Reply #6: Well since you ask,, [View All]

I'll just say it's something I've been looking into. I could never figure out why our economy kept chugging along so well, even after we sent all those manufacturing jobs overseas. We have a horrible trade deficit, we mostly only produce services for each other.

So why are economic numbers so good?

I'll take a stab at it, but do your own homework, don't go on my word.

After 9-11,,, who knows, maybe before,,, the Fed "injected" tons of money into our economy to keep things moving. I don't know how they do it exactly, but it's creating new money. This new money goes to banks to be lent it to anyone and everyone for houses. They didn't care if you could pay the loan back, because they would sell the loan. Someone else's problem.

This money had a huge affect on prosperity. People bought new homes who never dreamt it possible. More money created more buyers, and more buyers created higher home prices. And higher home prices created wealth. People could take this new money out of their houses and spend it on upgrades, cars, boats, colleges, whatever the need was. Even if you decided not to touch your equity, since you now had your retirement "covered", via the appreciation on your house, you wouldn't need to save as much and could spend more of your take home pay.

Realtors loved this set up. Builders loved this set up. Granite tile sellers loved this set up. And why not? Everyone was making money and it seemed we didn't need an economy that produced good jobs, because smart people knew how to make money in real estate. They even had actual shows on tv about flipping houses.

But an economy not built on solid ground can falter. This turned out to be a pyramiding scheme. Lot's to say about those, but one thing that it does need is continuing growth. When growth slows, in this case the real estate market, the whole system becomes unstable and wants to fall over.

The hole in our armor this time was greedy mortgage lenders,,,, remember the guys who gave mortgage's to anyone? Yepper, they didn't care, because they sold the loan later. So they sold off lots of this stuff to buyers all over the world. These foreign interests figured that with the American economy as strong as it was, it was a rock solid investment.

Nothing could be further from the truth. It was a ponzi scheme and they got hit hard.

I don't know what long term affect that will have on our international monetary relationships, but I guess it won't be good.

So now things are going in reverse. There is less money available to buy homes, so buyers buy less. Real estate value falls. Realtors, builders, home supply companies all getting hit.

This is the part I'm trying to get a handle on. I think many of the "troubled" banks are actually bankrupt. I think that it's not the money they lost that is so important to them. I think since the system has slowed down, the entire American banking system, as well as the Dollar are at risk of collapsing. No oil in the motor and it seizes.

This will have a dramatic affect on the dollar.

What happens when a society only "uses' and doesn't produce?

My guess is you're going to see foreign money come in a big way and start buying up land....

They want something real for the phony money we've been selling. They need to dump dollars as quickly and quietly as possible. Real estate is a good way to do that.

Just my very disorganized, scattered thoughts. Still a work in progress. I'm open to ideas.

Here's a link. There's plenty of other info available..

http://video.google.com/videoplay?docid=8300027528248281842&q=money+and+banking+video&total=698&start=0&num=10&so=0&type=search&plindex=2