Loans, Repo, and an economy built on real estate

Recently I got these two pieces of spam:

This one pre-approves me for a loan…

Wow! Great!

And this one will help me out when that loan goes bad…

Wow! Great!

This reminds me of this nugget that I found on Jim Kunstler’s blog once:

I see several major trends / events / stories that are apt to severely affect “normal” American life in the years ahead. One is the financial mess that lies under the immense and rickety credit structure that two decades of relative world stability has allowed us to erect. I saw the whole gruesome picture in microcosm illustrated in four commercials that played during a half-hour segment of CNN when I was visiting Atlanta to write a chapter for my next book. First commercial was for the DiTech “125 percent Dream Loan.” People could finance a new house plus get a premium amounting to 25 percent of the mortgage, and use the extra money to buy furniture, or a bass boat, or go to Vegas and play the slots, if that’s what they liked. The second commercial was for a debt consolidation service. The third was for bankruptcy lawyers. And the fourth was for a local bail bondsman “because bad things even happen to good people.”

You could see the whole Sunbelt mentality in this sequence of advertisements, and, in a way, you could infer the whole story of the surreal, reckless 1990s boom in it: all the traditional notions of lending and banking suspended to fuel an orgy of spending.

Maybe it’s just me, but it is somewhat perturbing to read articles like this: Real Estate Reliance May Hurt California

Half of the private-sector jobs created in California in the last two years are connected in some way to real estate. Meanwhile, property values in the last four years have swelled $1.7 trillion, the equivalent of about 35% of the total personal income in the state since 2001.

This sharp increase in home equity has spurred consumer spending that, in turn, has fueled more economic growth.

“We have an economy that’s rolling along on the basis of a false sense of wealth,” said Christopher Thornberg, a senior economist with the Anderson Forecast team.

Time to stock up on natural resources!