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Huff, Puff, and Blow Your House Down

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Wolf and straw house. Source: http://www.glala.com/m/_general/reports.asp?riIDReport=63&CAT=1The winds of the wolf’s breath are coming back to haunt us, again. Amid the talk of deflation and of falling house sales, gold has found its way to the $1240s, and silver is in the $19s.

It’s been two years since the crisis blew up, and people are still unemployed and still in debt. There are those of us in bubbles (and you guys know who you are… and I admit that I somewhat belong to this group, too) who are doing fine; we have jobs, we have some savings, and not too much debt. How do we reconcile this reality with the storms brewing outside?

Is the economic system a house made out of straw, or out of bricks? The clouds on the horizon are dark, and there is still no telling if they are headed our way or will simply pass us by in the distance. Is your own financial house in order, should the winds and the rains come?

Here are some interesting articles I read this week:

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Comments

  1. Gold and silver look a little frothy to me, but we are in unique economic times. I don’t think sovereign debt has ever been at these levels for so many countries….. and these levels of debt generally lead to one thing…. inflation and a debasement of the currency. We just keep piling more and more govt. debt on the mountains of debt we already have. When currencies go bad, where is there value?

    • Hey Biz,

      It’s so strange, because you would think things would be even worse with all of the bad news that you hear. Maybe we’ve simply adjusted to a new level of “normal”, and we’ve forgotten (or never knew) what things were like when the politicians didn’t attempt to tax and legislate everything in existence.

      I found your article relevant, so I also included it above!

  2. There’s no problem with the economic system other than it might be focused on growth a bit too much. It is the greatest wealth machine ever devised. Let people make up their own minds on what they want to do and let them keep much of what they produce – then get out of the way. Unfortunately our political system has built in incentives to get politicians to spend other people’s money and it’s subtle. It isn’t our money today but money in the future and it is being borrowed from other countries. I tell my students that if we went to the local mall and asked shoppers to explain the difference between the Federal Reserve and the U.S. Treasury that probably not 1 in 10 Americans could. We are learning the wrong things in school and it means that we do poorly in the voting booth. For democracy to work citizens have to understand how the economy works – especially as the system gets complicated.

    • I agree completely about the effect of incentives. All one has to do is look at Hong Kong and just across the border in China before China started liberalizing its economy with market reforms. Change the incentives, and you can change people’s behavior, for the better.

  3. I am trying to make sure my house is made of the strong stuff! Sadly I have debt but am working on killing that and creating a career online that will weather storms.

    Once I have enough savings to live for 2 years I think I will feel comfy but I may not get there soon enough 🙁

    • Two years is quite a bit unless you count investments as well 😉 I think my own house has some bricks, but the roof is still made out of thatch, so I need to be careful.

  4. Rememer, periods of pessimism are usually good times to add to one’s holdings of stocks!

    • Good point… and if we see a dip of 400+ in the fall, it could be a good opportunity to buy! We know our friend in Singapore is looking forward to DOW 6000 😉

  5. I love this picture of the classic story “The three little pigs”…

    I know your post is deeper than than, and my comment must seem like a child saying “pretty picture”… but it’s pretty cool!!! 🙂

    Perhaps I like to so much because it’s the one story that I read to both my kids over and over when they were very young…

    • I just re-read it when looking for the picture, and I didn’t remember that the wolf gets boiled and eaten up in the end. The story’s a little morbid, actually, but it’s a classic!

  6. I think our economy is made of cement houses. Undeterred strongholds!

    With 10% unemployment means 90% employment. Corporations are cashed up and going on an M&A spree, while credit is CHEAP and people are refinancing and leveraging up again.

    Things are getting better for sure.

    • Your house is probably a hardened castle that can defend against the best samurais, Sam, but is everyone’s? Cheap credit is what got us into this mess in the first place; have you heard about the politician that wants to restimulate housing by lowering lending standards? With QE2 potentially around the corner, I don’t think we’re out of the woods yet, and there are evil ninjas lurking about.

  7. I am retired, receiving nice pension checks and still working. My house seems to be built of bricks but hyperinflation could undermine it pretty quickly.

  8. I think even if it goes down for a while longer we are close enough to the bottom that there is a lot of money to be made by the average person. When we sold our small house in Las Vegas five and half years ago we got double what we paid and moved to East Texas so that we would own a larger house with no mortgage. In Las Vegas right now that same house would sell for close to if not less than I paid for it in 1997. There are so many opportunities right now. Almost makes me want to move back to Vegas and by another one. It may take twenty years for that house to double again, but when we sold the prices were so high that the average person couldn’t afford to buy.

    • The prices here in Canada have not come down, so the same opportunities are not present up north. If I had a large amount of cash to spare, though, I’d be looking around down south for some good buying opportunities!

  9. You people are the ones that need mental help. Stop standing on street corners with pictures of Obama with a Hitler mustache and get a real job. Whoever took the time and effort to make this site has a lot more problems than Obama and has a lot of growing up to do themselves.

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