cnnfn.com keeps posting up these articles. This is one of many articles they have posted on the subject have houses not selling. At first, the articles seemed funny, but then I started thinking to myself the seriousness of the matter. It sucks being on the wrong end of the trade whether it be a house, stocks, futures, etc.

Help! Home for sale - Young and Ballanco
The Orlando-based couple thought they were in a bubble. Are they in a bust?
By Les Christie, CNNMoney.com
September 22 2006: 2:34 PM EDT
NEW YORK (CNNMoney.com) -- When Casey Young and his wife Jaime Ballanco put their Orlando house on the market back in March, they had no clue that the property would not sell. As far as they were concerned, Orlando was still bubbling.

"It was a foregone conclusion that we would sell it very quickly," says Young. "There were still bidding wars going on around Orlando."

After all, home prices were supposedly growing in the neighborhood of 20 percent a year. But what the top-line statistics masked was that a slowdown was already underway - from the fourth quarter of 2005 to the first quarter of 2006, the median home price in Orlando fell 0.5 percent.

Young and Ballanco have a particularly vexing problem having just contracted to buy a new house.

"We're planning on starting a family someday," says the 30-year-old Young, who builds simulation software for a defense contractor. "We wanted a bigger home - with a pool."

The new house cost $562,000 so they were really counting on profits from the old place to help. They had paid $167,000 for their current four bedroom, two-and-a-half bath, 2,861 square foot contemporary that they bought new, on the last day of 2002.

Young had improved the place over the years, putting in tile floors, chair rails, crown moldings and other amenities. The house has formal living and dining rooms and Young also installed a lovely Koi pond in the backyard with a rustic Japanese bridge.

Believing that the house would sell itself, Young decided to list it through Flat Rate Realty, a for-sale-by-owner operation that will place a property on the multiple listing service for a fee of $99. He priced it at $402,000.

The only calls he was getting were from realtors, who wanted to act as his agent.

No action
After weeks of no action, he hired one of the agents - The John Muccigrosso Team - which had a reputation as a very active seller and had done well in down markets, according to Young.

They re-priced the house, lowering it to $369,000 and then to $349,000. They've had open houses that nobody attended; run advertisements that elicited no responses; and sent out flyers that were totally ignored.

In all its months on the market, the house has drawn only two lookers.

"One sounded like he was just doing research. He may not have been a legitimate buyer," says Young. And the other couple just walked away.

The biggest issue may be a glut of listings. "Lots of investors swooped in buying homes when the market was hot. Now they are dumping them. My agent tells me that's where the glut comes from."

The number of homes on the market in Orange and Seminole Counties has skyrocketed, from 4,473 in July 2005 to 19,827 in July 2006, according to raw data drawn from Mid-Florida Regional Multiple Listing Service Hotsheet reports.

To know the problem is no consolation to the couple, who are increasingly feeling the stress. They have to make a decision soon about whether to go ahead with the purchase and hope they'll sell the old house, or give up the new place and lose their $28,000 deposit.

They're due to close Oct. 24.

"I absolutely need the profit from my old home to afford the new one," says Young. "Even with rental income from one of the homes, there's no way I can afford both mortgages at the same time.

The Eaton's struggle to sell their Carbondale, Illinois home.
Terry Likens and Duane Przybilla struggle to sell in Eden Prairie, Minn.
Latest home prices for 150 markets.
The most overvalued markets.
How is the deflating bubble affecting you? If you're home isn't selling, e-mail us at yourhome@money.com
Find mortgage rates in your area.

What that article doesn't say is that their new house they are about to pay $562,000 for is now worth probably $500-525k at the most, so eating the $28k deposit - idiots for not having a contigency clause on their new contract to cancel if the old house didn't sell - and staying in their exising home will actually save them some money since their new investment is already $40k underwater. Ditch the deposit and walk away.

What the articule also fails to point out is the greed of the young couple
They bought a 4 bedroom, 2 1/2 bath 2831 square foot house on the last day of 2002 for $167,000 They plan on starting a family someday....but that house wasn't big enough.
Sounds like they put the house on the market early this year 2006 for $402,000. They were trying to sell it for more than 2 times ( a $235,000 profit) for what they paid for it in 3 years. The improvements they made where all cosmetic that don't add to the the appraised value of the house only give it more "curb appeal. Just Greed!
Catocony, you are right....they should just eat the deposit and walk away but they won't. Also, the new house they contracted is now worth probaly $400,000 or less.

Here in Arizona, 70% of new houses built in the last 4 years are NOT lived in by the owner. 70%!! Sounds like there are other places in the same situation. 19,000 houses are listed? WOW!

"They bought a 4 bedroom, 2 1/2 bath 2831 square foot house on the last day of 2002 for $167,000 They plan on starting a family someday....but that house wasn't big enough."

That is funny.

4 bedrooms & 2800 square feet seems good enough to start a family. If they had just left "good enough" alone, then they wouldnt be in this predicament. The $28000 could have been used as college money for the baby that they hope to have in the future.

I looked at some of the pictures of their house and it seems decent. I would feel comfortable raising a family in that house.

Here is a picture of the house. It looks fairly new and enough for a couple that wants to have kids.

Beachman,

It sounds like a new house and still under construction, what with the 6-month lead time. If they paid over a half million for it - which is a lot of money for Orlando - it's your standard McMansion. I wouldn't think the price has fallen more than maybe 10% on a totally new, never-occupied house at this point in time. 400k would be about a 30% decline, and the market isn't that bad.

Here in Broward county it seems that every third house is for sale. I have one flyer I picked up yesterday while walking through the neighborhood. It was listed at $425k and is now at $399k. There's no chance it will sell for anywhere near $399k, so that price is highlighted with the following note - Reduced Bring All Offers. Basically, name a price and if I get desperate enough I might take it.

A number of my friends tried to sell houses this summer. Mostly McMansions in the far outer suburbs of Northern Virginia. Original listings in the 1.2-1.4 million range, the problem is there are over a hundred houses for sale in the same development, all the same age and all in that price range. They were bought new for around $700k three years ago, so not that much of a increase in valuations from a percentage standpoint. Him and his neighbors have each knocked money off but they seem to be doing it in $10k increments, and the old adage has been proven true - only reduce your price once. If you keep doing it, no one will buy because they expect the prices to keep going down.

Ironeagle-

I am a Real Estate and Mortgage broker here in Central Florida and that is the attitude of alot of people who purchased homes in the last 3-4 years and they are just greedy.

If you look at the article the owners Casey & Jamie told the writer that homes in their neighborhood were supposedly growing 20% a year.
Do the math.... Year one $167,00 plus 20% = $200,400. Year two $200,400 plus 20% = $240,480.
Year three $240,480 Plus 20% = $288,576.

They started listing it at $402,000 and the last drop was to $349,000. Still probaly $60,000 over apraised value. The story fails to point out that it is the greed of the Casey and Jamie that is what put them in this situation!

Catcony-

It may be a liitle extreme to think that a never-occupied house may drop 30%.... there are a shit load of investor empty houses who's adjusable rate mortgages are adjusting and ther cash flow is getting worse negative and are dumping them because they bought pre-construction at $500,00 houses at $325,00 - $350,000 and are still making a profit at $400,000.

What is worse....is that not only do the Builders have a huge existing inventory they are discounting.... there are also dozens upon dozens of new subdivions already platted out where they have invested in the roads, utilities, etc and they have to sell them. The Builders are giving all kinds of incentives from upgrades and the thing most sellers can't compete with.... 3 1/2% fixed financing for 5 years with closing cost paid and no payment for a year.

Catocony-

Sounds like your friends in Virgina may be up against competition from the Builders. Even if a house hasn't been lived in....I think most buyers will choose to build what they want in there price range ubless they get a great bargin.
As bad as it sounds I think there will be isolated areas where values may drop up to 30% and I think that will be mostly in subdivisions 3 years old or less because of the pre-contruction sales that attracted all the investors.... and as you said in your neighhood with the flyer you pick up "bring all offers and if I get desperate enough they may take it"

I currently don't have any participation in any residential building groups - only one small commercial office building project. That said, you know it's bad when the builders start to discount, since that highly pisses off people who paid "full price" in the same development from the same builder. The first and hopefully last step is to throw in upgrades for free - same price as the house next door but with crown molding, higher-end appliances, good carpet (not the builder's shit), custom paint selection, better tiles, jacuzzi tubs, finished basements, built-in bookshelves, pools, patios, so on and so forth. All just to make sure that the last new house sold isn't cheaper than the cheapest one sold before.

I'm still not going to buy in Florida - at least not until next year. I'm not selling my place in VA but will continue to rent it out, seeing as my tax hit alone on selling a place that I've had for almost 7 years would be brutal.

As of February, my house was sellable for about 260% of what I paid for it. It's come back some but since the DC area probably has the best local economy of anywhere in the US, the expectation is that condos will go down maybe 20% (depending on location), townhouses maybe 10-15 and single family homes about 10% from the peak bubble prices. Still lots of people moving in, still the highest per-household incomes in the country, that sort of thing.

Florida? Way too many out-of-town owners who bought for investment purposes only. Plus, houses in Florida are real shit. Just piles of cinderblocks really. You want to hang a picture? Break out the drill and anchors. The place I'm temporarily in is about 15 years old but the physical plant - electric, plumbing and AC - is real shit. Lots of cheaply built homes down here, wired, plumbed and rooved by idiots.

Catocony-

Commercial Office Buildings a good place to be in Real Estate Investment in Florida right now. That area was somewhat neglected because of the residental boom.... all the Builders were focusing on it. Mean while as the population increased... commercial office space has become more of a demand.....especially in the suburbs.
A suggestion you may look into...you state your not going to buy in Florida-at least until next year. Have you consider a lease option.....you could probaly get some sweet terms with one of those desperate sellers that is drowning in negative cash flow with an empty house.

Considering that everyone I've met in Florida rates about 20 points less on the standard IQ tests than those in NoVA, probably not. I won't be down here long enough to make it worthwhile financially.

Lets see....Broward county predominatly Democrat and Virginia is a Red state right. I see your correlation!

Uh, Fairfax Co VA - went over 60% Democrat during the last state elections and went for Kerry in '04. Highest per-household income in the US, best public school system in the US, one of the highest rates of per-capita bachelors, masters and doctorate degrees in the US. Not a lot of Republicans there these days, except the politicians and their staffs in from other states who live there part of the year.

11

I dont mean to sound negative guys, but I hope real estate takes a big dump. I'll be waiting on the sidelines to buy a house when that happens. During the analyst meeting with Lowes, they seemed to believe that the bottom will be hit in 12-18 months. That seems to make sense.

I like southern Florida and southern California as places to live.

Ironeagle-

I don't think Real Estate is going to drop to much here in Florida except in the areas I spelled out above. The baby boomers from the Northeast are still retiring down here in grooves and homes are much more expensive in the Northeast and they get a much newer, bigger house for less than they had in the Northeast. We also get a lot of Califorians relocating here and alot of people from England and Germany and Latin America buying here.

http://query.nytimes.com/gst/fullpage.html?res=9C0CEFD6133BF93AA1575BC0A966958260

http://query.nytimes.com/gst/fullpage.html?res=9D04EEDA153BF934A2575BC0A967948260

pretty comical thread...now look at the greenspan body count

Cobra; I think that this one thread that Beachman was REALLY hoping would not resurface. LOL

RG.

I'm sure his problems in Orlando are all the fault of Obama and other Democrats.

I was right on condos dropping 30%, I underestimated a lot on other housing, it's all down 25-30%

What's funny is, that very house I discussed in Florida for $399,000, 2.5 years ago, is still on the market. I walked by it when I was in Florida 6 weeks ago.

Here is a fresh article from International Herald Tribune.....notice the 80% price decline

From boom to bread line in a Florida exurb
By Damien Cave

Sunday, February 8, 2009
LEHIGH ACRES, Florida: Desperation has moved into this once-middle-class exurb of Fort Myers, where hammers used to pound.

Its straight-ahead stare was hidden amid the chatter of 221 families waiting for free bread at Faith Lutheran Church on a recent Friday morning, and it had appeared a block away a few days earlier, as laid-off construction workers in flannel shirts scavenged through trash bags at a home foreclosure, grabbing wires, CDs, anything that could be sold.

"I knew it was coming," said Gloria Chilson, 56, the former owner of the house, as she watched strangers pick through her belongings. "You take what you can; you try not to care."

Welcome to the American dream in high reverse. Lehigh Acres is one of countless sprawling exurbs that the housing boom drastically reshaped, and now, the bust is testing whether the experience of shared struggle will pull people together or tear them apart.

The changes in these mostly unincorporated areas outside cities like Charlotte, North Carolina; Las Vegas; and Sacramento, California, have been swift and vivid. Their best economic times have been immediately followed by their worst, as they have generally been the last to crest and the first to crash.

In Lehigh Acres, homes are selling at 80 percent off their peak prices. Only two years after there were more jobs than people to work them, fast-food restaurants are laying people off or closing. Crime is up, school enrollment is down and one in four residents received food stamps in December, nearly a fourfold increase since 2006.

President Barack Obama is scheduled to visit Fort Myers on Tuesday to promote his economic stimulus plan. But residents here tend to view it as the equivalent of an herbal remedy - it cannot hurt, but it probably will not heal. Instead, in church groups and offices, people call for "industry" and repeat one telling question: "What do we want to be when we grow up?"

"That's one of things we struggle with: What is our identity?" said Joseph Whalen, 37, president of the Lehigh Acres Chamber of Commerce. "We don't want to be the bedroom community of southwest Florida; we don't want to be the foreclosure capital."

Lehigh Acres, like much of Florida and many suburbs nationwide, was born with speculation in its DNA.

The area got its start in the 1950s when a Chicago pest-control baron, Lee Ratner, and several partners bought thousands of acres of farmland and plotted about 100,000 lots. Seeing it as a bedroom community of Fort Myers, 15 miles, or 25 kilometers, to the west, developers left little room for schools, parks or even businesses.

What they sold was sun and quiet living.

"They used to bring 20 busloads a day," said Bob Elliott, a former salesman for Ratner's company who struck out on his own in 1982. "We had 300 customers, seven days a week."

By 2000, the lots had been sold, but most stayed empty. Only about 30,000 people were living in an area roughly four times the size of Manhattan. The builders really started to arrive in 2004, setting up model homes on Lee Boulevard next to Elliott's office, with the faded wooden sign that said "$50 lots."

Bill Spikowski, a city planning consultant in Fort Myers, said that because Lehigh Acres had so many parcels and few restrictions on what could be built, smaller companies battled for customers. From 2004 to the end of 2006, developers completed 13,183 units in Lehigh Acres - nearly doubling the total stock of 15,216 that existed in 2000, according to Lee County figures.

Residents remember the boom for its noise, with dump trucks lining the streets and power tools heard in nearly every neighborhood. Housing prices doubled, then tripled, and jobs were plentiful, nearly all of them tied to real estate.

Signs of trouble were ignored. "Sometimes houses would sell three or four times in a few months, and no one would move in," Elliott said.

Then, in 2007, it all went quiet. Houses stopped selling. Foreclosures multiplied. The median home price in the Fort Myers area dropped to $215,200 in December 2007, from a peak of $322,300 in December 2005. It had fallen to $106,900 two months ago.

It's not just Florida, California is also having a bad time with the falling property values. What is going to kill a lot of people is when the second and third mortgage's come due, or go up to a much higher interest rate.

I suspect things are going to be much worse for Florida property values. The tax rate on a house in Florida is much higher than that of California, and your insurance is crazy high if you live anywhere near the coast, and I understand that one of the major insurance companies is puling out of Florida on top of that.

RG.

A buddy of mine bought HUNDREDS of lots in Leehigh Acres a few years ago and still has them all.

Mitchc,

Maybe your friend could start growing pot. That was once good farmland.

yep, just wait for all the option arms, alt A's and run of the mill prime loans from people that have lost their jobs. This is just the beginning. 2009 is going to make 2008 look really good.

Then try and refinance a commercial deal that was purchased at a 5 cap and today will be underwritten at an 8 cap. Ugly.

Retail first, followed by office and multifamily. Not sure where industrial is at. I dont want to even think about the poor guy that owns land. Hope he didnt cross collateralize or personally guarantee it.

Cat, I think anyone that wasnt retarded knew the party was going to end badly. I just dont think most people knew the credit markets would get this bad. I didnt.

When are people going to call this what it is? People gambled and lost and now they want the non-gamblers to pay back their losses?

In Lee County Florida (where Ft. Myers is located) there were twice as many homes built as could be occupied. People were speculating on rising property values.

Homes did not lose their value. Prices should have never risen in the first place. This government bailout and stimulus is absurd. Why not just go to Las Vegas and follow people around. When they lose money, give them some more.

The guy who saved money, put down a reasonable down payment and didn't do some crazy financing is the one paying for all the speculators. Unfortunately, when anyone brings this up, they get shouted down.

So Obama is going to Ft. Myers looking for photo ops with all the Las Vegas losers. What does that make him?

We had a chance to elect someone who understood well how to turnaround companies and the country. Unfortunately, the media made sure he wouldn't have a chance. Now we are stuck with a guy who hasn't a clue. Screw-up is right.

Good points ET, I am assuming the turnaround guy you refer to is Romney? Certainly not McCain.

It would have been nice if politics as usual were not involved in the stimulus package. These fucking guys just cant help themselves. The only change I see is a different party is fucking us now. The politicians should be ashamed of themselves for sticking all the bullshit spending in the plan. These idiots are just making it worse.

During times like this it would have been nice to have the smartest kid in the class running the show.

Even if Romney did not get screwed by the media during the primaries (am I the only one who noticed how the media blew the story about the Fundamentalist kids out of proportion), it would have been hard for any Republican to win the general election. Bush made sure of that.

Obama does not have the political capital to deal with the likes of Pelosi and company. They are all nodding their heads now but keeping in mind that 2012 is just 3 years away.

We had a chance to elect someone who understood well how to turnaround companies and the country. Unfortunately, the media made sure he wouldn't have a chance. Now we are stuck with a guy who hasn't a clue. Screw-up is right.

The RON PAUL MOVEMENT LIVES!!!

Give me a f-ing break! Romney still thinks a big tax cut is all thats needed to solve the financial crisis, and Ron Paul thinks if the govt just stays the hell out of the economy, business will straighten everything out. Just like it has done over the past six months. Republicans have never seen any political or economic problem of any type or magnitude that they think cant be solved with a big tax cut. They're the political equivalent of religious fundamentalists who think the answer to every problem is trust in Jesus.

I WAS joking, but you're greatly misunderestimating Ron Paul, actually. He's an uber-fiscal restraint nazi and said (Correctly, IMO) that this current monetary clusterfuck as due to over-reliance on cheap credit expansion to take care of past pesky fiscal gnats.

The voices at the margin (Paul and Nader) were the ones that made the most sense to me, but Obama is smarter than both put together, and the pragmatic middle ground of the two.

God Bwess us All.

ET well said

Yeah, and Paul's ideas at this point would be the same as Hoover's - cut spending to keep the deficit down and hope for the best. About the exact opposite of what is needed.

It sucks, since I hate debt, but there's no other remedy at this point. After the economy recovers then taxes will have to be raised - or more likely, the idiotic Bush cuts will simply sunset out in 2011 - and spending trimmed back, just like in 92-94. But right now, without a large kickstart of spending, pork and all, there's no chance of getting out of the rut.

Lower interest rates are actually working, but they'll work slow, too slow for most.

Just saw Obama in Ft. Myers. Maybe someone should tell him he won the election. How anyone can look the American public in the face and tell them this spending plan is a good idea is beyond me.

Ft. Myers has high unemployment, foreclosure rates and falling housing prices. Guess what? That is what you get when you gamble and lose. Can't tell you how many people I told not to buy that condo or house they had no intention of living in and were going to flip in 6 months.

Obama should just go to Las Vegas, get a group of losing gamblers together (they will love his message as much as the losers in Ft. Myers) and agree to reimburse all their loses. Then he should go to Dallas (which did not overbuild and speculate) and tell them they are going to pay for the Las Vegas losers. And, while he is at it, why doesn't he gather their children around and tell them they will be paying too.

What America needs is a dose of reality and someone with the balls to tell it like it is. I know more than a little bit about turning around companies. Unless there are fundamental changes throwing money at the problem solves nothing.

(Message edited by exectalent on February 10, 2009)

Should the ones who speculated lose everything? Possibly, but the rest of us shouldn't go down the tubes because of it. Most of us aren't into cutting off our noses to spite our faces.

I actually believe that the United States is going into a period of no-win. There are no good outcomes.

I think exectalent hit the nail on the head. We all benefited from the boom (some more than others) and now we need to suffer through the crash. The problem is that no politician will ever get elected on that platform. So there are two options (cut taxes or spend money), and neither one is going to work. I think it is an inherent flaw of democracy. It is probably why Japan had the lost decade. I really worry that the United States will lose more than a decade as we make all the same mistakes as the Japanese:

1. The Japanese did their stimulus from a surplus, the US is doing it from a deficit.
2. The Japanese had a trade surplus, the US has a trade deficit.
3. The Japanese fell while the rest of the world continued to grow. The rest of the world is falling as well when the US is trying to recover.
4. Japan has always had a positive savings rate.

The only thing that I can think of is that stands in the US's favor, is that the dollar still stands as the world's reserve currency. If that changed, the dollar would plunge.

After this mess is finally over, the US must learn to do things:

1. Export as well as import
2. Save money

Exec, Paul Volcker might be the guy (with balls) in a year or two.

Volcker four years ago.......

AN ECONOMY ON THIN ICE
by Paul A. Volcker
The Washington Post, Sunday, April 10, 2005

The U.S. expansion appears on track. Europe and Japan may lack exuberance, but their economies are at least on the plus side. China and India -- with close to 40 percent of the world's population -- have sustained growth at rates that not so long ago would have seemed, if not impossible, highly improbable.

Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks -- call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.

We sit here absorbed in a debate about how to maintain Social Security -- and, more important, Medicare -- when the baby boomers retire. But right now, those same boomers are spending like there's no tomorrow. If we can believe the numbers, personal savings in the United States have practically disappeared.

To be sure, businesses have begun to rebuild their financial reserves. But in the space of a few years, the federal deficit has come to offset that source of national savings.

We are buying a lot of housing at rising prices, but home ownership has become a vehicle for borrowing as much as a source of financial security. As a nation we are consuming and investing about 6 percent more than we are producing.

What holds it all together is a massive and growing flow of capital from abroad, running to more than $2 billion every working day, and growing. There is no sense of strain. As a nation we don't consciously borrow or beg. We aren't even offering attractive interest rates, nor do we have to offer our creditors protection against the risk of a declining dollar.

Most of the time, it has been private capital that has freely flowed into our markets from abroad -- where better to invest in an uncertain world, the refrain has gone, than the United States?

More recently, we've become more dependent on foreign central banks, particularly in China and Japan and elsewhere in East Asia.

It's all quite comfortable for us. We fill our shops and our garages with goods from abroad, and the competition has been a powerful restraint on our internal prices. It's surely helped keep interest rates exceptionally low despite our vanishing savings and rapid growth.

And it's comfortable for our trading partners and for those supplying the capital. Some, such as China, depend heavily on our expanding domestic markets. And for the most part, the central banks of the emerging world have been willing to hold more and more dollars, which are, after all, the closest thing the world has to a truly international currency.

The difficulty is that this seemingly comfortable pattern can't go on indefinitely. I don't know of any country that has managed to consume and invest 6 percent more than it produces for long. The United States is absorbing about 80 percent of the net flow of international capital. And at some point, both central banks and private institutions will have their fill of dollars.

I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.

It's not that it is so difficult intellectually to set out a scenario for a "soft landing" and sustained growth. There is a wide area of agreement among establishment economists about a textbook pretty picture: China and other continental Asian economies should permit and encourage a substantial exchange rate appreciation against the dollar. Japan and Europe should work promptly and aggressively toward domestic stimulus and deal more effectively and speedily with structural obstacles to growth. And the United States, by some combination of measures, should forcibly increase its rate of internal saving, thereby reducing its import demand.

But can we, with any degree of confidence today, look forward to any one of these policies being put in place any time soon, much less a combination of all?

The answer is no. So I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase. At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates. We had a taste of that in the stagflation of the 1970s -- a volatile and depressed dollar, inflationary pressures, a sudden increase in interest rates and a couple of big recessions.

The clear lesson I draw is that there is a high premium on doing what we can to minimize the risks and to ensure that there is time for orderly adjustment. I'm not suggesting anything unorthodox or arcane. What is required is a willingness to act now -- and next year, and the following year, and to act even when, on the surface, everything seems so placid and favorable.

What I am talking about really boils down to the oldest lesson of economic policy: a strong sense of monetary and fiscal discipline. This is not a time for ideological intransigence and partisan posturing on the budget at the expense of the deficit rising still higher. Surely we would all be better off if other countries did their part. But their failures must not deflect us from what we can do, in our own self-interest.

A wise observer of the economic scene once commented that "what can be left to later, usually is -- and then, alas, it's too late." I don't want to let that stand as the epitaph of what has been an unparalleled period of success for the American economy and of enormous potential for the world at large.

The writer was chairman of the Federal Reserve from 1979 to 1987. This article is adapted from a speech in February at an economic summit sponsored by the Stanford Institute for Economic Policy Research.