Are we seriously all screwed? (credit crunch question)

Last couple of weeks the media has been sounding the end of civilization as we know it, biggest market crash since X, start of a new great depression, some even more scary shit on various blogs I’ve read. Now I’m really worried - don’t want to end up eating the family pets I’m quite fond of them. A recession I could live with, have seen those before. But are we in for something much worse that’s well outside most people’s experience? Are the various bailouts and interest rate cuts etc going to help or is that all like pissing on a burning house? How soon will be know one way or the other if this will be a footnote or chapter in the history books?

Sorry if this has been asked/answered already.

Part of me thinks this is just the next “Big Media Scare” but this seems worse than Sars, Bird-flu,Terrorism etc…

Media loves a crisis.

It’s a chapter in the history books already with the demise of the big investment banks. It’s too soon to say exactly how it’s going to shake out, but the right people are taking steps to minimize the damage.

Well, Gulliver put out a rather nasty palace fire by doing just that - and it got him into trouble.

Personally I don’t think that the interest cuts matter a jot, but the bailouts and direct Govt intervention should do the trick. In the 1980s a good part of Western banks were technically bust after over lending to S. America etc we got over it.

Admittedly, this time there is more complexity - and panic mongering - however Govts seem determined to sort things out, rather than let nature take its course. An encouraging sign if one considers that economics degrades into mass psychology.

I just keep thinking back to the 1987 crash, and how reports at the time made it seem like the Apocalypse. In fact, life soon returned to normal .I know there is more going on this time than just a stock market crash, and I realise there were recessions in various countries a couple of years after the 1987 crash. But in the case of the British recession of 90-91, it was made worse by the government trying to keep the pound in the ERM at an unsustainable rate, with interest rates climbing to absurd levels.

So until I see actual signs of serious trouble in the real world, I have decided not to worry about it too much.

Am I the only one that thinks the timing of Columbus Day this year couldn’t be more fortuitous for the US? Gives an extra day for Wall Street to take a deep breath and get their spazzing under control…

What I keep hearing is how nobody is able to get auto and home loans.


Last week I bought my wife a brand new Jeep. No trade in and I only put $3500 cash down on it. I financed the rest for 5 years at 6.9%. No problem getting it. And financing wasn’t through the manufacture either, it was a bank.

Exactly 1 year ago I bought a new Mustang. Put the same amount down and financed about the same amount as the Jeep also for 5 years. The best interest rate I could get at that time was 7.2%. Absolutely nothing has changed in my income/credit rating since then. Actually I’m earning less money right now because I’m semi-retired. I always get car loans @ 60 months and pay more towards principal paying them off in 30.

So what gives? Is this “you won’t get auto/home loans” story a scare tactic, or is my credit score just real good.

Well, you probably have a good credit score AND you put money down - what I’ve heard is that is you put money down you can get car and home loans, but so many people are over extended on credit with no savings that they can’t cough up a downpayment.

Actually, if you were always a good credit risk, you will surely benefit from this mess, as you will get better rates, deals, etc. If you have been leasing cars on bad credit, getting by without putting money down or rolling trade-in deficits to new loans, hold on to your friggin’ hat.

A common scene goes like this:

You are a credit risk who is driving a Lexus that you should never have been given a lease on in the first place. You reach the end of lease and go to return the Lexus and now want another super duper lease special w/ no money down on a 615 credit score. They turn you way because you credit score is low and you have nothing to put down.

Now you go from driving a Lexus to taking the bus, because you have no cash on hand, you can’t get a car loan of any type, and your leased car has now been returned.

This is a big problem. A huge group of borrowers have no cash in the bank, are bad credit risks, and they’ve been driving expensive cars for 499/month for the past three years.

The ride is over. Unfortunately a modern recession has now come to mean that a person who has been driving a Lexus for the past three years with no money/credit is back to where they should be: taking the bus.

Or it means you can’t buy a 55" plasma on some stupid deferred interest plan until 2012. It means you are stuck with regular def for a few more years.

And for homeowners who had no money/credit, they have to go back to renting.

So alot of people lived a false reality for a few years. So, to me, recession means: Back to reality.

Amen. Media outlets love headlines of “Apocolypse!” “Armmagedon!”.

“Sources say we will suffer another major terrorist attack this summer!!”
“$3 gas gone forever! $5 by end of year!!”
“Markets fall! Experts say the worst is yet to come!!”

On NPR, they were talking with a former head of the World Bank, I looked for a cite but couldn’t find it, and he said that he thought that the US Goverment would likely make money off of the mortgage packages they were going to acquire and that it wouldn’t take $700 Billion. . . But, he also said that the whole crisis was due to the way Derivatives were valued, and if that wasn’t fixed then we would be back in the same situation in another 10 years. But, overall he was surprisingly positive.

Did anybody else hear that? Who was this guy?

Unless you were living on the edge or you lose your job during this, you should be relatively unaffected. Yes, your 401k will go down… but then back up. In the end, for dudes like me with good credit, not over-extended, and a decent salary, this whole thing will blow over with a little less in my 401k.:frowning:

And I too just bought a new Volvo and had dudes falling over themselves to loan me the money.

Actually, I HAVE lost my job during this… but because I wasn’t over extended or in debt I am able to pay my bills and shouldn’t come out too badly from the whole mess. So even losing a job shouldn’t cause your entire world to blow up IF you’re living within your means…which few people seem to do these days.

I am hoping that at least one good thing will come of this; that those of us who have good credit and have been living within our means will actually be able to afford to buy a place to live once we save up a down payment. Now that both of us are fully employed, we should be able to sock away a fair amount of cash over the next year or two, provided we can hold onto our jobs. My car has been paid off for years, but has hardly any mileage on it, so as long as it doesn’t die, shortly my only remaining debt will be a student loan payment (which is deferrable if I am unemployed).

One of the main reasons I hadn’t bought a place so far was that it would have cost me well over what I was paying in rent in monthly mortgage, etc. payments to buy a condo. I’m sure some bank would have been willing to give me a 5% down mortgage with good credit, but I wouldn’t have been comfortable with how tight my budget would have been given what the monthly payments would have been. At least even if banks start requiring more substantial down payments, the monthly installments on the balance will be lower. That, combined with falling real estate prices, may make home ownership actually affordable for more people who have behaved themselves financially. :: fingers crossed ::

If you are a 1st time homebuyer, your city or county may have some nice help programs for you.

I am, but I’m not buying anything just yet. I’d been covering basically all the expenses for both of us for the past year, until my BF got a job, so things have been rather tight. (Plus I am about to kill off the last bit of credit card debt in the next couple of months.) We would both like to have some kind of savings cushion in addition to a down payment, plus neither of us thinks the housing market has bottomed out yet, and I don’t think it will for at least a year or maybe two (confirmed by a fund manager friend of mine - even he is not ready to buy a place just yet for that reason, and he just had his second kid).

Except the markets are open today And doing quite nicely, thanks to Paulson deciding to invest in the banks (up > 550).

I agree that those of us who save and have no debt are going to get some good deals. There are going to be immense sales for Christmas, for instance, because people are cutting back. I also agree this might scare people into living on their incomes, not on their credit cards. Card debt has actually decreased, and the credit lines for people with debt are being cut.

But it is a real problem. There are legitimate business uses of debt, for instance for inventory, and state uses, such as revenue anticipation bonds, and the freeze is hurting this. It is not just a media scare story.

The NY Times has a nice interactive graphic showing how this latest downturn compares to all the others. As they put it, “the current bear market is already among the worst in history”.

You might be surprised at how few people actually have $3500 to put down on a car. The SOP for many people has been to buy a new car every few years, sometimes with no equity at all in their trade-in, just rolling each car loan into the next.

I was reading an article about the tough times for car dealerships, and it mentioned some weekend sales event where they had to keep turning people away if they couldn’t come up with $1000 for a down payment. Pretty much any car that runs is worth $1000, so that means they had no savings, and either had no car, or had 0 equity (or worse) in it.

We received this message this morning from the company president:

I’ve had a rough five years. There have been some positives, but many negatives as well. It’s left me a little gun-shy, even though I like my job and there’s lots of work. I hope ‘some growth’ continues.

As for my 401ks, I’m not looking at them. I looked at one a few weeks ago, and it was down 20%. No use looking at it really, as I have a couple of decades before I can touch it. I should get some advice on the current one. It seems a very good time to use my contributions (and the matching funds) to buy stock.