How do you cause the US economy to fail??

There are a few parts of the US Economy that are so significant that if they fail, the whole economy takes a huge hit. One of those is housing. If you don’t build houses, you don’t need shopping centers, or schools, or highways, or streets, or water / sewer plants. So, other than maintenance requirements – the Construction Industry takes a dive. 1/3 of the workers in the US are construction workers – that, my folks is a HUGE portion. If they don’t have money to spend – retail tanks. Grocery stores, clothing, automobiles, refrigerators – everything that people buy costs money, and if 1/3 of the people don’t have money – guess what happens to all the business’s they can’t buy from, and all the people who work in those businesses – DOMINO. The US Economy tanks.

Now, normally when the housing market falters in one area, it picks up in another area – for regional business reasons. Such as – land / houses get too expensive in one place for the wages, so folks move to less expensive areas – which then build houses for them, and industry moves for the lower property rates too – and so forth – so, the odds of a the Housing Industry Faltering Nationally is so small, it wouldn’t be considered as a serious consideration. But, what if you could make that happen? Hmmm… What if you did several things that most folks would not piece together as a total – and you managed to trash the housing market Nation Wide???? DOMINO…

What if an economy is robust, everybody is working – the jobless rate is lower than we would expect to see just from people who are in between jobs by choice. There is literally so much work, we can’t get workers – you know, like it has been for about 3 years (ending right after the elections last year). And one political party starts telling all its members over and over and over that the economy is tanking – for 2 years. Ever since the previous legislature election in which they did not win. And, what if those folks who don’t personally check the facts out ( and to be honest, that would be the majority of the folks of EVERY political party) – hear their party leaders and act accordingly – cut back on spending –“ hey, I may be rolling in money, but apparently lots of other folks are not – so I better cut back because my party leaders are telling me hard times are here”…And what if that party was about 50% of the people in the US – NATION WIDE? That’s right, what if nothing is wrong – but ½ the people cut back on spending NATION WIDE? Wanna guess??? One thing they quit buying is houses…big ticket item. People stopped buying houses in the midst of one of the most robust economies in history, so builders stopped building them. DOMINO….what falls next – people are out of work, foreclosures start happening…

What if some folks in the legislature get together and change the rules on buying houses – Nation Wide? What if they said that if an investor buys a house that is in foreclosure, then the investor has to sell the house back anytime within 2 years for the same price paid. Now the investor takes all the risk, and if the market pulls out, or the seller’s financial position improves within two years – the investor has to give back the house and all of the profit -- so, why would the investor take all the risk, just to give any potential profit away? THEY AREN’T – INVESTORS HAVE LEFT THAT MARKET. So, then you end up with a lot of houses going into repossession, that otherwise would not have. Even almost brand new houses. And the Legislature is right on the spot to make sure we all know about it – which tends to prove that the economy is tanking ( unless you realize the Legislature caused it to tank). DOMINO…

So now the Investors can buy the house on the courthouse steps at the repossession sale – for even less. The original owner’s credit is ruined, the lender looses money, and the investor makes out. Hmmmm. But, what if you also change the rules on buying houses again? Normally an investor shows up at the court house steps with a credit line – and uses it to buy a house. Then ASAP, the investor takes out a Home Loan for that house – pays down the credit line – and can go do it again. So – what if the legislature changes home lending rules to make it so you can’t re-finance a house within 6 to 9 months after you buy it? The investors can only buy one house every 6 to 9 months – suddenly the lenders can’t even sell the houses at auction. And again, the Legislature is right on the spot to make sure we know it which tends to prove that the economy is tanking ( unless you realize the Legislature caused it to tank). DOMINO…

Then what happens if the Legislature has an interview with the Feds who make home lending rules ( I watched it – saw the lips move – heard the words), and the Legislature tells the Feds that they simply do not understand economics – imagine that. The Legislature claims to have statistics that show that the average home loan that does not default has a 19% down payment. The average home loan that defaults has an average down payment of 9%. No mention of where they got those “statistics” ( I wonder why). Then they say that based on their research, lending at 9% down or less is not prudent. It should be a minimum of somewhere between 9 and 19%, if not 19%. Now, other than 2nd or 3rd time homebuyers moving up in the market – I have never heard of someone putting 19% down on a house – even in the 1970’s when houses where $30,000 – we were scrounging to get the 3% down for an FHA loan, and the additional 1/2 point it costs for the FHA Loan Insurance. And we didn’t default. Well, I can tell you what happens – that conversation scared the living daylights out of the lenders – and they laid off thousands of workers and closed hundreds of offices, and canceled thousands of loans – all across the Nation…THE NEXT DAY. Who wants to take a chance on the Legislature passing something that finds any loan with less then 19% down as being Not Prudent Lending – and doing something similar than they did to investors? Better to stop loaning money, than to have to forgive a bunch of loans…DOMINO…

RECAP: First, they worked very hard to convince folks the economy was bad – when obviously it was not. Which caused people to quit buying houses, SO the economy did start to tank. I say SO to point out that the economy started to tank BECAUSE people stopped buying homes, rather than people quit buying homes because the economy was tanking…
Next people who were out of work due to housing shutting down, began to have loans go into foreclosure - so they made it difficult to sell a house if the owners could not make their payments, causing the houses to go into repossession.
Next they changed the rules so that people couldn’t even buy houses in repossession – so the lender got stuck with the houses…

Next they threaten to change the lending rules – and the lenders gave up.
And as a result – the Legislature has caused a Nation Wide Housing Stoppage. DOMINO – our economy now truly is in peril!!!

WHY, WHY, WHY. Because they needed our economy to tank, so they could get elected, and then get the Presidency. And who gets hurt – all the little people. And the gamble is that right after the next Presidential Election, they can reverse all these new rules and threats – and the economy will recover – and they can say WE SAVED THE ECONOMY ( which they caused to fail).

What if it tumbles so far, they can’t save it? What if they cause a depression? What about all the little people they are harming – you know, the ones they claim to be fighting for? And who wins in two years – who owns all those houses? The big big lenders who can afford to let inventory sit. And who is the winner in the end? Those big big lenders – the same folks our Legislature says they are defending the little guy from…

Hmmm…

Pete