Glenn Beck: Warning signs missed on economy

CNN.com ^ | January 18, 2008 | Glenn Beck

[rightwingintelligentsia]

NEW YORK (CNN) -- Longtime viewers of my television program know that I've been banging the recession drum for a while now, but the truth is that an economy as large and complex as ours doesn't just collapse overnight. It happens slowly and methodically, with plenty of warning signs along the way.

Think about it as a series of waves heading toward the beach, with each one representing a different area of trouble. There's one for slowing consumer spending (American Express said that spending among its affluent clients slowed for the first time since 2001); one for inflation (wholesale and consumer prices recently posted their largest increases in 26 and 17 years, respectively); and one for the continuing credit crunch (Citigroup recently announced its fourth-quarter loss was the largest in its 196-year history).

But while those waves are the latest to form, we need to pay more attention to the wave that started it all: housing. In theory, looking closely at the housing market in some parts of the country could help predict what's in store for the rest of us. And if that's true, then buckle up.

If you look beyond the headlines, you'll find a couple of unnerving trends. The first began back in the housing collapse that followed the savings and loan crisis of the late '80s and early '90s. People with homes worth less than their mortgages simply stopped paying, put their keys into an envelope, mailed them back to the bank and just walked away. It's called "jingle mail," because when the banks receive the envelopes, all they hear are the jingling keys.

[rightwingintelligentsia]

Hmmm . . . wonder why CNN put this on their front page?

[in hoc signo vinces]

Yep...CNN loves when a conservative guy starts beating ye ole Democrat Drum...the economy isnt in a recession Glenn...let’s be honest...

[Codeflier]

Actually, if you read the whole thing it really argues for a massive tax cut.

[sauropod]

Maybe not now, but it’s coming and boy is it gonna be a mother...

[Domandred]

the economy isnt in a recession Glenn...let’s be honest...

Just wait. There's a storm coming.

[Edit35]

CNN, CNBC, the Democrats, and all lib-supporting news outlets have been pushing and pushing for a recession the past three years.

HOUSING CRISIS!! — the headlines read over and over and over in 2004, 2005, and 2006 — until people began to believe it... and thus changed their normal business habits and buying, etc.

Contrast THAT with how those same media outlets pumped up the “no earnings” economy of the late 1990s.

[pgkdan]

Glenn Beck: All the Doom and Gloom in the world, all in one convenient spot. If you ever feel the need to be depressed, anxious or afraid...just give the Glenn Beck show a listen.

He's turned into a real prophet of doom lately...if it's not the immenent collapse of the world into war then it's the greatest depression ever known to man. He needs to start taking his happy pills again.

[dawn53]

And instead of tax rebates, which are like economic crack because they result in a temporary high followed by an even lower low, how about we put some lasting trust back into the system by slashing government spending and finally sending the signal to businesses that taxes won't be going through the roof next year? After all, no business owner -- including small-business owners like me -- are going to start expanding if they believe that our tax rates are about to skyrocket. That's why we've got to take away that uncertainty, cut corporate tax rates -- which are the second-highest in the developed world -- and watch as American businesses once again bail us out by creating thousands of jobs that pump billions of tax dollars back into Washington.

You're right, he's arguing for tax cuts, and rightly so.

[rightwingintelligentsia]

I like Glenn, but I have to agree he’s been a downer lately.

Stu is actually a voice of reason.

[B4Ranch]

A recession is when your neighbor loses his job. A depression is when you lose yours.

I hope you don’t lose yours.

[shadeaud]

Sounds like the Global Warming scam to me. Find some facts, add a dash of theory, fill with fear and destruction, shake till the cloud of confusion is thicker than a morning fog in London and whammo you got people toward you for salvation.

[Always Right]

Yep...CNN loves when a conservative guy starts beating ye ole Democrat Drum...the economy isnt in a recession Glenn...let’s be honest...

The indicators are pointing to one. Of course we won't actually know if this is a recession until 6 months from now, but there has been a significant slowdown in production.

[atomicweeder]

I may be old and foolish, but I think the housing crisis represents an adjustment caused by supply and demand. There was a belief that you could get rich by flipping a house, so builders responded by building lots of houses -- just generating excess supply.

Since demand was not equal, the bottom sort of fell out. I say "sort of" because houses are still being sold, just not at the prices and the volume of two or three years ago.

Soon enough, increasing population, and upward mobility will cause the excess supply to get used.

Example: In 1982, I purchased a townhouse for $70,000 in Northern Virginia. Five years later (1987) the price had doubled, peaking in our neighborhood at $155,000. Thus, an approximate annual return of 17%.

Then there was a softening of the market. Nine years later, in 1996, I sold it for $140,000. (I did not sell earlier because I was not ready to move). So, at $140,000, I realized an annual return of 5%. A CD would have been better, but I would have then been paying rent elsewhere.

In mid-2006, these townhouses peaked again at $400,000. From the original price, that represents an annual return of 7.5%. But for the person that bought mine in 96, they got an annual return of 12%.

This year, they are running at about $380,000, which represents an annual return of 7% since 1982.

[Sender]

I've been applying for jobs since Thanksgiving, and with almost 30 years experience, I can hardly even get a reply saying "no thanks".

So, personally, I am already in a depression. It's a tough world out there right now.

[Son House]

those same media outlets pumped up the “no earnings” economy of the late 1990s

Busted again! Seen so many dealer new car plates lately I could begin to tell how stupid folks are to worry about a normal economic cycle even if there was a recession, can’t have the good without the bad. Discount tires was also so busy on a Friday night, I waited to have the tires rotated. Only those moving out of stocks are going to suffer any recession.

[rstrahan]

The economy over the last 8 years has been built on the housing piggy bank and consumer spending. It hasn’t been built on real wage increases, because wages have been flat at best. Worse, if you’re over 50, you’re a drag on the company and companies are routinely “restructuring” to remove older, higher-paid employees. The most striking was when Circuit City fired everyone making over $9 per hour, saying they could pay $8 per hour if the people wanted their jobs back.

So, people flipped houses on the basis of fraudulent lending practices and loans that no one in their right mind would take out, pushing house prices into the stratosphere, creating a huge Ponzi scheme. For the ones that got in then got out, they made good money, as usual. Now, the ones at the top are finding that there actually is a top. They can’t refi the home to fund their car payments, etc. So, a major portion of what they were planning to live on is gone, never to return.

Finally, corporations cannot get loans for expansion, etc. The Cosmopolitan project on the Las Vegas strip, a 50 story casino, hotel, and shopping center complex, was just posted for foreclosure. Not because it wasn’t appropriate for the area, but because the developer is having trouble getting financing to complete the project, since banks are cash-crunched.

So, we’ve got declining wages, an economy built on consumer spending, and there’s much less money for the consumer to spend, and lenders who won’t lend to support the spending of the consumer, the investor and the builder.

I’ve seen this before, and it took over 5 years to work it out. But this time, it’s national, not regional.

For those of you who don’t believe it’s going to get rougher, go ahead and run up those credit cards. You’ve not seen anything, yet.

[cinives]

Tell them you only have 15 years experience and the job market dramatically opens up.

[Biblebelter]

I am a conservative, and I am pretty gloomy about a lot of things. I keep asking how did Jorge and his Republican majority for six years move the country toward a more sound economic footing? The other question is, when will the Republicans have another opportunity to hold the White House and both houses of Congress? There is a chance that those six years may be as good as it gets for quite a while.

[mysterio]

70 percent of our GDP is people buying crap. What happens when people stop buying crap because their credit cards are maxed out and their heat bill this month is $300 and the car needs filled up and that costs $40 instead of $15?

You guessed it.

[Sender]

LOL, I might try that. I don’t look 50, so maybe I should change my age too. Maybe 39, with 15 years experience.