I just run around." The plan was to do what Mom and Dad did for Teresa and I: trade houses when children come. That way our empty nest downsizes, and the young people can upsize in the main family farmhouse. Sounds reasonable and environmentally sensitive to me. But no, his little honeymoon cottage or our retirement shack had to be a 900-square-foot Taj Mahal.
Then build it 900 square feet. You just got to out think the Feds. Make all but 200 square feet Open to the outside via porches which are considered living spaces in most house plans. Move your kitchen to one of these porches and you have the ability to have a no heated area for cooking in the summer time and a heated kitchen in the winter time for added heat to your living areas.
I could with a few hours prep time draw up several ideas for a 900 square foot house. I have plans for a 450 square foot house that seconds as a 600 square foot house with all the covered decks and open roof design for star watching.
Just because a gov't agency tells you to live beyond your desires does not mean you have to cowtow to them, it just means you have to work around their petty rules and get better at design work.
Me and my dad discussed the fact that if we had cisterns in our yard we could have gotten over 2,000 gallon of fresh rain water over the past 2 weeks of rains. And if we had other systems in place we could rebuild the kitchen to house several renewable energy items while we rebuild it sometime this next year. He is working 48 hrs a week for a company that is in the closeout mode. They were only supposed to work 13 weeks, as it stands they have about 6 more weeks than that worth of merchandise to sell. But he is for once getting paid time and a half for his overtime. and he is working it just to catch up. But at 71, he is afraid that when he does stop work he will go down hill fast if he does not have something to do after this mess goes away.
We could get into the design and building of small cottage homes in the 900 square feet or less range.
Aww, just build it as small as you want, then put wallpaper on two of the outside walls and leave up a tape perimeter for the 'rest' of the mansion.. put up a nice, courteous sign saying 'pardon our appearance while we build'..
Sometimes its better to ask forgiveness than permission.
Building codes are why people are putting these little habitations on wheels. That way they become trailers, not "houses." A friend of mine in New Hampshire has done the same thing, because housing on wheels is not subject to property taxes. She has hauled her "Gypsy Cabin" up to a 340 acre hunk of land she owns in the northern part of the state.
I grew up in and around Central and Boston, MA, and have walked around Walden Pond many times, but that is the first picture I have ever seen of what Thoreau's cabin looked like on the inside.
Try this:
http://www.lifeaftertheoilcrash.net/Archives2007/blogcatastrophe.html
Matt: The Fitts book looks like a good read. Thanks.
Did someone say Fitts!
http://www.solari.com
http://www.solariactionnetwork.com/phpBB2/
Start up a good Peak Oil discussion. I'd like to see someone other than Daybrown post!
Fitts had the correct reply. The stock markets, interest rates, dollar index, and gold prices are all actively managed. The Fed (~JPMorgan) and Treasury (~GoldmanSachs) have all the tools required to prevent abrupt market discontinuities. The BOJ, BOE, and ECB are all partners in this process. There will only be a financial "crash" when and if the PTB want one.
In addition, for people who have significant investments, "crashes" can be immensely profitable. Selling some stock (even in Evergreen Solar) and buying some put options can put one in position to profit from a "crash".
As for real estate, the "crash" can't come soon enough for this renter. IMO, someone who bought their house or farmlet in 1977 should be very happy to sell it to me for a 1997 price and make a huge profit. But, they still are greedy enough to want a 2007 wishing price, which is at least twice a reasonable multiple of local income and no buyer will pay it. Bring on the "crash", please!
What is the BOJ, BOE, and ECB and the PTB?
Bank of Japan
Bank of England
European Central Bank
Powers That Be
MH,
I intend to poach you from TOD over to the LATOC forum. I can offer you lots of turnips.
Everything MH said about the PTB and a crash are pretty much dead-on, however, if the PTB really had all the power they think they do, and all that we attribute to them, we wouldn't be in quite the level of sh!t we are in right now.
The best laid plans, and all that.
And a crash can also be profitable a little later on when large amounts of material resources can be had for fire sale prices, but one again needs significant resources to begin with.
The rich get richer, etc.
710: TPTB are rich-they are getting richer-they are presently too busy to worry about everybody else's problems.
If I have a 5% fixed 30 year mortgage, and the bank has a call provision that allows them to call the loan at any time, and they can get 7% on their money somewhere else, why don't they?
If S&Ls made 3% fixed 30 year mortgages in the 50s and 60s, and the prime interest rate went to 20% in 1980, and the S&Ls can call in the loan, why did they choose to go bankrupt instead?
If a BANK is actually solvent but having a liquidity crisis, can't they borrow money from the federal reserve? Bears Stern investment fund I dunno, but if it was solvent, and Bears wanted to, I presume they could borrow money from somebody.
They would bite the golden goose that feeds them. As long as that mortgage is in their books, they can use it as collateral to go out and "fractionally invest" 10 times what the mortgage is worth. That pays far more than the 2% extra you mention. In fact, if they use your loan to raise 10 times what it's worth, and get 10% interest on that, their return is 100% of the loan, not some lousy 5-7%.
They'd be real dumb calling it in, it would kill the collateral, and hence the chance to invest.
What's more: it's not their money you borrowed for your home, they created it out of nowhere, it's not like they had it waiting in the safe when you walked in. They need just a few percent of it in their books, if that.
These funds consist of 95% borrowed money to begin with. They'd have to borrow money to save the money they borrowed to buy into vehicles that are now worthless. One of Bear's funds' big lenders is Merrill Lynch, and they got the ball rolling recently, by making a call on Bear. When they tried to auction off part of the funds' "assets", no-one offered more than pennies on the dollar, and the auction was halted.
So where could Bear borrow? Not at Merrill's. Other big banks? Not today, honey, I have a headache...
It strikes me that these big financial institutions have tons of money. So much money that they can hold $11BN of worthless bonds on their books pretending that it is still worth something. The tipping point will come when, in aggregate, the excess money sloshing around at these institutions dries up and they can't pretend any more. The only things we can be sure of are:
1. the real picture is highly likely to be worse, maybe much worse, than the publicly reported picture.
2. They will keep pretending as long as they aren't totally forced into some kind of liquidation
Hmmmm, sounds like other pictures, such as oil and energy and Global Warming.
Another finance company getting hit...
CIT Group Posts Unexpected Loss on Home-Lending Exit
http://www.bloomberg.com/apps/news?pid=20601087&sid=aal8W.hF.QpM&refer=h...
Hooray! That makes it 100!
http://ml-implode.com/
Damn, and just when I thought I understood banking! I always heard, from my economics teachers and other such no-nothings, that banks were allowed to loan out a given percentage of monies held on deposit. I believe it was 90% at the time but I would not swear to that.
But now I hear that this is not the case at all. That instead banks are allowed to loan out 10 times the money they already have out on loan. Well no, that's not really what you said is it? You say they can "fractionally invest" ten times the money they have out on loan.
Exactly what does "fractionally invest" mean anyway. Where would they get this money to "fractionally invest"?
I did a Google search on "Fractional Investment" and find it means to invest in a fraction of a property. For one million dollars you can buy a ten percent fraction of a ten million dollar property.
http://www.rees1031.com/pdf/fractionals.pdf
Uhhhh....now I am really confused.
What am I missing here HeIsSoFly, somehow that just doesn't make any sense at all. I need you to explain what you mean and do banking laws really allow this sort of thing.
Ron Patterson
Ron,
I am genuinely sorry that it's hard to understand, and humbly suggest Money as Debt to clarify matters.
HeIsSoFly, thanks for the link. I watched all 47 minutes and 7 seconds of it. It was excellent and I would advise anyone to watch it. Although I do not see money as the bogeyman the creators of the film obviously did, it was nevertheless very good.
I found the explination of how the economy must grow exponentially as we use, then throw away, our natural resources very interesting.
That being said, the film cleared up for me where you got the idea that banks were allowed to loan out or "fractionally invest" ten times the amount of existing loans. You simply misunderstood what the film was saying.
Banks were allowed to loan out ten times the amount of moneys that were invested, by the bankers, in the original bank charter. After that, as the film clearly stated, banks were then allowed to loan out 9 dollars for every 10 dollars on deposit in the bank. And that is the way banks create money.
A bank will loan out 10,000 dollars. The borrower then deposits the 10,000 back into the bank. New deposits! Then the bank can loan out another 9,000 on these new deposits. The borrower then deposits the 9,000 back into the bank. The bank then lends out 8,100 on these new deposits and so on down the line.
That is exactly how I learned it in economics classes and that is exactly how it is explained in this film.
Thanks again for the link.
Ron Patterson
Ron,
I'm glad you liked it, and yes, i agree, everyone should watch Money as Debt.
Your description of the process is exactly how I tried to describe it; the term "fractional investing" was half-jokingly used.
I was responding to the question why banks wouldn't call in loans if they could make more with "their money" elsewhere. As the film says: If there's no debt, there's no money. So that loan of yours is a prerequisite, and it's not so important how much the interest is. You are the vehicle that allows the bank to make money.
I like the following piece by Prof. Succo at Minyanville for describing the next phase in money for nothing and your chicks for free: derivatives.
FT's financial editor Gillian Tett wrote well on that topic too, see The Dream Machine, and estimated the trade at $470 trillion.
"Rich Dad" Kiyosaki put it this way:
Leanan, sorry dear but that is not the way it works.
Watch the film:
http://www.rees1031.com/pdf/fractionals.pdf
Or just skip to the point where this point is explained. It begains at about 13:28 into the film.
The 9 to 1 reserve ratio applies only to the banks investors in a newely chartered bank! That is to the banks original investors, not deposits. After that the law kicks in that governs loans verses moneys on deposit. And that is 10 to 9, or 9 dollars can be loaned out for every 10 dollars on deposit.
It is al explained very well on the film. Just watch the part beginning at about 13:28 on the film and runs for three or four minutes. Just take the short time to do that and all this muddy water will be cleared up.
Ron Patterson
And may I rudely add that Kiyosaki is a louse.
You want proof? The Google Corporation happily obliges:
http://video.google.com/videoplay?docid=-7039974980410674247&q=Kiyosaki&...
I think the term that you want to look up is Fractional Reserve Banking. See link for an explanation of Fractional reserve banking.
http://en.wikipedia.org/wiki/Fractional-reserve_banking
Banks rarely invest their own deposits in Mortgages these days. Banks usually off load Mortgage debt to the GSE or sell Mortgage backed bonds on the market (Syndication). They make money collecting service fees. This is why during the mortgage boom years banks were more than eager to loan money. They didn't own the debt, so if the borrower defaulted, they cared less. The more loans they made the more loan service fees they collected, but they don't make any direct money off the loan interest. Since the Banks don't own the debt the can issue as many billions or trillions they wish without violating federal (or state) banking laws. I believe HeIsSoFly doesn't quite understand how mortgage lending works.
Another common misunderstanding is how long term fixed rate mortages work. When a borrow gets a 30 yr fixed mortgage, the lender doesn't issue a 30 yr fixed bond to finance it. Generally a long term mortgage is financed with much shorter term bonds (2 yr, 5 yr and 10 yr). When the bond comes do, they re-issue a new set of bonds. They'll continue to do this until the mortgage is paid off. However, there is a risk factor. For instance lets say that a lender offers home owners 30 yr fixed at 6.00%. They calculate that the during the entire life of the loan, that they'll be able to issue bonds below 6.25%. Usually its a significantly lower since they make money off the difference. Now lets suppose that with in the next few years, the rates rise substantially, so that the Fed overnight rate is at 6.50% and the lender must sell a new set of bonds to finance a group of 30yr mortgages sold @ 6.00%. Can you see the lender's problem?
Seems as though the whole bond market is tanking. Check out the price of AAAs:
And some comments:
Some interesting numbers from the Housing Bubble Blog:
An interesting photo essay on the number of businesses that have shut down along a three mile long commercial area in Boston:
http://www.financialsense.com/fsu/editorials/nystrom/2007/0718.html
I've begun to notice a similar pattern in the Dallas area--businesses closing and no one taking over the empty space.
I thought that the news release from Southwest Airlines--probably the best, or at least one of the best, managed airlines in the world--was pretty interesting.
Southwest is offering buyout packages to about 9,000 of their highest paid employees--basically offering to pay them to go away.
The fundamental restructuring of the US economy from an economy focused on meeting wants into one focused on meeting needs has begun.
One of the many reasons that I recommended trying to live on half of your current income, as part of ELP, was that it would allow you to offer to take voluntary pay cuts in order to keep your job and benefits, at least for a little longer. You need to be thinking about how to become, or work for, a provider of essential goods and/or services.
WT: Another option, if one has a modest nest egg, is to relocate. There are gringos living quite well in Costa Rica on $20000 per annum.
Or live cheaply in the US: http://www.katu.com/news/local/8499817.html
This is an article from the EB, about a woman living in a 84 square foot space.
Recall our discussions about 100 square foot living spaces last year? I mentioned it in my August, 2006 net oil exports article:
http://www.energybulletin.net/19420.html
"Cheap is the new chic"
WT: If you wanted to live that lifestyle, my estimate would be $7000 per annum in CR. Talking to expats in CR, it seems like the main obstacles to a really cheap existence in the USA are 1. health insurance (one woman alleges her bill for a family of 4 was $10000 per annum) 2.property taxes and 3. house insurance (for expats from Florida). The minimum charge to breathe the air in the USA seems to be increasing at a good clip.
"alleges"???
Health insurance for my wife and I cost us over $14,000 per year.
JJ: Wow. I wasn't questioning her number, I just wasn't sure as I am in Canada and health care is almost free here. I think yours is the biggest bill I've heard.
Is it also true that the deductible for a single treatment can be as high as $10,000? I won't admit where I got that figure from...
WT, this absolute gem of an article has a different take:
Then build it 900 square feet. You just got to out think the Feds. Make all but 200 square feet Open to the outside via porches which are considered living spaces in most house plans. Move your kitchen to one of these porches and you have the ability to have a no heated area for cooking in the summer time and a heated kitchen in the winter time for added heat to your living areas.
I could with a few hours prep time draw up several ideas for a 900 square foot house. I have plans for a 450 square foot house that seconds as a 600 square foot house with all the covered decks and open roof design for star watching.
Just because a gov't agency tells you to live beyond your desires does not mean you have to cowtow to them, it just means you have to work around their petty rules and get better at design work.
Me and my dad discussed the fact that if we had cisterns in our yard we could have gotten over 2,000 gallon of fresh rain water over the past 2 weeks of rains. And if we had other systems in place we could rebuild the kitchen to house several renewable energy items while we rebuild it sometime this next year. He is working 48 hrs a week for a company that is in the closeout mode. They were only supposed to work 13 weeks, as it stands they have about 6 more weeks than that worth of merchandise to sell. But he is for once getting paid time and a half for his overtime. and he is working it just to catch up. But at 71, he is afraid that when he does stop work he will go down hill fast if he does not have something to do after this mess goes away.
We could get into the design and building of small cottage homes in the 900 square feet or less range.
Aww, just build it as small as you want, then put wallpaper on two of the outside walls and leave up a tape perimeter for the 'rest' of the mansion.. put up a nice, courteous sign saying 'pardon our appearance while we build'..
Sometimes its better to ask forgiveness than permission.
Building codes are why people are putting these little habitations on wheels. That way they become trailers, not "houses." A friend of mine in New Hampshire has done the same thing, because housing on wheels is not subject to property taxes. She has hauled her "Gypsy Cabin" up to a 340 acre hunk of land she owns in the northern part of the state.
Replica of Thoreau's Walden one room cabin c. 1850. Thoreau wrote of the virtues of a simple life on the land.
I grew up in and around Central and Boston, MA, and have walked around Walden Pond many times, but that is the first picture I have ever seen of what Thoreau's cabin looked like on the inside.
Thank you, it's quite inspirational.
Garth
Where do I fit the big screen plasma Monitor????
On the wall?