Ground Zero (Californians Lead the Way off the Cliff)

If you will think back you will remember that the economy suddenly began to turn around before WJC actually got into office. You radicals will all have to feel back since thinking isn’t allowed. If you’re in California join hands and share your feelings. At the time when good ole WJC got out of office he was trying to allow margin call trading on the stock exchange. He lost that one because it was one of the contributing factors in the Great Depression. I know a few people who were around back then. They didn’t think it was so great. But there is something that has made a comeback from that era and it is just as insidious. It is a lot like margin call trading only it is with houses. It is known as an interest only loan.

With an interest only loan one doesn’t have to pay anything against the principle for three to seven years. This allows some people to spend their money on other things rather than build up real equity. Many people have used this type of loan to purchase houses that are way outside their range. I read one comment from some guy that got one of these loans so he could buy his dream home. He said that if it weren’t for that loan he would still be a renter. Yes and one pill makes you bigger and one pill makes you small. It was like a fantasy land rant to me. He doesn’t realize that he is essentially still a renter and it’s against a loan he isn’t touching the principle on for years. The loan is also designed for people who aren’t planning on staying in that house for long. The only way they can turn any kind of a profit on it is to sell at a higher price the next time. Eventually this will reach critical mass and trigger the breaking of that bubble. On fine day even the silly people will admit that well you just want too much for that house. That is when the bubble will break.

Here is one comment from Bankrate.com that says it all: “The concept is not a new one; back in the Roaring Twenties, interest-only mortgages were commonplace. At the end of the term, homeowners typically refinanced. The system worked great unless your home lost value or you lost your job. Which is exactly what happened when the Great Depression hit. Foreclosures skyrocketed and lenders abruptly stopped writing interest-only loans.” They went on to say that these types of loans continued to be used in Great Britain.

Do you think for one moment that it is an accident for this to be happening at a time when we are losing jobs? Right now seventy percent of the new loans in San Francisco are interest only loans. A few years ago it was about three percent. This kind of loan reemerged about the time that Bill Clinton was leaving office.

When this bubble breaks all of the demagogues will begin to crawl out of the woodwork and from under rocks. I can already hear the war cry. “It’s the Jew bankers that did this to us.” Do you know what happened after the roaring twenties? The Nazi’s emerged. This time it will be here. Before they all begin making their claims I would like to make a point to all of the conspiracy nuts out there. I’ll even put it in quotation marks so it will be more quotable.

“Yes maybe it was a conspiracy. There is a problem with conspiracies; they only work on corruptible and stupid people. Jews didn’t do this; we did. This was done to us by people who were supposedly educated in our universities. It was done to create the environment required to foment revolution. And because of this, we in America are no longer allowed to be amused that a bunch of Indians gave us an island for a bunch of beads.”

When the bubble breaks in the home state of Barbara Boxer and Diane Feinstein it will spread across our entire economy. This is nothing more than another tentacle of the red octopus.

R.A. Hawkins is the author of "Through Eyes of Shiva", available through http://www.amazon.com/. Visit Entropical Paradise - The Home Of R.A. Hawkins for more commentaries and editorials by R.A. Hawkins.

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© 2005 R.A. Hawkins