The housing thing is still collapsing full blast. 926,000 foreclosures in first half of this year, 12 major mortgage brokers gone, plus hundreds of others. I have a client who works for the absolute biggest mortgage outfit in America, Countrywide, and she says it is a zoo. All levels are going into foreclosure, not just sub-primes and home equities, but even first mortgages. People are screaming for loans to save themselves, and they lie through their teeth about their incomes. It no longer works, because even though the horse is long gone (failures), they are now shutting the barn door (checking facts and incomes). Too late? Of course! How long have I been saying that housing will go down, and be careful? Well over a year and a half. At any rate, that’s bad, but there’s another facet of the economy which will take it down even further, and that is the auto industry. (That’s not counting the fact that billions in bonds sit on shelves, unsold, and the stock market keeps going down.)
Locally, all the new car and used car lots are jammed full, and business is lousy. A friend sells Chevys and Toyotas, and without the Toyota, he’d be dead in the water. Detroit auto makers, thanks to the United Auto Workers, may never recover. Detroit is virtually dead in the water, and is 64th in income per capita. In 1950, it was first. Toyotas and other Jap cars are made in the South with non-union workers, so they can be made cheaper. Remember the old expression, “Don’t buy a car made on Monday?” That’s because all the union auto workers were hung over and did a terrible job of assembling cars. May not be true, but that expression was around when I was a kid, and I’m an old geezer. A friend rented a new Chevy with 9,000 miles on it for a 2,000 mile trip. A major strut broke on a paved interstate highway.
When a new car dealer is forced to take bunches of cars, which he probably doesn’t want, he pays the factory interest on them till they are sold, and he pays for the car in full. Millions of new cars sit on dealers’ lots around America, collecting interest, and it is bankrupting them. Yesterday, a dealer was so backed into a corner with debts, that he shot dead two employees who asked for raises. His troubles will be over now, doing life in the pokey I am sure. Imagine the pressure, having a hundred or two hundred new cars which aren’t selling, and you being forced to buy and pay interest on them. Imagine owning a used car lot and there is no or little business. The auto advertising in papers and on the TV and radio are awfully expensive, and they don’t seem to sell without them. More expense, not counting help, taxes, insurance, and utilities. I believe that the auto industry is the next collapse, either after or during the final throes of the housing bubble collapse. It is said that one out of seven workers in America are employed by the auto industry. If tens of thousands or more get laid off, and dealerships go bust, what will that do to the economy? It isn’t going to be pleasant.
If housing goes, and then autos, how many millions will be out of work? Lumber mills, roofers, manufacturers and truckers, cement workers and framers, and sales force, all laid off just in housing. Then the auto mess will lay off a million? More? I don’t know, but it isn’t going to be pleasant, and of that I am sure. A client called me and admitted he is a Democrat. He told me where the expression “Yellow Dog Democrat” came from. A Democrat who would rather vote for a yellow dog than a Republican. He told me where “hush puppies” came from also. In old times in the South, when the pot was boiling, and the dogs were begging for a handout, the ladies would throw in a ball of flour, let it cook and give it to the dogs to make them “hush.” See? you can always learn something here!