The Next Hit Coming for the Economy


	The Next Hit Coming for the Economy

CulturalEngineer

11-9-2009 8:52 AM

2620 views

tags:

economics, politics, social contract, social networks

CulturalEngineer says:

Full article has specific excellent examples. There are vast distortions in both valuations and wealth/income distribution which are extremely dangerous to the social contract! Further brief comment at http://singularitygov.blogspot.com

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/a944d365-6b8c-4e21-acd7-4441b685c2b3/67A532FA-1DD9-4C27-AA2C-2BCA48232A91/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.businessweek.com/magazine/content/09_46/b4155042792563.htm?chan=magazine+channel_top+stories" href="http://www.businessweek.com/magazine/content/09_46/b4155042792563.htm?chan=magazine+channel_top+stories" style="font-size: 11px;">www.businessweek.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563.htm?chan=magazine+channel_top+stories"><H1>Why This Real Estate Bust Is Different</H1></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563.htm?chan=magazine+channel_top+stories"><H2>
Unrealistic assumptions, layers of investors, sky-high prices, and possible fraud will make it hard to clean up the mess in commercial real estate
</H2></blockquote><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content8.clipmarks.com/images/clip-icon.gif" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm" href="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm" style="font-size: 11px;">www.businessweek.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm">The market won't fully recover until 2020, says Kenneth P. Riggs Jr., CEO of Real Estate Research, and in cases where "values were over the top...maybe never."
</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm">In the short term, toxic securities are creating a new problem weighing on the market</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm">And yet the securities are only a secondary problem. The main driver of the commercial real estate bust is the underlying loans.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm">Commercial lending mirrored mortgage lending in another way: Loans were made based on an unshakable belief that the market would never go down.</blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.businessweek.com/magazine/content/09_46/b4155042792563_page_2.htm">When the numbers didn't add up, some lenders got imaginative. Says a banker at a large Wall Street firm: "If the cash flow wasn't there, you had to ignore it or find ways to create it."
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