dbuckley
Senior Member
- Location
- Canterbury, New Zealand
Joe the Plumber has made the news here in NZ 
Clearly the ECs are doing it all wrong if Joe makes a quarter mill...
From where I sit many miles away - The American economy powers the world. Since the end of world war two the US economy has been driven by consumer spending, which until recently accounted for 70% of the US GDP. In recent years that money for consumer spending has come from folks "releasing equity" on their homes by taking out second and/or top-up mortgages.
Now house prices are on their way down, and the credit market is frozen.
The idea of pumping what I believe is now 2.5 trillion dollars of American taxpayer wealth into the markets is to get credit going again, so the money can start flowing again, but the problem is that homeowners have no equity left in their homes to mortgage (and many are in negitive equity situations) and now the banks are lending prudently again, they are (quite rightly) not prepared to lend to people who are over-leveraged.
So there is no consumer spending to re-start the GDP flow and best as I can see, there wont be any time soon. There is little manufacturing left in the 'states to generate real wealth through adding value to raw materials and subsequently through exports.
So in the short term, I cant see how this is going to end well.
Given America has a problem, the world has a problem, so even though our banks in Aus and NZ went no-where near the subprime mess that started this all off, they are still being hammered 'cos the whole world is being hammered.
And I've deleted the next paragraph as it could be interpreted as having strayed from economics into politics, and its best I dont even appear to have gone there
Clearly the ECs are doing it all wrong if Joe makes a quarter mill...
From where I sit many miles away - The American economy powers the world. Since the end of world war two the US economy has been driven by consumer spending, which until recently accounted for 70% of the US GDP. In recent years that money for consumer spending has come from folks "releasing equity" on their homes by taking out second and/or top-up mortgages.
Now house prices are on their way down, and the credit market is frozen.
The idea of pumping what I believe is now 2.5 trillion dollars of American taxpayer wealth into the markets is to get credit going again, so the money can start flowing again, but the problem is that homeowners have no equity left in their homes to mortgage (and many are in negitive equity situations) and now the banks are lending prudently again, they are (quite rightly) not prepared to lend to people who are over-leveraged.
So there is no consumer spending to re-start the GDP flow and best as I can see, there wont be any time soon. There is little manufacturing left in the 'states to generate real wealth through adding value to raw materials and subsequently through exports.
So in the short term, I cant see how this is going to end well.
Given America has a problem, the world has a problem, so even though our banks in Aus and NZ went no-where near the subprime mess that started this all off, they are still being hammered 'cos the whole world is being hammered.
And I've deleted the next paragraph as it could be interpreted as having strayed from economics into politics, and its best I dont even appear to have gone there