There’s a house on my block
That’s abandoned and cold
Folks moved out of it a
Long time ago
And they took all their things
And they never came back
Looks like it’s haunted
With the windows all cracked
And everyone call it
The house, the house where
Once it held laughter
Once it held dreams
Did they throw it away
Did they know what it means
Did someone’s heartbreak
Or did someone do somebody wrong?
– Tom Waits, “House Where Nobody Lives”
This just in… Bloomberg reports that Americans continue to fall further and further behind on their mortgage payments.
Unemployment is rising. And now, carpenters, plumbers and even granite countertop installers are getting jobs with the banks. They’re finding work maintaining foreclosed houses.
Today, we’re still waiting for a bounce in the stock market, following last week’s big drop. But there was little change in the Dow. Nor was there any change in the oil market. The price per barrel stayed right where we left it last week – at $140.
No change in the dollar either – at $1.57 per euro. And gold? It stayed where it was too – at $927 per ounce.
Alan Greenspan was back in the news. He said, “risk was heavily underpriced,” last summer. Shame he waited a year to mention it.
As you know, dear reader, we think Mr. Greenspan did somebody wrong. He did the whole nation wrong – by handing out money and credit far too freely for far too long.
But Mr. Greenspan is retired. No point in criticizing him. He went on to say that housing remains a “critical problem.” Of course, housing is not a problem at all. It’s becoming more affordable. It’s only a problem for people who mistook the roof over their heads for a speculative investment. They thought it was something it wasn’t. Even for them, the current sell-off in the housing market is a good thing; it brings their feet back to terra firma.
The problem is that the correction in the housing market creates other problems. America is becoming a country of houses where nobody lives. Foreclosed and abandoned houses, and “see through” houses that never heard laughter and never knew dreams, are everywhere. Police say they are becoming a nuisance. Squatters move in. Transients. Drug users. Criminals and bums. Then, the houses become an even bigger problem for neighbours.
(We’re surprised. More people, as a percentage of the population, are behind bars in American than in any other country; it’s amazing there are even any jaywalkers or litterers still at liberty.)
Aside from that, the fall in housing values undermines the spending power of the typical American consumer. As Dear Readers know so well, Americans had become accustomed to spending money they hadn’t yet earned. They just used the rising value of their houses as collateral.
But he who spends what isn’t his’n,
Pays it back or goes to prison
You’d expect that they’d now have to become accustomed to NOT spending what they actually have earned. Debts have to be paid. Accounts have to be settled. Mistakes have to be reckoned with.
But heck this is the 21st century. There’s a report in today’s Financial Times that “consumers fail to save despite the gloom.” How do you like those consumers? Are they dumb…or what? We don’t know. People think there’s some magic, sweet spot in the universe where the old rules no longer apply. Many seem to think they will never have to pay back what they’ve borrowed. They think the government will bail them out.
Good luck to them…
The Daily Reckoning Australia