Blog > Politics > Blog article: Economic crisis: The candidates program for sustained economic calamity
 | Email This Article Email This Article  | 

Economic crisis: The candidates program for sustained economic calamity

Posted January 11, 2008

Blogger's Note: Increased government spending seems to be the cornerstone of the program of all presidential contenders — and all road lead to economic crisis. I found this well-written article on the site of a guy who calls himself the Truth Mason. Thought I pass it along. 

Baltimore — (TFN): Every "top-tier" candidate has their own plans to address the problems in our society, but every plan presented by any of top tier candidates has one thing in common: increased government spending. The republicans want to borrow and spend while the democrats want to tax and spend. Both choices ultimately severely harm the economy; the only difference is when and how.

By now most people have heard of the housing bubble and the subprime slime that is causing runs on major banks across the globe and is threatening to bankrupt Countrywide. The root cause of this problem is people defaulting on their mortgages because they are unable to refinance out of toxic adjustable rate mortgages. They cannot refinance because the market price of their house has fallen below what they owe and interest rates are higher today than they use to be. As more people default, the prices will continue to spiral downward until the price of a house is inline or below its true economic value, the rent income that it could generate.

All things considered the price of a house is directly linked to supply and demand. Supply has gotten out of hand as people were speculating, but demand is where the biggest problem is. Demand consists of those people willing and able to buy a property. There are always people willing to buy a home (particularly when prices are climbing at 50% per year), so the primary driver in this market crash will be those that are able to buy a home.

The ability to buy a home will be hurt significantly by the Democrats who wish to raise taxes to pay for universal medical coverage, universal pre-k, etc. Every additional dollar they tax out of us is one less dollar available to buy a house. Because the monthly payment is the primary consideration in buying a house, each dollar per month someone loses represents $16 lost on the value of all houses (6% APR). The more they tax, the lower home prices must go. Those who can barely afford their house today will default on their loans. The lower prices go, the more people there will be that owe more on their house than its market value. When they default the banks will be taking significant losses.

Click here to finish reading this article. 

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. Click here to pick your favorite reader. If you prefer to have the feed delivered to your email, just click here. 


Related Articles


Posted by TFN · Filed Under Politics 

Comments

close Reblog this comment
Powered by Disqus · Learn more
blog comments powered by Disqus