Disappearing Money
Aug 2nd, 2007 at 1:03 pm by Brendan
Before heading off for yearlykos, Susie sent me a spine-chilling piece of deflation and depression from the good folks over at The Agonist, which takes a look at how the sub-prime implosion may well instigate a depression. It’s a great read, and makes me feel alot better about my fixed-rate mortgage on my inexpensive house in Killadelphia.
I am beginning to see how money disappears.
It started when lending institutions loaned money to people on no-money-down, adjustable-rate-mortgages for homes and real estate, and in so doing created a buying frenzy. Good sales created competition and drove up real-estate prices. As values for real-estate grew in what was really a stagnant economy when looked at just from the standpoint of producing and selling products, people took out additional equity loans. Real-estate outpaced other goods in value for a number of consecutive years—somewhere around 15% per year. This could not go on forever. And it hasn’t.
[snip]
When all of his happens in enough places at the same time, the people wake up and realize they have no money. They tear up the credit card, leaving another unpaid debt, and consequently destroy more money, and start paying with cash which means they quit buying so much stuff because they don’t have enough money to do so. The stuff doesn’t sell, so the store lowers its prices. And it still doesn’t sell. Before long, the store is in trouble. As are the employees of the store. Stores close, more jobs are lost.
And on and on. Read the whole thing.
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Most anyone who’s interested in doing so can take a minute and realize that what’s been happening over the past six years is the looting of the US economy by means of a classic bait and switch con. Something for nothing always works.
I’ve been seeing this just based on fuel prices.
People pay more for fuel, don’t have money for much else. Everything else goes up, and people still buy less.
I drive a semi. I see exactly where things are going in the supply chain. I was laid off in July–despite a driver shortage–because my company quit running west of the Mississippi.