Forum Archive Index - February 2004

[nickk@quicksilver.net.nz]

Allan 

It is fascinating to get a real life US persepctive on this.  Many thanks. 

FYI - At work we gave a seminar to businesses about 5 months back on the 
state of NZ economy et al.  The chief speaker is one of New Zealand's 
leading economists (I won't name  him).  He said that only thing holding the 
US economy together was the housing sector and when that collapsed and/or 
when the extent of private borrowing became apparent (as it seems it is now) 
the US would be in real trouble. 

Occasional updates would be appreciated Allan. 

Gooner 

Allan Potts writes: 

> 
> Bill, 
> 
> Unfortunately, the word "trend" should have been replaced with "avalanche" or 
>alternatively "tidal wave". 
> 
> Sadly, it is my forecast that within the next 18 months the rate of 
>foreclosures in the U.S. will reach those ominous descriptions. 
> 
> It doesn't take a degree in economics from Harvard to figure this out.  
>Sadly, too many Americans are drowning in debt, yet continue to borrow on the 
>equity in their residences, run up credit card debt and buy new cars.  When 
>interest rates start to rise, and they will, as we say here -- "Katy bar the 
>door".  
> 
> It will take about four to five months after the second rate hike to put a 
>large percentage of the population in the bankruptcy courts.  Many people now 
>have 0% interest rates on their maxed out credit cards.  When the "free ride" 
>period is over the rates go to 7.5% to the most credit worthy people (who 
>normally do not max out their credit cards anyway) to more like 12.99% up to 
>22 to 23% for the least credit worthy that still can get credit cards.  Add to 
>these rates 1 to 3% and variable mortgage rates increasing at the same time 
>and you can see what is going to happen. 
> 
> To make matters worse, the overinflated price of real property will be 
>plummeting and many many people will find themselves with a mortgage far 
>greater than the value of their property.  As Yogi would say "Deja vu all over 
>again". 
> 
> On that cheerful note, I'll bid all -- a good balance of the weekend. 
> 
> From the U.S. Allan  
> 
>  
> 
> 
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