From the leaven of the Pharisees. Same as it was 2,000 years ago. 'Course, they didn't have paper, intaglio, and computa techmology then, or Monsanto rat DNA genetically modified super yeast either. Will wonders never cease?
My guess is the taxpayer who are subsidizing lower rates. The spread is the same (or better) for the bank. Not really a free lunch. It is, however, a very regressive and unfair tax on low income people and renters. The culture in America is about home ownership because it is the easiest way to keep millions of people under debt their adult life. It keeps the hamsters happy, hard working, fearful of losing their jobs and docile. Closest thing I have seen to voluntary slavery.
Well of course since the new meme is risk realigning with return when they say 4.5% they really mean 3% for we 800+ FICOs and 5%+ for less worthy borrowers and 6.5% for risky prospects. Right? Right? [crickets]
It's not just lower mortgage rates. Hyperinflation will bring buyers back into the market because otherwise they will be priced out forever. This time, for real.
The impact of hyperinflation will be greatest in commodities, so it will drive up building costs and make existing homes relative more affordable than new homes. This is good. This is what the Fed wants.
i believe your hyperinflation scenario to an extent but what about the fact that housing is a non-productive asset. i cant see the inflation hitting capital that actually produces goods but there are too many houses and not enough people. i wonder if inflation doesnt pass on the housing sector of the economy.
also i think we need a currency crisis to get 'hyperinflation' i dont see that happening either.
"But won't this hurt the existing MBSs as people refinance?"
Those would be the forgotten man. Or the forgotten suckers.
Interestingly, FN30s didn't move a lot of the news, probably because no private investor wants to buy, since they have no assurance the Fed won't want to have 3% mortgage rates, or 2% mortgage rates, or...and the MBS they buy today will get hammered.
Lower rates didn't get us into the housing bubble, lower rates won't get us out. Only the reintroduction of "affordability" products can do that: no documentation, interest only, option arms, teaser rates, etc. A lower rate on a 30 year fixed fully amortizing full doc mortgage isn't going to do much.
As it hasn't yet. When the Fed stepped in back in the fall, mortgage rates moved from the mid-6s to under 5, but yet house prices continue to fall, delinquencies continue to rise.
The US economy is broken, no amount of financial engineering is going to change that.
"So, if the Fed brings 30-yr fixed rate mortgages down "to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."
meanwhile the aggregate impact of inflation will be how much?
Isn't this an effort to reinflate the bubble? And won't it just postpone the correction? Are they trying to push the total collapse off until 2013 in hopes of getting reelected?
I think this is the exact opposite of that. This is capitulation that no way, no how are the zombie banks going to earn their way back to solvency w/o inflation.
If you don't want to bring housing prices to income, you can bring income to housing prices.
"It's not just lower mortgage rates. Hyperinflation will bring buyers back into the market because otherwise they will be priced out forever. This time, for real. "
Rich, you've been calling hyperinflation for real for at least a year now. A 3% move in CDN is not hyperinflation. $50/barrel oil is not hyperinflation. As I pointed out previously CDN moved over 10c in either direction in a few days time multiple times last year. Where is this hyperinflation you speak of?
I will take 20% less in house price and a renegotiable rate any day of the week over a higher base price and a fixed rate.
The reason why lower rates are seen as stimulating may not apply today.
This is not something modelled by "elasticity" or other downright stupid economic indicators where it is assumed market participants have no market power, or that things follow a parametric equation. It's a CAUSAL system.
Flattening the curve doesn't help because amortizing debt over longer periods no longer helps. Same goes for lower absolute rates.
The debt load is too high, and the only way to issue more new debt is if old debt is first defaulted on. That won't have the net positive impact they are looking for.
There is no asset class big enough to absorb the leverage which would decrease the debt load. Housing was freaking huge with minimal risk premium
There are people left out there, but they are precisely the people who can resist the unleveraged temptation if they have waited this long
Evil Henry Paulson, I read your post today at 5:49:01, I wonder if you can 'dumb down' your thoughts on QE? I'm lost and would very much like to understand. The Wall Street economists generally think QE is good. That kinda scares me. Clearly you don't think QE will have its intended effects. Can you elaborate a little more? Thanks so much, you seem quite lucid!
I'm unavailable for the next little while, but I'm sure there are others in the peanut gallery that will oblige
In short my thoughts are that the Fed can do whatever they want within their sandbox. Low rates, done. Print money, certainly inflation is not an option with the credit unwinding.
What they can't control is capital flight; and it will come. I call that re-importing inflation. The question I would ask about it though is whether it is a clean step-shift devaluation (eg Japan), or whether it becomes a self-feeding hyperinflationary disaster
The reasons why I think capital flight will come is not necessarily what investors will run away from, but in my opinion what they are drawn to. It's somewhat obvious US equities, bonds, consumption will not enjoy the same credit imbued growth in the near future
Do be aware that bankers have a statistically significant emotional bias when it comes to supporting currencies (referring to an econometric analysis that tracked credit rating, deficit, gdp growth, trade balance, etc... and the USD, GBP, EUR, CHF, JPY all exhibit irrational movements that do not show up with smaller currencies or rather currencies of smaller financial centres)
"meanwhile the aggregate impact of inflation will be how much?"
I think Bernanke is fighting deflation at the moment.
If he overshoots, we'll see inflation. I think he
is aware of the game he is playing: fighting deflation
with what would under normal circumstancces be inflationary moves.
I owe over $300,000 on my home and grow all my own food and make my own clothes. I'm hoping hyperinflation pays off my home with the 100,000 dollar bills I'll be getting at the Farmers Market!
The flow will detract from present lenders who are actually getting payments from their borrowers. On the other hand, NOBODY IS FINANCING THE REOS. And in South Florida, there is NO financing except FHA. None.
Well, maybe if you have an 800 credit score.
We know the lenders are in such great shape, they won't mind at all having the interest rate income that they have slashed--not!
O wants to do something he needs somebody to offer 4.5% financing on REOs. Or tell the banks that if they don't sell within x months, they have to finance their own damn REOs.
How can all of these people Refi out of 6.5%, 80% LTV loans when their new LTVs are 90%+ ; which are no longer available. In addition, avg FICOs have deteriorated in the past 6 months. Banks aren't going to lend money.
EHP-like me...deflationary jane said it well in last thread...you can rent for so much cheaper than buying, I can't see a positive..I was thinking about a second home..now I'll refi the flat, rent it to students and rent for cheaper..I'm sure many here are the people the fed is trying to motivate to buy...they have de-motivated me with their war against my kid...
the great housing rush is over...just like the gold rush the merchants made all the money....
" many here are the people the fed is trying to motivate to buy"
I'm done. The free trade policies have destroyed me over the past six years and I've already accepted that I'll be retiring in parent's house. Feds can get fucked, I'm not buying another house, regardless of what they do.
There is too much momentum in the system for lower rates to matter now
pissing into the wind
The margin of stability closed in on where we were, and now we must say adieu to the unsustainable credit until the reset works its way through the system
ok ok ok, you want conventional economics? I have a case study, I'm in Vancouver right. We had a huge housing bubble, same deal as in the US but 18-24 months behind the Florida/Arizona/Vegas crests.
We have those low mortgage rates right now. In today's paper one local developer had huge Ads, The Beasley,
Old price: $459,000
New price: $249,000
Keep in mind the prices were rising here up until May 2008, and units did sell at 'old price'. 46% off in 10 months, and in my opinion definitely falling more
Inventory dictates pricing. Learn it, live it, love it
High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful.
BEST CASE SCENARIO
you lower payments for people in homes they want to keep right now.
What happens when all the vacant inventory drags the prices down further? You think anyone but an idiot will keep holding on to their home with 30% negative equity when everyone around them is defaulting? It's a non-recourse loan!
I'm not saying everyone defaults, I'm saying defaulting is contagious. People who wouldn't default amongst normal circumstances, who would liquidate their kid's savings and pawn family heirlooms, will do it now nonchalantly. Something to be done between playing minesweeper and getting more coffee
"High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful."
During the 80s -- double-digit -- the banks stopped offering assumable mortgages. To sell a house, you often had to carry
the loan yourself, at less than market rates. It was also a
time when you could get 12% in an IRA, even more with treasuries.
But it was also a time when house prices went up.
"there is no debt asset larger than a house for most people"
I think that is why down payments should be greater than 20%.
At 20%, a buyer has 5X leverage, which is too much in an
environment where prices may decline further.
That big picture site (as opposed to Ritholtz's) always has awesome pics. I especially liked the one of all the unused newspaper racks. That part of the boston globe site is one of the few on the web I'd actually pay to access.
Imagine a rich drunk in the bar. He is borrowing cash from you with IOU's at interest but you know he is good for it so you keep taking his IOU's. You find out he is broke from bad bets on the stock market. What are the value of his IOU's now? Hyperinflation does not come from issuing to much money in a debt based system, but the realization by other countries that you cannot pay them back. We may not have access to cash but still have hyperinflation because the rest of the world will not sell us anything. IMO Ben has taken a big bet that the rest of the world wants to keep the party going on the same terms.
Even people paying their bills are having their FICO scores reduced.
That happens when a credit card company reduces their line of credit.
The effect of that is that the debtor is using a greater percentage
of their available credit, which looks bad to the FICO algorithm.
"In addition, avg FICOs have deteriorated in the past 6 months. Banks aren't going to lend money.
Banks are actually doing the lending for many of the refis. They're processing them as servicers, but it's Uncle Sam holding the bag."
Which is why 417k is the key. The liquidity is disappearing for jumbo loans and thus jumbo house prices. This is about slowing down the slide and preventing a wild offshoot on the downside, not magically preventing the slide in it's tracks.
The FOMC meeting minutes removed any mention of the recession ending this year. Couple that with double-digit unemployment, no liquidity in jumbo mortgage markets and things are going to get ugly.
"High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful."
I was (and will be) when you realize your wages won't be inflating at the same rate. Didn't have global wage arbitrage 20 years ago like we do now.
ok the actual ad for that 'The Beasley' place
Studio, 430sq ft, $219k
1bed, 559sq ft, $249k ($439k)
1bed+den, 676sq ft, $318k ($519k)
2bed, 930sq ft, $497k ($755k)
That's 10 months after peak. Available mortgage rates are down at 3.5 - 4.15% (we do things a little differently, which is -- and I'm not sure -- but maybe 200bp lower than 1 year ago
The point is mortgage rates themselves mean zilch. It's inventory that determines pricing. Mortgage rate is just one variable that can convert non-owner to owner and eat away at that inventory.
Back when the Fed started raising rates, you could get a 15 yr mortgage at 4.75%. I missed it by 1 day, and got mine at 4.875%. In December, a friend of mine got a 15 yr for 4.25%. Neither of us will be able to refinance soon.
Guest a few comments back has it right. BB is betting that the world will take action to prevent the dollar from devaluing against their currencies. I think it is a good bet for the next couple of years while Europe+Asia are screwed and can't afford for US demand to drop any further. When the world economy starts to rebound things get murky.
"Are banks actually lending elsewhere than in South Fla, Liz asks pathetically?"
Banks don't want to lend with measly down payments.
So FHA, with 3% down, may be the only alternative.
But someone buying with 3% down is underwater immediately,
considering that it would cost about 6% to unload the house.
Obviously this is not going to help the 8% who do not make their mortgage payment. Who it is going to help are the people who are more well to do who can refi and get their part of the TARP.
The last couple of closings I did, 'way more than 3% was put down. One had nearly 20% down. There is no financing that I can see except FHA no matter how much you put down. People are going FHA, because that's all that's available, not necessarily because they only have 3%. Here, anyway. The closing I have tomorrow is Seller financing with 20% down. They went over to B of A and discovered the no cost closings had gone away. This is in Hendry county, which is in the middle of the state, and is pretty much the same as here. The owner is virtually giving it away. They gave seller financing once before, and this new loan is exactly half of the previous loan, which the Buyer at the time thought was very reasonable. Then the buyer walked away and gave back a deed in lieu of foreclosure. My clients own it free and clear. That's 100k down the drain, even if it was an imaginary 100k.
You can't bring up incomes in a weak employment environment. The Unions aren't going to be able to do anything this time around.
This is really an attempt to drive money absolutely anywhere except into Treasuries. They are going to need more than 300B since the Treasury is going to finance a cool additional tril of debt just for this year's deficit. Crap. If the Fed starts buying to keep rates low they are going to need to buy more and more and more... Which private investor wants 30yrs at 3.5%??? At 3%???... 300B my ass.
You can't bring up incomes in a weak employment environment. The Unions aren't going to be able to do anything this time around.
This is really an attempt to drive money absolutely anywhere except into Treasuries. They are going to need more than 300B since the Treasury is going to finance a cool additional tril of debt just for this year's deficit. Crap. If the Fed starts buying to keep rates low they are going to need to buy more and more and more... Which private investor wants 30yrs at 3.5%??? At 3%???... 300B my ass.
Uncle Sam wants you to start saving money now, to help Save America. My new bumper sticker; Save to Save America! Will be free to anyone who requests one, while supplies last.
You Can help Save America by participating in this campaign locally. Just have these bumper stickers printed up with the slogan; "Save to Save America", and distribute them free of charge if you have the means. Thank You.
Another addition to the story of what is coming. Well, my version at least.
Excerpt:
I listened to Aly who was explaining to White Man, very patiently I thought, “I never took anyone’s job. I have, excuse me, had, a small business. I paid my taxes and bothered no one.”
“Right! A small business! I know the type. You charged one price for ‘your people’ and another one for people like me! You and your freaking 12 people in a three bedroom house, trashing my neighborhood. Driving down house prices! That’s another thing god damnit! Your freaking people!” he was starting to cross the line. I put my hand on the butt of my gun. I told myself “One more comment” and I move.
Capital flight is already happening, I suspect. I'm certainly going to move everything I can out of here before the USG sets limits on it, which is a possibility, in my view.
I am also convinced hyperinflation is on the horizon, maybe 2 yrs out, and perhaps as bad as in the Weimar Republic but certainly in the 50% - 200%/yr range .. I haven't been able to find anything to put my $$ in yet that I'm comfortable with, except gold, which has practical problems (except for the ETF GLD, which also has other issues) .. also, it just may be that all currencies hyperinflate .. what did you have in mind as a safe haven ??
I'm also curious as to who would buy debt longer than 3-6 months now?? The corporate debt market has shown considerable strength recently, and I'm wondering who in their right mind is buying, since when hyperinflation hits, it will hit so quickly that no one will be able to sell fast enough, as bond values will disintegrate instantaneously.
I'm actually hoping the Chinese save us by stopping their purchase of US debt .. this would probably halt the printing presses asap, save us all.
People may have to face the future: a house is what it is worth for shelter, maybe some small premium for "ownership," but that premium is doubtful when a comparable house can be rented for less per month than the cost of "owning."
btw, CR
You want to talk about stimulus? How about the $350bn withdrawn from US equity mutual funds since last June? Or the $200bn in gasoline savings
Nevermind the $200bn loss attributed to the wealth effect, or the real loss of $800bn annually in mortgage equity withdrawal, or the growth of other forms of credit which exceeded GDP growth for a time.
$190bn... if everyone qualifies and chooses not to default
I'm not a doom & gloom type of guy, just a gloom type of guy
I had a follow up that began with "yes, yes... they have a lot of direct spending" but that was eaten apparently.
Basic contention was the amount of money necessary to spend in amount/speed would cause an immediate capital flight
I mean the TALF is an admirable amount of spending according to plan,
in any event stimpack 2 (there was one in 2001) had less than 20% of it go towards new consumption, rest went to paying off debt. we knew from stimpack 1 that less than 25% would go towards new spending, stimpack 2 was less successful despite targeting demographics better... because surprise surprise the economy is a causal system and previously accumulated debt affects present spending
If they can create claims on real goods faster than you can save claims on real goods you are just playing into their hands because you keep a higher "value" on their claim for real goods. You don't save sand at a beach. You just stop playing the game.
Setser had a good post today with a chart showing how foreign governments have piled into short-term Treasuries, waiting for the inevitable skyrocketing of rates for long term treasuries. The chart looked like a coiled spring.
NEW YORK, March 18 (Reuters) - NBC Universal Chief Executive Jeff Zucker fired back at comedian Jon Stewart on Wednesday, saying it was "unfair" and "absurd" for the funnyman to criticize CNBC and question its coverage of financial news.
I read an odd little book once called (I think) rules for aging. I think rule #3 was leave bad enough alone
It has a lot of applications lots of folks involved could benefit from it.
"After Dodd's segment was over, Blitzer continued with a live report in which he said that Dodd was "coming forward with a vastly different story'' on Wednesday than he had told to a CNN employee on Tuesday.
"It's very embarrassing to Senator Dodd to say one thing yesterday and another thing today,'' Blitzer said."
Thanks for the insight, Wolf! Now we know why you get paid the big bucks for reporting.
What will it be hyperinflation or debt slaves to the foreign bondholders? My money debt slaves to the bondholders with our politicos still managing us under their rule. Most Americans will never realize the difference.
It is a statistical impossibility for the American tax payer to ever pay back the 12 trillion dollar national debt and the 60 trillion of unfunded entitlement liabilities. The American tax payer has no intention of ever paying that money back.
[The news conference, which will be held at 8 p.m. EDT (0000 GMT), comes as the administration is trying to make the case for his proposed $3.6 trillion budget]
It's pretty clear that the American public doesn't need to be sold on free money to throw around. They simply don't believe there's a consequence.
BHO should save his sales pitch for the CHinese and Japanese. They might have some concerns. In fact, after the crushing the dollah took today (and the hit to their holdings) they may not even be inclined to listen.
Did you see that CNBC is reporting that the Fed's Treasury purchases are from 2-10 year maturity?
Like I've been saying, the average maturity in TBT is 25 years. There is no natural buyer out there for 25-year Ts. Not even the Fed.
The 30-year bond rallied today because the 10-year did. But in the days ahead, you will see them diverge. The Fed has the 10-year's back. Nobody in the world will want the 30-year. In fact, they will pile into short-term Treasuries and dump those over 10 years.
This is really a great buying op for TBT, if you have any hair.
Rich your theory on TBT is flawed, You are betting against Helicopter Ben and if unemploy. numbers hit 10 this summer there will be a flight to quality . Think puts on TBT, and your theory on comm. prices might be correct , but the time frame could be 6 months to 3 years
The Desk will concentrate purchases in the 2- to 10-year sector of the nominal Treasury curve, although purchases will occur across the nominal Treasury and TIPS yield curves.
Can we see the other side of the equation - how many dollars are going to be sucked out of the private sector to buy the Treasuries necessary fund this "stimulus"?
That speech should be frightening because he does not respect the role of credit in all of this. He thinks the collapse in demand is a spontaneous phenomena of mass hysteria
Yes. Move's like this purchase of MBS and Treasuries will instill great confidence. Risk capital is sure to flow into the markets after such actions. /snark
"So, if the Fed brings 30-yr fixed rate mortgages down "to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."
meanwhile the aggregate impact of inflation will be how much?
--
i would say somewhat less then the notional value of $560 trillion of derivative contracts evaporating.
debt to gdp at about 3.6x, add in shadow debt from hedge funds maybe 4.6x and assume real "debt" from derivatives (cds, etc.) being fairly small (5-10%) you're looking around 6.6x gdp. you don't stop deleveraging.
We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country.
Thomas Jefferson
Doc at the Radar Station says:Today, 3:00:50 PM“High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful.
Exactly, I am amazed at how Bernanke and the FR don't believe that we can handle 6/7% interest rates. SAD.
o We have nothing to fear but fear itself.
o The government should act responsibly with spending programs, in the future
o Individuals should pay down their debts, in the future.
He's right! He knows the future (since he's designing it with Timmay, Larry & Ben) and in the future dollahs will be worth a tiny fraction of what they're worth today... so better to wait.
I am looking for a re-fi here in Maine. I want that 4.5 rate. I cannot find any bank or CU offering lower than 5.5. I cannot get any servicer to answer why the rate of 4.5% is not available in my area. Does anyone know if the new rates should be nationwide or just to service the (big)foreclosure markets in CA, FL, NV?
I am not looking at foreclosure and have an excellent credit rating but I did purchase my home last Sept after a move from FL at a too high rate. Needed a place to live. Looks like I should have rented! O:-)
RE TBT:
-it's run by those Barclays' sleazebags
-what about counterparty risk in the swaps mentioned in the prospectus
-Euro and Eurozone will blow up before Treasuries...EU will QE massively and EU banks were leveraged more than US banks...so flight to US quality likely
It is a statistical impossibility for the American tax payer to ever pay back the 12 trillion dollar national debt and the 60 trillion of unfunded entitlement liabilities.
Cancel medicare and SS. there goes $5.5 Trillion in debt and all of the unfunded entitlements. The Congresscritters will all be looking for new jobs though.
CR, I believe that there are some serious logical flaws in this argument.
First of all, the pool of homeowners who stand to benefit materially from refinancing is rapidly shrinking. 30-year mortgage rates have been hovering just above 5% since December, when the Fed first started buying agency MBS.
As noted by the rocket scientists at Housing Wire, this has resulted in a mini refi "boomlet"; however I'll wager that it pales in comparison to previous booms in the 2002-2004 period. I doubt there are many folks out there with fixed mortgages above 6%.
Also just because a homeowner is "able" to refinance doesn't mean that they will. Going from a 5.25% rate to a 4.5% rate doesn't make much sense, as it will likely take more than 5 years to recoup the fees and points.
Case in point, I refi-d in 2003 near the previous mortgage rate low at 5.875 on a 30. It was a marginal call as my original mortgage was 6.5%. However, I knew we'd stay in the house for a long time and we've made substantial progress in paying the note down. I have no intention of even thinking about another refi unless 15-year rates get below 4%.
Doesn't mean that there won't be some benefit here, but even half of the $190 billion quoted doesn't seem likely.
I am looking for a re-fi here in Maine. I want that 4.5 rate. I cannot find any bank or CU offering lower than 5.5. I cannot get any servicer to answer why the rate of 4.5% is not available in my area.
Check out FinancialStability.gov Think it might have to be a GSE loan.
Where does the wealth for this "stimulus" come from, exactly?
The money for this is coming from printing (apparently) so part of the wealth will come from an inflationary tax on existing dollar-denominated debt. Quite possibly Fannie, Freddie, and FHA will end up with a lot of fraudulent priced refi's or the debt will go sour later when interest rates return to normal and so a lot of the wealth will come from future taxes.
it won't matter. The moronic liberals and sheeple in Connecticut and Massachusetts and Pennsylvania will still reelect Dodd, Frank, and Murtha no matter how many payoffs they take or boys they sleep with..
You can't put the globalization genie back in the bottle with out serious economic harm.
Do you have any idea how expensive a 100% domestically manufactured car or TV would be? Not to mention the start-up costs, of needing to bring high pollution type manufacturing back on line.
Protectionism would really be a re-enactment of GDI.
Another trill pumped into the market today to buy MBS. Don't confuse deleveraging with deflation. We are inflating and its going to get serious real soon. BB is monetizing us to the moo
I see a lot of confusion here about inflation. I doubt we are going to see much inflation, even with the Fed printing like mad, let alone hyperinflation.
What are incomes doing? How about home prices? Today I noticed that for the first time in memory, diesel is now cheaper than premium gas (note to self - buy that Jetta TDI.)
That tells me that trucking and commercial transport is still declining.
Bernanke is on a mad quest to prove his doctoral thesis. If we do see any inflation at all, it will only lead to more pain for the 16% unemployed and those on fixed incomes. See Mish's latest post; he explains it better than I can.
"A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs."
"And it's not just low-income earners who would find themselves financially challenged. Twenty-nine percent of those making $100,000 or more a year said they would have trouble paying the bills after more than a month of unemployment."
What was that tag line for mortgage adverts? Oh, yeah:
"People are smart"
On a lighter note, on this page Lance Armstrong is peddling energy supplements, in an ad window that also features colonic cleansers. Isn't capitalism wonderful?
David Greenlaw's comment that CR highlighted is interesting to me because it's an action that will directly help homeowners who can refinance. This aid comes only after the government gave zillions of dollars in handouts to banks that still wouldn't help homeowners.
Ok, I am a sheeple. How do I know what avenue to pursue to protect my investment in my major asset, my home? There are so many competing messages that I cannot sort them out. I am retired, no pension, my husband, retired, with a pension and also a 40 hour job. We are just barely making it even though we did all we could do over the last 45 years to provide for our family and climb the prosperty ladder. We are now reduced to living on the edge of poverty through no fault of our own. Every entity has taken a bite of our savings until we wonder if we will end up on welfare!
"Do you have any idea how expensive a 100% domestically manufactured car or TV would be? Not to mention the start-up costs, of needing to bring high pollution type manufacturing back on line. "
Labor is a small part of the cost of a tech. product. The old plants are still here, and still zoned for what they used to do.
"u can't put the globalization genie back in the bottle with out serious economic harm"
You mean like... a collapse of global trade that's already happened?
Scare tactic used to promote bullshit, and if you'd read any HISTORY, you'd know that this has all happened before. We're here beczuse of globalism, of constant disassociation of costs from benefits. If more debt can't fix debt, how can more globalism fix globalism?
"If more debt can't fix debt, how can more globalism fix globalism?"
I personally do not think globalism is wrong, just broken by the pegged Yaun. China's fear of losing control with a government that is slow to adapt to change is fucking it all up. BB is about to evaporate their accumulated assets (along with all other savers) in a puff of inflation. My bet is that the Saudis sell first.
No second home - just want to preserve the very modest place we have. I could never have predicted that we would be in this position. We did all the right things and it still was not enough. It makes me angry.
"There is only one solution to too much debt; less debt. Unfortunately the only schemes presented so far all involve more debt."
Quoted for truth. Unfortunately all the people in power think that the cure to too much debt is more debt, because that is what blew the bubble. I think the bubble is finally burst this time, and you can't reinflate a burst bubble.
Do you have any idea how expensive a 100% domestically manufactured car or TV would be?
Blackhalo
Strangrly there's a case to be made for trashing every CRT in the country in favor of LCDs as it forestalls electrical demand long enough to allow new investment in things like solar rather than commit to new traditional generating capacity.
"Looks like you need some depression to knock you off your high horse, get you working for peanuts." That is going to have to be a pretty impressive depression to get me working for 10c on the $. Which is what we pay our Bangalore/Shanghai equivalents in my biz.
All these globalisation shills are just spouting what they were brainwashed in business school with, without ever thinking about what they were told. Business education has been focused on short term gains at the expense of long term gains. There is an excellent article about the problem with business schools here
"the US standard of living will equalize with the rest of the world..." I agree with that view and with the poster above that we get there via low wage growth inflation.
How do I know what avenue to pursue to protect my investment in my major asset, my home?
Pat, I do not know. I am pretty mad at the whole situation. I do not know a time in history where a government has been able to outsmart the market without serious consequences.
That is going to have to be a pretty impressive depression to get me working for 10c on the $. Which is what we pay our Bangalore/Shanghai equivalents in my biz
That is exactly what OB is doing by punishing business. Unions, Taxes, more unrealistic environmental, new energy to compete with what we have now. Totally the wrong direction with severe consequences.
Your right, Ben. We need Bush back - someone you can help business, help flood victims, and find weapons of mass destruction after he allows a huge terrorist attack. Good thinking!
"the US standard of living will equalize with the rest of the world..."
How does turning the US into Mexico benefit Americans?
Not that it matters now, the country is gutted and won't recover. The post-WWII culture has been dismembered over the past couple of decades by increasing numbers of intellectually dishonest special interest groups and cabals.
Understand that global wage arbitrage is not going to be bloodless. Much as tPTB wish for a manageable transition to lowest common denominator labor the realities are such that the high wage earners will not stand for it and the low wage societies will not withstand the social stresses.
I think that the kink in the works is the number of people who are actually able to get that reduced rate money.
If there is no M2Market and no viable sense of what's actually in the capital base, then the lenders will continue to simply suck up the money and try to fill the black holes in their capital. Ditto with TALF...
You can take a banker to capital, but you can't make him lend.
the bubble burst, its all over the consumers faces and it's in their hair..They don't want no more gum because they are still cutting their hair to remove the sticky mess left from the last bubble....
I am not in the deflation camp but to say that with one stroke of a pen the FED has instantly created hyperinflation is ridiculous. We will be lucky to get 2% YOY in 2010.
Also home prices can still go down even during inflationary times. In fact real home price appreciation in the 10 years prior to 1997 were found to be 1% while Inflation ran 2-3%.
"I am not in the deflation camp but to say that with one stroke of a pen the FED has instantly created hyperinflation is ridiculous"
Depends on how much the Fed prints and how much China, Japan, the ME and the UK sell. If Ben is going to follow through on devaluing the currency, why would they continue to buy a depreciating asset.
Good point. US debt is dollar denominated, so foreign central banks are exposed to currency risk. If the dollar does a face plant, China, Japan and ME are going to get paid back in worthless script.
OB is the third clueless president on economics. Clinton's administration really kicked this one off. Bush greased it and OB is using it for a socialist agenda. Considering most people are incapable of providing a job for themselves,then jobs are the most important.
reptillian says:Today, 9:07:15 PM“"Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?"
It all started yesterday, when Bloomberg came in with a report about Unicredit's eastern exposure, outlining how a decade long expanison, which saw more than $65 billion of acquisitions in operations stretching from Poland to Kazakhstan is now alarming analysts who forecast that loan defaults in eastern Europe, where the bank focused its growth, are set to balloon. Unicredit's stock is down 76 percent in the past 12 months, the second-biggest decline among Italian banks.
and
Oh, and just to cap it all, and a very bad day for Unicredit, HVB Group, their German banking unit, announced this morning that they had a loss of 671 million euros last year because of writedowns on investments and higher provisions
So now that we are buying our own bonds to lower rates any guesses of what the unintended consequences will be?
Lets say I'm China and feel kind of foolish with all those rapidly depreciating dollars. What do I do?
Lets say I'm the EU and see that the rapidly dropping dollar makes me not very competitive.
Lets say I'm an Arab country how should I be paid for my assets?
Any opinions? I'm thinking trade barriers will start to appear in a very stealthy way among all of the above...
"Lets say I'm China and feel kind of foolish with all those rapidly depreciating dollars. What do I do?
Lets say I'm the EU and see that the rapidly dropping dollar makes me not very competitive.
Lets say I'm an Arab country how should I be paid for my assets? "
First one to sell wins! Too bad for the bagholders.
Blackhalo says:Today, 6:17:27 PM PDT
"Bordered In Black"
Damn good short story. Larry is at least 40yrs ahead of his time.
Everything that's going to happen has already been written about in sci-fi over the last half century. "Chocolate dollars" most likely (flash mobs) and "chocolate covered manhole covers" in the extreme (full reset) come to mind.
The FED is a joke. 4.5% will do nothing for Calif underwater homeowners nor the vast unemployed now receiving government checks. This is about the fact that nobody will buy GSE debt except the government itself. It will take the market a few days to figure it out but once it does, good bye and good night.
BHO should save his sales pitch for the CHinese and Japanese. They might have some concerns. - bearly
They only have one concern and only one - when will we start buying again so they can send their hundreds of millions of rural rubes back to work? It it takes 36 trillion banana bucks so be it - they'll recycle it back - just get it done. Get it done now.
That is the other side of the insanity so many here on this forum fail to grasp. Grasp it - with two fucking hands around the neck. That is half of what is required to 'fix' the problem. We have to do less day trading and more work... you up for that?
"BHO should save his sales pitch for the Chinese" - bearly
"That is the other side of the insanity so many here on this forum fail to grasp."
That is the next bubble, yet to burst. Depegging the Yaun and breaking the cycle. Far bigger than the housing bubble and with a lot more risk and uncertainty. But, ultimately, unsustainable.
I don't mind having to work for 2 days for a loaf of bread. This is 'Change,' afterall, and that's what we wanted.
Does anyone know the nutritional information on municipal grasses? I'm thinking iceplant can be processed and eaten from the freeway onramps, but I'm lost on harvesting food from a park or golf course.
They only have one concern and only one - when will we start buying again so they can send their hundreds of millions of rural rubes back to work - dryfly
They don't care what the 'ef happens to their surplus millions as long as those millions don't get uppity. And I do mean uppity in the very worst way.
"When brown clouds from China trigger EPA restrictions on Ventura County economic activities the whole intent gets hazy."
Part of the problem is that with the devalued Yaun, there is little chance for China to form their own consumer economy. The vast majority can not afford to buy the products they make. They have yet to develop a real "middle class" who would want things like non-toxic food and air, and healthy babies to care for them in a longer, old age. I think this is particularly out of fear that an enriched middle class might want troubling things like an EPA, OSHA, FDA and most troubling of all to career communists, Democracy.
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what we ve got to do is to switch ideas with chinese, we should subsidize production efficiency and they should subsidize consumption, otherwise most of the both stimuli will be wasteful.
Loan Brokers are gone.The Banks no longer need a legal buffer because they are no longer encouraging mortgage fraud.It is all in house and GSE.And not much is being done with hard money because prices are falling so fast.A 65% CLTV might look good until you see a yoy fall of 28% in the prior year and it appears to be accelerating this year.A 12%-15% return is nice if the borrower pays it...
Kleptocracy v. Kleptocracy Smack Down on CNBC! Larry Kudlow referees as as Yuan "the upstart" Chicomm takes on the aging Bucky "the beleaguered" Bureaucracy for global supremacy in a misguided quest for respect and dubious standing in a crumbling world economy. Maria and Erin will carry the round cards.
BoJ needs to make non-recourse loans directly to the American consumer.
You mean as opposed to passing through our agency & treasury 'middlemen first'? The only gov'ts serving their people more poorly than the US gov't are the Asian merchantilists. And those folks understand 'killing fields' 'cultural revolutions' and 'reeducation camps'...
"The FED is a joke. 4.5% will do nothing for Calif underwater homeowners nor the vast unemployed now receiving government checks. This is about the fact that nobody will buy GSE debt except the government itself. It will take the market a few days to figure it out but once it does, good bye and good night."
Thank god for that. There are many of us out here that would contemplate armed insurrection if our government started taking on huge new debt in our names, just to pay the mortgages of people in CA who have no job or income any more, so they can stay in houses in sunny CA while we here in flyoverland continue to labor at lower salaries to keep paying rent or mortgages on houses that aren't worth a fraction of those ...
Your sense of ENTITLEMENT is glaring, sir. We working taxpayers (and our children) are not your serfs, existing to continue laboring in the fields while you idle in your Manor House ...
A serious question for all of you well educated, intelligent folks who follow these things.
If we as a nation have spent trillions in stimulus, why would it not make more sense for the Treasury to be selling 30 year bonds at 3.5% in order to lock in a low interest rate to finance Tarp money etc which is being lent out at 6% or higher?
I understand the desire for lower mortgage rates, but mortgage rates in the range of 6% are reasonable by any historic standard, and adding another trillion of debt, when we do not have the money, which will be repaid with deflated dollars as inflation goes into high gear as a result of the printing presses running overtime, seems to be foolish economic policy.
If I am not understanding something here, please let me know.
I have to agree w/ Bill. Even if mortgage rates get to 2% it doesn't matter if the banks still are not loaning out money. At 4.5-5% the credit really hasn't eased up. You still seem to need a mid 700 credit score and 20% down to get a loan.
This economy is just plain crazy now. Perhaps they should have paid off all mortgages in the country that were behind and handed the deed to the "proud" homeowner. We might have come out cheaper than what all of the packages are going to end up costing us.
I would hate to be the one trying to figure this all out. Nuts I tell ya!
Money represents wealth.
Where does the wealth for this "stimulus" come from, exactly?
From the leaven of the Pharisees. Same as it was 2,000 years ago. 'Course, they didn't have paper, intaglio, and computa techmology then, or Monsanto rat DNA genetically modified super yeast either. Will wonders never cease?
"Money represents wealth. Where does the wealth for this "stimulus" come from, exactly?"
Taxes, in the form of money paid to the banks so they can afford to lower interest rates that much.
My guess is the taxpayer who are subsidizing lower rates. The spread is the same (or better) for the bank. Not really a free lunch. It is, however, a very regressive and unfair tax on low income people and renters. The culture in America is about home ownership because it is the easiest way to keep millions of people under debt their adult life. It keeps the hamsters happy, hard working, fearful of losing their jobs and docile. Closest thing I have seen to voluntary slavery.
i just finished a re-fi... went from 6.25 to 4.75 on a 30-year fixed. Spending over 20% less a month on the payment.
But then again, I just stimulate my poor savings account.
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How do they intend on doing this? Just buying and buying and buying in the secondary market?
Well of course since the new meme is risk realigning with return when they say 4.5% they really mean 3% for we 800+ FICOs and 5%+ for less worthy borrowers and 6.5% for risky prospects. Right? Right? [crickets]
Dawg dont your know the 'risk premium' part of debt is sooooo late eighties. its gone out of style like the camaro and the mullet.....
I am supposed to re-fi next week at 4.5% and am going to call them tomorrow about making it lower. I will report back.
My rank among the population is 810+. I wonder what percentile of the population I am better than?
"Money represents wealth. Where does the wealth for this "stimulus" come from, exactly?"
Better question: Where is the wealth this money represents?
i just finished a re-fi... went from 6.25 to 4.75 on a 30-year fixed. Spending over 20% less a month on the payment.
...and the value of the underlying asset has changed by what ___% ? (on a FASB 157 M2M basis that is)
It's not just lower mortgage rates. Hyperinflation will bring buyers back into the market because otherwise they will be priced out forever. This time, for real.
The impact of hyperinflation will be greatest in commodities, so it will drive up building costs and make existing homes relative more affordable than new homes. This is good. This is what the Fed wants.
rich,
i believe your hyperinflation scenario to an extent but what about the fact that housing is a non-productive asset. i cant see the inflation hitting capital that actually produces goods but there are too many houses and not enough people. i wonder if inflation doesnt pass on the housing sector of the economy.
also i think we need a currency crisis to get 'hyperinflation' i dont see that happening either.
still i believe your theory on commodities...
any thoughts?
But won't this hurt the existing MBSs as people refinance?
"But won't this hurt the existing MBSs as people refinance?"
Those would be the forgotten man. Or the forgotten suckers.
Interestingly, FN30s didn't move a lot of the news, probably because no private investor wants to buy, since they have no assurance the Fed won't want to have 3% mortgage rates, or 2% mortgage rates, or...and the MBS they buy today will get hammered.
ahhh negative convexity! such a beautiful thing...
4.5% probably isn't low enough.
Previous bottom was 5.25% or so.
I'm guessing they'll have to push it down to 3% to salvage the current debt pyramid.
I dont think brokers will be busy, lots of programs being taken away on the broker side. Retail loan officers will be swamped though.
I just checked BofA, it looks like they pulled their no closing cost loan. Rates are 5 @ par, 4.75 @ 1 pt, 4.375 at 2 pts.
What affect on home prices this spring, 5 years, 10 years out?
They will have to save the refinancing profit. It wont bost consumptio
Lower rates didn't get us into the housing bubble, lower rates won't get us out. Only the reintroduction of "affordability" products can do that: no documentation, interest only, option arms, teaser rates, etc. A lower rate on a 30 year fixed fully amortizing full doc mortgage isn't going to do much.
As it hasn't yet. When the Fed stepped in back in the fall, mortgage rates moved from the mid-6s to under 5, but yet house prices continue to fall, delinquencies continue to rise.
The US economy is broken, no amount of financial engineering is going to change that.
"So, if the Fed brings 30-yr fixed rate mortgages down "to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."
meanwhile the aggregate impact of inflation will be how much?
"he aggregate impact of inflation will be how much?"
Cough, cough.
"Go away, kid, ya bother me"
Isn't this an effort to reinflate the bubble? And won't it just postpone the correction? Are they trying to push the total collapse off until 2013 in hopes of getting reelected?
"Isn't this an effort to reinflate the bubble?"
I think this is the exact opposite of that. This is capitulation that no way, no how are the zombie banks going to earn their way back to solvency w/o inflation.
If you don't want to bring housing prices to income, you can bring income to housing prices.
It is hilarious to watch people shouting at each other as they water fills their lungs..if on...l.....y....gurgle gurgle gurgle O O O O O O O O O
"It's not just lower mortgage rates. Hyperinflation will bring buyers back into the market because otherwise they will be priced out forever. This time, for real. "
Rich, you've been calling hyperinflation for real for at least a year now. A 3% move in CDN is not hyperinflation. $50/barrel oil is not hyperinflation. As I pointed out previously CDN moved over 10c in either direction in a few days time multiple times last year. Where is this hyperinflation you speak of?
I will take 20% less in house price and a renegotiable rate any day of the week over a higher base price and a fixed rate.
The reason why lower rates are seen as stimulating may not apply today.
This is not something modelled by "elasticity" or other downright stupid economic indicators where it is assumed market participants have no market power, or that things follow a parametric equation. It's a CAUSAL system.
Flattening the curve doesn't help because amortizing debt over longer periods no longer helps. Same goes for lower absolute rates.
The debt load is too high, and the only way to issue more new debt is if old debt is first defaulted on. That won't have the net positive impact they are looking for.
There is no asset class big enough to absorb the leverage which would decrease the debt load. Housing was freaking huge with minimal risk premium
There are people left out there, but they are precisely the people who can resist the unleveraged temptation if they have waited this long
Scenes from the recession - The Big Picture - Boston.com
wow, my words were jumbled in that last sentence, interesting bug
move unleveraged to the beginning of the sentence
There is no asset class big enough to absorb the leverage which would decrease the debt load. Housing was freaking huge with minimal risk premium ~EHP
(Worth repeating...)
Evil Henry Paulson, I read your post today at 5:49:01, I wonder if you can 'dumb down' your thoughts on QE? I'm lost and would very much like to understand. The Wall Street economists generally think QE is good. That kinda scares me. Clearly you don't think QE will have its intended effects. Can you elaborate a little more? Thanks so much, you seem quite lucid!
I'm unavailable for the next little while, but I'm sure there are others in the peanut gallery that will oblige
In short my thoughts are that the Fed can do whatever they want within their sandbox. Low rates, done. Print money, certainly inflation is not an option with the credit unwinding.
What they can't control is capital flight; and it will come. I call that re-importing inflation. The question I would ask about it though is whether it is a clean step-shift devaluation (eg Japan), or whether it becomes a self-feeding hyperinflationary disaster
The reasons why I think capital flight will come is not necessarily what investors will run away from, but in my opinion what they are drawn to. It's somewhat obvious US equities, bonds, consumption will not enjoy the same credit imbued growth in the near future
Do be aware that bankers have a statistically significant emotional bias when it comes to supporting currencies (referring to an econometric analysis that tracked credit rating, deficit, gdp growth, trade balance, etc... and the USD, GBP, EUR, CHF, JPY all exhibit irrational movements that do not show up with smaller currencies or rather currencies of smaller financial centres)
"meanwhile the aggregate impact of inflation will be how much?"
I think Bernanke is fighting deflation at the moment.
If he overshoots, we'll see inflation. I think he
is aware of the game he is playing: fighting deflation
with what would under normal circumstancces be inflationary moves.
I owe over $300,000 on my home and grow all my own food and make my own clothes. I'm hoping hyperinflation pays off my home with the 100,000 dollar bills I'll be getting at the Farmers Market!
This hasn't spread through the system-- First Tech CU still at 5.25% 30 year fixed. 5.75% at Washington Federal.
The flow will detract from present lenders who are actually getting payments from their borrowers. On the other hand, NOBODY IS FINANCING THE REOS. And in South Florida, there is NO financing except FHA. None.
Well, maybe if you have an 800 credit score.
We know the lenders are in such great shape, they won't mind at all having the interest rate income that they have slashed--not!
O wants to do something he needs somebody to offer 4.5% financing on REOs. Or tell the banks that if they don't sell within x months, they have to finance their own damn REOs.
Some money is better than no money.
Liz,
Have you seen any cases in which the borrower goes after the lender for fraudulent lending?
Stimulus? While mortgagors will pay less in interest, mortgagees will receive less in interest.
How can all of these people Refi out of 6.5%, 80% LTV loans when their new LTVs are 90%+ ; which are no longer available. In addition, avg FICOs have deteriorated in the past 6 months. Banks aren't going to lend money.
EHP-like me...deflationary jane said it well in last thread...you can rent for so much cheaper than buying, I can't see a positive..I was thinking about a second home..now I'll refi the flat, rent it to students and rent for cheaper..I'm sure many here are the people the fed is trying to motivate to buy...they have de-motivated me with their war against my kid...
the great housing rush is over...just like the gold rush the merchants made all the money....
" many here are the people the fed is trying to motivate to buy"
I'm done. The free trade policies have destroyed me over the past six years and I've already accepted that I'll be retiring in parent's house. Feds can get fucked, I'm not buying another house, regardless of what they do.
There is too much momentum in the system for lower rates to matter now
pissing into the wind
The margin of stability closed in on where we were, and now we must say adieu to the unsustainable credit until the reset works its way through the system
ok ok ok, you want conventional economics? I have a case study, I'm in Vancouver right. We had a huge housing bubble, same deal as in the US but 18-24 months behind the Florida/Arizona/Vegas crests.
We have those low mortgage rates right now. In today's paper one local developer had huge Ads, The Beasley,
Old price: $459,000
New price: $249,000
Keep in mind the prices were rising here up until May 2008, and units did sell at 'old price'. 46% off in 10 months, and in my opinion definitely falling more
Inventory dictates pricing. Learn it, live it, love it
The increasing number of people who are unemployed or worried about being unemployed won't buy a house if the rate is 4% or 6% or whatever.
High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful.
ades, I have been saying this for 2 years.
This bubble only existed because it was built on the largest possible asset for the largest swath of people.
A FREAKIN' HOME!
What, are we gonna get everyone with 1 to go in for a second, or maybe, a rocket ship.
Heck, there is no debt asset larger than a house for most people.
I have a cycle-cross bike i (over)paid a grand for. Thats worth more than half of the detroit housing stock
Bikes for everyone. nova's been saying it for a while after all!
the biggest change in mindset is that a mortgage isn't an asset anymore... its debt, like a car.
What is the effect on One Year LIBOR and other ARM related rates?
BEST CASE SCENARIO
you lower payments for people in homes they want to keep right now.
What happens when all the vacant inventory drags the prices down further? You think anyone but an idiot will keep holding on to their home with 30% negative equity when everyone around them is defaulting? It's a non-recourse loan!
I'm not saying everyone defaults, I'm saying defaulting is contagious. People who wouldn't default amongst normal circumstances, who would liquidate their kid's savings and pawn family heirlooms, will do it now nonchalantly. Something to be done between playing minesweeper and getting more coffee
"High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful."
During the 80s -- double-digit -- the banks stopped offering assumable mortgages. To sell a house, you often had to carry
the loan yourself, at less than market rates. It was also a
time when you could get 12% in an IRA, even more with treasuries.
But it was also a time when house prices went up.
Happy Days are Here Again
So long sad times
Go long bad times
We are rid of you at last
Howdy gay times
Cloudy gray times
You are now a thing of the past
Happy days are here again
The skies above are clear again
So let's sing a song of cheer again
Happy days are here again
Altogether shout it now
There's no one
Who can doubt it now
So let's tell the world about it now
Happy days are here again
Your cares and troubles are gone
There'll be no more from now on
From now on ...
Happy days are here again
The skies above are clear again
So, Let's sing a song of cheer again
Happy times
Happy nights
Happy days
Are here again!
broward, I like your take better but on earlier thread someone didnt like that use of words...I find it more realistic right now...
Regarding credit score destruction..here are some stats I whipped up for a large honda dealer...I dont know if this will load right but here it goes
Month\t730+\t690-729\t650-689\t620-649\t600-619\t550-599\t-549\tNo Score\tTotal Apps\tAvg Score
Feb-09\t8\t11\t10\t8\t6\t23\t56\t24\t146\t574
Jan-09\t13\t8\t13\t10\t9\t13\t53\t11\t130\t586
Mar-09\t6\t0\t7\t2\t2\t7\t23\t4\t51\t582
if you go full screen it might work...
cd,
That's the crux of the matter. The technical which reinforces the social logic.
You can't blackball people with bad credit when everyone has bad credit.
"there is no debt asset larger than a house for most people"
I think that is why down payments should be greater than 20%.
At 20%, a buyer has 5X leverage, which is too much in an
environment where prices may decline further.
In addition, avg FICOs have deteriorated in the past 6 months. Banks aren't going to lend money.
Banks are actually doing the lending for many of the refis. They're processing them as servicers, but it's Uncle Sam holding the bag.
EHP at X:49:01
That big picture site (as opposed to Ritholtz's) always has awesome pics. I especially liked the one of all the unused newspaper racks. That part of the boston globe site is one of the few on the web I'd actually pay to access.
Imagine a rich drunk in the bar. He is borrowing cash from you with IOU's at interest but you know he is good for it so you keep taking his IOU's. You find out he is broke from bad bets on the stock market. What are the value of his IOU's now? Hyperinflation does not come from issuing to much money in a debt based system, but the realization by other countries that you cannot pay them back. We may not have access to cash but still have hyperinflation because the rest of the world will not sell us anything. IMO Ben has taken a big bet that the rest of the world wants to keep the party going on the same terms.
Even people paying their bills are having their FICO scores reduced.
That happens when a credit card company reduces their line of credit.
The effect of that is that the debtor is using a greater percentage
of their available credit, which looks bad to the FICO algorithm.
U.S. President Barack Obama plans to hold a televised news conference on Tuesday night March 24, the White House said.
The news conference, which will be held at 8 p.m. EDT (0000 GMT), comes as the administration is trying to make the case for his proposed $3.6 trillion budget
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Don't worry about it home boy, Benny will print all that you want.
"In addition, avg FICOs have deteriorated in the past 6 months. Banks aren't going to lend money.
Banks are actually doing the lending for many of the refis. They're processing them as servicers, but it's Uncle Sam holding the bag."
Which is why 417k is the key. The liquidity is disappearing for jumbo loans and thus jumbo house prices. This is about slowing down the slide and preventing a wild offshoot on the downside, not magically preventing the slide in it's tracks.
The FOMC meeting minutes removed any mention of the recession ending this year. Couple that with double-digit unemployment, no liquidity in jumbo mortgage markets and things are going to get ugly.
Banks are actually doing the lending for many of the refis.
oops, should have read "Banks aren't actually doing the lending for many of the refis." DONT_KNOW
Are banks actually lending elsewhere than in South Fla, Liz asks pathetically?
I just read that the stock market is on a run to 10,000 one last time. Won't this change everything?
Check-out the landlord before renting!<a/>
I mean on their own behalf or the govt's behalf or anybody's behalf.
"High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful."
I was (and will be) when you realize your wages won't be inflating at the same rate. Didn't have global wage arbitrage 20 years ago like we do now.
ok the actual ad for that 'The Beasley' place
Studio, 430sq ft, $219k
1bed, 559sq ft, $249k ($439k)
1bed+den, 676sq ft, $318k ($519k)
2bed, 930sq ft, $497k ($755k)
That's 10 months after peak. Available mortgage rates are down at 3.5 - 4.15% (we do things a little differently, which is -- and I'm not sure -- but maybe 200bp lower than 1 year ago
The point is mortgage rates themselves mean zilch. It's inventory that determines pricing. Mortgage rate is just one variable that can convert non-owner to owner and eat away at that inventory.
Back when the Fed started raising rates, you could get a 15 yr mortgage at 4.75%. I missed it by 1 day, and got mine at 4.875%. In December, a friend of mine got a 15 yr for 4.25%. Neither of us will be able to refinance soon.
Unless the Fed drives rates below 4%...
Guest a few comments back has it right. BB is betting that the world will take action to prevent the dollar from devaluing against their currencies. I think it is a good bet for the next couple of years while Europe+Asia are screwed and can't afford for US demand to drop any further. When the world economy starts to rebound things get murky.
Yeah, as 833 points out, this may make people who are hoping for the lowest imaginable rates actually wait to see if it even goes lower.
"Are banks actually lending elsewhere than in South Fla, Liz asks pathetically?"
Banks don't want to lend with measly down payments.
So FHA, with 3% down, may be the only alternative.
But someone buying with 3% down is underwater immediately,
considering that it would cost about 6% to unload the house.
Obviously this is not going to help the 8% who do not make their mortgage payment. Who it is going to help are the people who are more well to do who can refi and get their part of the TARP.
Pls no inflation comments. I know.
This stimulus is for the sheeple to feel good about debt again. Managers of their real wealth will just laugh watching them jump through the hoops!
Bill: Here is the result of Japan's QE: Japan Chart
The Latest from Ritholz:
Fire !
Reptillian, that isn't true. It takes 0% to unload a house. Maybe the cost of a uHaul if you wanna be picky.
Reptillian, that isn't true. It takes 0% to unload a house. Maybe the cost of a uHaul if you wanna be picky.
Bank of America | Please Select Your State
So BofA online calculator.. 5% down and 20% down conforming loans... Same rate quoted!?
It used to allow conforming jumbo loans with 10% down.. now it appears 20% is the minimum.
I know they are about to go customer day 1 for the Countrywide integration, I wonder if this is a part of that or just general underwriting changes.
I don't understand. 4.5% does not include a risk premium. Who will pay for the risk? I'm confused. They didn't teach this one in school. DONT_KNOW
You pay for the risk, the taxpayer.
My country has become an f-ing joke.
Where does the wealth for this "stimulus" come from, exactly?
The same place they get all the ponies.
Remember where you were today people, because you may need to tell your children when they asked what happened.
C
The day my country.....died.
So Bye Bye Miss American Pie...
Bloomberg News: "Housing Starts hit record 20 million in April. U.S. Futures climb."
"Reptillian, that isn't true. It takes 0% to unload a house. Maybe the cost of a uHaul if you wanna be picky."
Sigh. Jingle mail is destroying my credibility.
\t
The last couple of closings I did, 'way more than 3% was put down. One had nearly 20% down. There is no financing that I can see except FHA no matter how much you put down. People are going FHA, because that's all that's available, not necessarily because they only have 3%. Here, anyway. The closing I have tomorrow is Seller financing with 20% down. They went over to B of A and discovered the no cost closings had gone away. This is in Hendry county, which is in the middle of the state, and is pretty much the same as here. The owner is virtually giving it away. They gave seller financing once before, and this new loan is exactly half of the previous loan, which the Buyer at the time thought was very reasonable. Then the buyer walked away and gave back a deed in lieu of foreclosure. My clients own it free and clear. That's 100k down the drain, even if it was an imaginary 100k.
You can't bring up incomes in a weak employment environment. The Unions aren't going to be able to do anything this time around.
This is really an attempt to drive money absolutely anywhere except into Treasuries. They are going to need more than 300B since the Treasury is going to finance a cool additional tril of debt just for this year's deficit. Crap. If the Fed starts buying to keep rates low they are going to need to buy more and more and more... Which private investor wants 30yrs at 3.5%??? At 3%???... 300B my ass.
You can't bring up incomes in a weak employment environment. The Unions aren't going to be able to do anything this time around.
This is really an attempt to drive money absolutely anywhere except into Treasuries. They are going to need more than 300B since the Treasury is going to finance a cool additional tril of debt just for this year's deficit. Crap. If the Fed starts buying to keep rates low they are going to need to buy more and more and more... Which private investor wants 30yrs at 3.5%??? At 3%???... 300B my ass.
Here's how we can fight Bernanke.
I'm announcing here on CR for the firs time;
The "Save to Save America" Campaign.
Uncle Sam wants you to start saving money now, to help Save America. My new bumper sticker; Save to Save America! Will be free to anyone who requests one, while supplies last.
You Can help Save America by participating in this campaign locally. Just have these bumper stickers printed up with the slogan; "Save to Save America", and distribute them free of charge if you have the means. Thank You.
Another addition to the story of what is coming. Well, my version at least.
Excerpt:
I listened to Aly who was explaining to White Man, very patiently I thought, “I never took anyone’s job. I have, excuse me, had, a small business. I paid my taxes and bothered no one.”
“Right! A small business! I know the type. You charged one price for ‘your people’ and another one for people like me! You and your freaking 12 people in a three bedroom house, trashing my neighborhood. Driving down house prices! That’s another thing god damnit! Your freaking people!” he was starting to cross the line. I put my hand on the butt of my gun. I told myself “One more comment” and I move.
More: 401 Authorization Required
Capital flight is already happening, I suspect. I'm certainly going to move everything I can out of here before the USG sets limits on it, which is a possibility, in my view.
I am also convinced hyperinflation is on the horizon, maybe 2 yrs out, and perhaps as bad as in the Weimar Republic but certainly in the 50% - 200%/yr range .. I haven't been able to find anything to put my $$ in yet that I'm comfortable with, except gold, which has practical problems (except for the ETF GLD, which also has other issues) .. also, it just may be that all currencies hyperinflate .. what did you have in mind as a safe haven ??
I'm also curious as to who would buy debt longer than 3-6 months now?? The corporate debt market has shown considerable strength recently, and I'm wondering who in their right mind is buying, since when hyperinflation hits, it will hit so quickly that no one will be able to sell fast enough, as bond values will disintegrate instantaneously.
I'm actually hoping the Chinese save us by stopping their purchase of US debt .. this would probably halt the printing presses asap, save us all.
People may have to face the future: a house is what it is worth for shelter, maybe some small premium for "ownership," but that premium is doubtful when a comparable house can be rented for less per month than the cost of "owning."
btw, CR
You want to talk about stimulus? How about the $350bn withdrawn from US equity mutual funds since last June? Or the $200bn in gasoline savings
Nevermind the $200bn loss attributed to the wealth effect, or the real loss of $800bn annually in mortgage equity withdrawal, or the growth of other forms of credit which exceeded GDP growth for a time.
$190bn... if everyone qualifies and chooses not to default
I'm not a doom & gloom type of guy, just a gloom type of guy
How about the $350bn withdrawn from US equity mutual funds since last June? Or the $200bn in gasoline savings
Don't forget about the actual stimulus bill v.1.
I had a follow up that began with "yes, yes... they have a lot of direct spending" but that was eaten apparently.
Basic contention was the amount of money necessary to spend in amount/speed would cause an immediate capital flight
I mean the TALF is an admirable amount of spending according to plan,
in any event stimpack 2 (there was one in 2001) had less than 20% of it go towards new consumption, rest went to paying off debt. we knew from stimpack 1 that less than 25% would go towards new spending, stimpack 2 was less successful despite targeting demographics better... because surprise surprise the economy is a causal system and previously accumulated debt affects present spending
Another Bailout Bonus: Fannie, Freddie .
They don't get it.
We need special legislation to tax this 100%.
The "Save to Save America" Campaign.
If they can create claims on real goods faster than you can save claims on real goods you are just playing into their hands because you keep a higher "value" on their claim for real goods. You don't save sand at a beach. You just stop playing the game.
If they can
I'm talking about saving cash in a mattress or a home safe. The ultimate Fed revenge.
Setser had a good post today with a chart showing how foreign governments have piled into short-term Treasuries, waiting for the inevitable skyrocketing of rates for long term treasuries. The chart looked like a coiled spring.
NEW YORK, March 18 (Reuters) - NBC Universal Chief Executive Jeff Zucker fired back at comedian Jon Stewart on Wednesday, saying it was "unfair" and "absurd" for the funnyman to criticize CNBC and question its coverage of financial news.
I read an odd little book once called (I think) rules for aging. I think rule #3 was leave bad enough alone
It has a lot of applications lots of folks involved could benefit from it.
Dodd Admits!!!!
In a live interview on CNN, Dodd said, "I agreed to a modification in the legislation, reluctantly.''
Topic Galleries -- Courant.com
Is there no end to the lies??????
The children in our country are so screwed. I'm glad I don't have any kids to be taken advantage of by my government.
"After Dodd's segment was over, Blitzer continued with a live report in which he said that Dodd was "coming forward with a vastly different story'' on Wednesday than he had told to a CNN employee on Tuesday.
"It's very embarrassing to Senator Dodd to say one thing yesterday and another thing today,'' Blitzer said."
Thanks for the insight, Wolf! Now we know why you get paid the big bucks for reporting.
What will it be hyperinflation or debt slaves to the foreign bondholders? My money debt slaves to the bondholders with our politicos still managing us under their rule. Most Americans will never realize the difference.
It is a statistical impossibility for the American tax payer to ever pay back the 12 trillion dollar national debt and the 60 trillion of unfunded entitlement liabilities. The American tax payer has no intention of ever paying that money back.
Nothing is impossible. The treasury can just mint 12 one trillion dollar coins, or any more moderate equivalent. No default required.
The inflationary repercussions are what we would have to live with.
Difficult, yes. Impossible, no.
Ben Bernanke capitulated today.
[The news conference, which will be held at 8 p.m. EDT (0000 GMT), comes as the administration is trying to make the case for his proposed $3.6 trillion budget]
It's pretty clear that the American public doesn't need to be sold on free money to throw around. They simply don't believe there's a consequence.
BHO should save his sales pitch for the CHinese and Japanese. They might have some concerns. In fact, after the crushing the dollah took today (and the hit to their holdings) they may not even be inclined to listen.
Did you see that CNBC is reporting that the Fed's Treasury purchases are from 2-10 year maturity?
Like I've been saying, the average maturity in TBT is 25 years. There is no natural buyer out there for 25-year Ts. Not even the Fed.
The 30-year bond rallied today because the 10-year did. But in the days ahead, you will see them diverge. The Fed has the 10-year's back. Nobody in the world will want the 30-year. In fact, they will pile into short-term Treasuries and dump those over 10 years.
This is really a great buying op for TBT, if you have any hair.
Rich your theory on TBT is flawed, You are betting against Helicopter Ben and if unemploy. numbers hit 10 this summer there will be a flight to quality . Think puts on TBT, and your theory on comm. prices might be correct , but the time frame could be 6 months to 3 years
rich --
Did you see that CNBC is reporting that the Fed's Treasury purchases are from 2-10 year maturity?
Not entirely. The New York Fed statement says:
The Desk will concentrate purchases in the 2- to 10-year sector of the nominal Treasury curve, although purchases will occur across the nominal Treasury and TIPS yield curves.
"They simply don't believe there's a consequence"
They're just accepting Bernanke's expert opinion.
""They simply don't believe there's a consequence"
They're just accepting Bernanke's expert opinion."
I have been told that Ben Bernanke is an expert on the Great Depression. And I take him at his word.
When we're in one he will finally know what to do. :-E
Ben Bernanke is an expert on the theory of the Great Depression, and in theory that is the same as in practice
and his textbooks are garbage... I don't even care if it's mostly the same garbage that everyone else puts out for undergraduate economics
Brenanke has no mercy on our children.
None of this is a new source of productivity or dynanicism for the U.S., or even world, economy. It's simply more of the same.
Meanwhile savers and renters are totally screwed. Way to fight for the little guy, Obama!
Get into the new capitalism.
SBA loans backed 90%! That's 10X leverage.
Hire yourself!
Can we see the other side of the equation - how many dollars are going to be sucked out of the private sector to buy the Treasuries necessary fund this "stimulus"?
"Get into the new capitalism"
You misspelled "cannibalism".
Speech, Bernanke --Deflation-- November 21, 2002
Dr. Bernanke or How I Learned to Stop Worrying and Love the Bomb
That speech should be frightening because he does not respect the role of credit in all of this. He thinks the collapse in demand is a spontaneous phenomena of mass hysteria
Where does the wealth for this "stimulus" come from, exactly?
from the dopes?
Who's carrying the feed at 8pm CSpan? I don't like the look of this.
C
Yes. Move's like this purchase of MBS and Treasuries will instill great confidence. Risk capital is sure to flow into the markets after such actions. /snark
how many dollars are going to be sucked out of the private sector to buy the Treasuries necessary fund this "stimulus"?
Weren't you paying attention? No money will be sucked out of the private sector. Ben is going to make all new money.
"So, if the Fed brings 30-yr fixed rate mortgages down "to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year."
meanwhile the aggregate impact of inflation will be how much?
--
i would say somewhat less then the notional value of $560 trillion of derivative contracts evaporating.
debt to gdp at about 3.6x, add in shadow debt from hedge funds maybe 4.6x and assume real "debt" from derivatives (cds, etc.) being fairly small (5-10%) you're looking around 6.6x gdp. you don't stop deleveraging.
repeat after me. you don't stop deleveraging.
We may consider each generation as a distinct nation, with a right, by the will of its majority, to bind themselves, but none to bind the succeeding generation, more than the inhabitants of another country.
Thomas Jefferson
Doc at the Radar Station says:Today, 3:00:50 PM“High single digit inflation isn't really "hyper-inflation". It is relative to what we've experienced since the early 90s, but I remember the double-digit stuff and it wasn't that awful.
Exactly, I am amazed at how Bernanke and the FR don't believe that we can handle 6/7% interest rates. SAD.
BHO's speech premise:
o We have nothing to fear but fear itself.
o The government should act responsibly with spending programs, in the future
o Individuals should pay down their debts, in the future.
He's right! He knows the future (since he's designing it with Timmay, Larry & Ben) and in the future dollahs will be worth a tiny fraction of what they're worth today... so better to wait.
Rich your theory on TBT is flawed
graingod
Your theory on rich's theory is flawed.
explain please? are you long TBT
Members of Congress Spam YouTube with cringe worth video
I am looking for a re-fi here in Maine. I want that 4.5 rate. I cannot find any bank or CU offering lower than 5.5. I cannot get any servicer to answer why the rate of 4.5% is not available in my area. Does anyone know if the new rates should be nationwide or just to service the (big)foreclosure markets in CA, FL, NV?
I am not looking at foreclosure and have an excellent credit rating but I did purchase my home last Sept after a move from FL at a too high rate. Needed a place to live. Looks like I should have rented! O:-)
The Latest from Ritholz:
Fed: Rates Going Much Lower
RE TBT:
-it's run by those Barclays' sleazebags
-what about counterparty risk in the swaps mentioned in the prospectus
-Euro and Eurozone will blow up before Treasuries...EU will QE massively and EU banks were leveraged more than US banks...so flight to US quality likely
It is a statistical impossibility for the American tax payer to ever pay back the 12 trillion dollar national debt and the 60 trillion of unfunded entitlement liabilities.
Cancel medicare and SS. there goes $5.5 Trillion in debt and all of the unfunded entitlements. The Congresscritters will all be looking for new jobs though.
wow.. .cancelling medicare would mean my grandma would die... I actually would shoot on sight anyone who tried to do that
CR, I believe that there are some serious logical flaws in this argument.
First of all, the pool of homeowners who stand to benefit materially from refinancing is rapidly shrinking. 30-year mortgage rates have been hovering just above 5% since December, when the Fed first started buying agency MBS.
As noted by the rocket scientists at Housing Wire, this has resulted in a mini refi "boomlet"; however I'll wager that it pales in comparison to previous booms in the 2002-2004 period. I doubt there are many folks out there with fixed mortgages above 6%.
Also just because a homeowner is "able" to refinance doesn't mean that they will. Going from a 5.25% rate to a 4.5% rate doesn't make much sense, as it will likely take more than 5 years to recoup the fees and points.
Case in point, I refi-d in 2003 near the previous mortgage rate low at 5.875 on a 30. It was a marginal call as my original mortgage was 6.5%. However, I knew we'd stay in the house for a long time and we've made substantial progress in paying the note down. I have no intention of even thinking about another refi unless 15-year rates get below 4%.
Doesn't mean that there won't be some benefit here, but even half of the $190 billion quoted doesn't seem likely.
I am looking for a re-fi here in Maine. I want that 4.5 rate. I cannot find any bank or CU offering lower than 5.5. I cannot get any servicer to answer why the rate of 4.5% is not available in my area.
Check out FinancialStability.gov
Think it might have to be a GSE loan.
http://financialstability.gov/makinghomeaffordable/refinance_eligibility.html
Money represents wealth.
Where does the wealth for this "stimulus" come from, exactly?
The money for this is coming from printing (apparently) so part of the wealth will come from an inflationary tax on existing dollar-denominated debt. Quite possibly Fannie, Freddie, and FHA will end up with a lot of fraudulent priced refi's or the debt will go sour later when interest rates return to normal and so a lot of the wealth will come from future taxes.
it won't matter. The moronic liberals and sheeple in Connecticut and Massachusetts and Pennsylvania will still reelect Dodd, Frank, and Murtha no matter how many payoffs they take or boys they sleep with..
"The moronic liberals and sheeple in Connecticut and Massachusetts and Pennsylvania will still reelect Dodd"
I would not bet on that yet. Dodd is going to take a beating over the AIG bonus amendment.
We must bring back protectionism.
America for Americans.
We can do it.
We have no obligations to the rest of the world.
But we do have self-interest, no?
"We must bring back protectionism."
That would end us, so very, very badly.
You can't put the globalization genie back in the bottle with out serious economic harm.
Do you have any idea how expensive a 100% domestically manufactured car or TV would be? Not to mention the start-up costs, of needing to bring high pollution type manufacturing back on line.
Protectionism would really be a re-enactment of GDI.
There is nothing wrong with the government protecting American citizens jobs and livelihood with fair trade.
Another trill pumped into the market today to buy MBS. Don't confuse deleveraging with deflation. We are inflating and its going to get serious real soon. BB is monetizing us to the moo
I see a lot of confusion here about inflation. I doubt we are going to see much inflation, even with the Fed printing like mad, let alone hyperinflation.
What are incomes doing? How about home prices? Today I noticed that for the first time in memory, diesel is now cheaper than premium gas (note to self - buy that Jetta TDI.)
That tells me that trucking and commercial transport is still declining.
Bernanke is on a mad quest to prove his doctoral thesis. If we do see any inflation at all, it will only lead to more pain for the 16% unemployed and those on fixed incomes. See Mish's latest post; he explains it better than I can.
Dodd and Schumer have been the bankster's goto Senators for a long time. Why do you still have any faith in them?
More good news:
More consumers are just a paycheck or two away from ruin
"A MetLife study released last week found that 50% of Americans said they have only a one-month cushion -- roughly two paychecks -- or less before they would be unable to fully meet their financial obligations if they were to lose their jobs. More disturbing is that 28% said they could not make ends meet for longer than two weeks without their jobs."
"And it's not just low-income earners who would find themselves financially challenged. Twenty-nine percent of those making $100,000 or more a year said they would have trouble paying the bills after more than a month of unemployment."
What was that tag line for mortgage adverts? Oh, yeah:
"People are smart"
On a lighter note, on this page Lance Armstrong is peddling energy supplements, in an ad window that also features colonic cleansers. Isn't capitalism wonderful?
AIG Chief Executive Admits 'Mistakes,' Touts Progress - washingtonpost.com
The Latest from Ritholz:
Technical Analyst Magazine 2009 Annual Awards
David Greenlaw's comment that CR highlighted is interesting to me because it's an action that will directly help homeowners who can refinance. This aid comes only after the government gave zillions of dollars in handouts to banks that still wouldn't help homeowners.
Ok, I am a sheeple. How do I know what avenue to pursue to protect my investment in my major asset, my home? There are so many competing messages that I cannot sort them out. I am retired, no pension, my husband, retired, with a pension and also a 40 hour job. We are just barely making it even though we did all we could do over the last 45 years to provide for our family and climb the prosperty ladder. We are now reduced to living on the edge of poverty through no fault of our own. Every entity has taken a bite of our savings until we wonder if we will end up on welfare!
Pat,
Pay your house off or consider downsizing and pay it off. Pay all debt off and save what you can. Hang on for a rough ride ahead.
America: Freedom to Fascism - Director's Authorized Version
America: Freedom to Fascism - Director's Authorized Version
"Do you have any idea how expensive a 100% domestically manufactured car or TV would be? Not to mention the start-up costs, of needing to bring high pollution type manufacturing back on line. "
Labor is a small part of the cost of a tech. product. The old plants are still here, and still zoned for what they used to do.
Do you have any idea how expensive a 100% domestically manufactured car or TV would be?
Blackhalo
Looks like you need some depression to knock you off your high horse, get you working for peanuts. Then the car won't be so expensive.
"u can't put the globalization genie back in the bottle with out serious economic harm"
You mean like... a collapse of global trade that's already happened?
Scare tactic used to promote bullshit, and if you'd read any HISTORY, you'd know that this has all happened before. We're here beczuse of globalism, of constant disassociation of costs from benefits. If more debt can't fix debt, how can more globalism fix globalism?
"If more debt can't fix debt, how can more globalism fix globalism?"
I personally do not think globalism is wrong, just broken by the pegged Yaun. China's fear of losing control with a government that is slow to adapt to change is fucking it all up. BB is about to evaporate their accumulated assets (along with all other savers) in a puff of inflation. My bet is that the Saudis sell first.
If 4.5% s gooder than 6.00% then -2.00% must be even more betterer. Right?
There is only one solution to too much debt; less debt. Unfortunately the only schemes presented so far all involve more debt.
Inflation can and will happen without spiraling wages.
Please elaborate.
Every entity has taken a bite of our savings until we wonder if we will end up on welfare!
Pat
So I take it your not in the market for a second home? =-O
No second home - just want to preserve the very modest place we have. I could never have predicted that we would be in this position. We did all the right things and it still was not enough. It makes me angry.
"There is only one solution to too much debt; less debt. Unfortunately the only schemes presented so far all involve more debt."
Quoted for truth. Unfortunately all the people in power think that the cure to too much debt is more debt, because that is what blew the bubble. I think the bubble is finally burst this time, and you can't reinflate a burst bubble.
Do you have any idea how expensive a 100% domestically manufactured car or TV would be?
Blackhalo
Strangrly there's a case to be made for trashing every CRT in the country in favor of LCDs as it forestalls electrical demand long enough to allow new investment in things like solar rather than commit to new traditional generating capacity.
"I think the bubble is finally burst this time, and you can't reinflate a burst bubble." They sure seem committed to continue trying though.
I've heard of few cases recently of grandparents fully financing homes for their grandkids..
Kind of an odd bird in the flight-to-safety meme...But encouraging to see people being creative WITHOUT bank or government intervention...
The Latest from Yves:
Why We Need Criminal Investigations
"Looks like you need some depression to knock you off your high horse, get you working for peanuts." That is going to have to be a pretty impressive depression to get me working for 10c on the $. Which is what we pay our Bangalore/Shanghai equivalents in my biz.
All these globalisation shills are just spouting what they were brainwashed in business school with, without ever thinking about what they were told. Business education has been focused on short term gains at the expense of long term gains. There is an excellent article about the problem with business schools here
"the US standard of living will equalize with the rest of the world..." I agree with that view and with the poster above that we get there via low wage growth inflation.
How do I know what avenue to pursue to protect my investment in my major asset, my home?
Pat, I do not know. I am pretty mad at the whole situation. I do not know a time in history where a government has been able to outsmart the market without serious consequences.
I wish I could always be a sheep
I'd stay in the middle of the flock
There at night I could safely sleep
When those on the edge cowered at the howl
Deeper in the middle I would burrow
Safe from the wolf on the prowl
Teeth ripping at my friends flesh and bone
I would cover my eyes
Thank god I own my home
“"the US standard of living will equalize with the rest of the world..."
what a dope
That is going to have to be a pretty impressive depression to get me working for 10c on the $. Which is what we pay our Bangalore/Shanghai equivalents in my biz
That is exactly what OB is doing by punishing business. Unions, Taxes, more unrealistic environmental, new energy to compete with what we have now. Totally the wrong direction with severe consequences.
Your right, Ben. We need Bush back - someone you can help business, help flood victims, and find weapons of mass destruction after he allows a huge terrorist attack. Good thinking!
"the US standard of living will equalize with the rest of the world..."
How does turning the US into Mexico benefit Americans?
Not that it matters now, the country is gutted and won't recover. The post-WWII culture has been dismembered over the past couple of decades by increasing numbers of intellectually dishonest special interest groups and cabals.
"How does turning the US into Mexico benefit Americans?"
I'm pretty sure the goal is still, to benefit bankers.
Understand that global wage arbitrage is not going to be bloodless. Much as tPTB wish for a manageable transition to lowest common denominator labor the realities are such that the high wage earners will not stand for it and the low wage societies will not withstand the social stresses.
"high wage earners will not stand for it"
Fear of hunger and hunger are interesting motivators.
I think that the kink in the works is the number of people who are actually able to get that reduced rate money.
If there is no M2Market and no viable sense of what's actually in the capital base, then the lenders will continue to simply suck up the money and try to fill the black holes in their capital. Ditto with TALF...
You can take a banker to capital, but you can't make him lend.
The bastard.
"How does turning the US into Mexico benefit Americans?"
In a world of finite resources, the more peasants the richer the nobles.
Have been reading the Blood Bankers by James Henry. This guy is NOT tinfoil. Former chief economist for McKinsey.
Chilling.
C
Nikki tanks. Nice one.
C
Dodd admits inserting bonus loophole
BofA Ordered to Disclose Merrill Bonuses
"I wish I could always be a sheep
I'd stay in the middle of the flock
There at night I could safely sleep
When those on the edge cowered at the howl
Deeper in the middle I would burrow
Safe from the wolf on the prowl ..."
Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?
Surprised the Nikkei isn't digging a deep hole with the dollah tankage.
"How does turning the US into Mexico benefit Americans?"
More tacos?
Nova: "How does turning the US into Mexico benefit Americans?"
"More tacos?"
Not just more but higher quality tacos, plus a vas selection of culinary delights.
Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?
We eat our own, so the protection should be from within?
"We eat our own, so the protection should be from within?"
Nice! With no natural predators, we invent banking!
They need to drive it to 0.00 or 0.001, that should help enough homeowners.
"Is there anything that makes human beings different from those?"
Cannibalism - Being in the middle of the herd is like being in the middle of the stew pot.
Pavel,
I hope so. They are lambs. We are the flock of the Lamb of God
"Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?"
Courage? As in the courageousness of one person, which others will follow?
the bubble burst, its all over the consumers faces and it's in their hair..They don't want no more gum because they are still cutting their hair to remove the sticky mess left from the last bubble....
I am not in the deflation camp but to say that with one stroke of a pen the FED has instantly created hyperinflation is ridiculous. We will be lucky to get 2% YOY in 2010.
Also home prices can still go down even during inflationary times. In fact real home price appreciation in the 10 years prior to 1997 were found to be 1% while Inflation ran 2-3%.
"I am not in the deflation camp but to say that with one stroke of a pen the FED has instantly created hyperinflation is ridiculous"
Depends on how much the Fed prints and how much China, Japan, the ME and the UK sell. If Ben is going to follow through on devaluing the currency, why would they continue to buy a depreciating asset.
Good point. US debt is dollar denominated, so foreign central banks are exposed to currency risk. If the dollar does a face plant, China, Japan and ME are going to get paid back in worthless script.
"If the dollar does a face plant, China, Japan and ME are going to get paid back in worthless script."
I'm pretty sure that the recent meetings with China were around, "de-peg the Yuan, or we start printing."
However, I do not see the dollar becoming worthless just worth less.
bb is bound by the wrists to the edge of the bed on a bear rug. Tarpy is wearing a magnificent vintage strap-on, mincing around bb.
bb: forget the ky today, I want to really feel it
traderwalt,
OB is the third clueless president on economics. Clinton's administration really kicked this one off. Bush greased it and OB is using it for a socialist agenda. Considering most people are incapable of providing a job for themselves,then jobs are the most important.
"OB is the third clueless president on economics."
I think you missed a couple. Granted I'll give you GW and Carter as not being complete idiots.
"Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?"
Triumph of the Will
[The spread is the same (or better) for the bank]
You think the bank is holding ANY new mortgages? They are dumping them on the Fed. Banks are fleeing martgage debt...
reptillian says:Today, 9:07:15 PM“"Flocks of birds, schools of fish, herds of gazelles...? Is there anything that makes human beings different from those?"
Triumph of the Will
Michael and Werner both own the that movie
Triumph of the Will (Triumph des Willens)
Don't need to own it, it's right here;
Triumph of the Will (Triumph des Willens)
Yes that was me posting anonymously so the post couldn't be tracked back to me. Wouldn't want to be labeled an anti J-People person. =-X
Broward Horne says:Today, 6:02:21 PM PDT
"Is there anything that makes human beings different from those?"
Cannibalism - Being in the middle of the herd is like being in the middle of the stew pot.
"Bordered In Black" - Niven 1966.
"Bordered In Black"
Damn good short story. Larry is at least 40yrs ahead of his time.
What banks have exposure here? Have not heard a lot about Italy, Austria etc.. lately
Slovenia
Bailout Apologists
Same blog - eurowatch
Oh, Slovenia is a Euro state
It all started yesterday, when Bloomberg came in with a report about Unicredit's eastern exposure, outlining how a decade long expanison, which saw more than $65 billion of acquisitions in operations stretching from Poland to Kazakhstan is now alarming analysts who forecast that loan defaults in eastern Europe, where the bank focused its growth, are set to balloon. Unicredit's stock is down 76 percent in the past 12 months, the second-biggest decline among Italian banks.
and
Oh, and just to cap it all, and a very bad day for Unicredit, HVB Group, their German banking unit, announced this morning that they had a loss of 671 million euros last year because of writedowns on investments and higher provisions
So now that we are buying our own bonds to lower rates any guesses of what the unintended consequences will be?
Lets say I'm China and feel kind of foolish with all those rapidly depreciating dollars. What do I do?
Lets say I'm the EU and see that the rapidly dropping dollar makes me not very competitive.
Lets say I'm an Arab country how should I be paid for my assets?
Any opinions? I'm thinking trade barriers will start to appear in a very stealthy way among all of the above...
"Lets say I'm China and feel kind of foolish with all those rapidly depreciating dollars. What do I do?
Lets say I'm the EU and see that the rapidly dropping dollar makes me not very competitive.
Lets say I'm an Arab country how should I be paid for my assets? "
First one to sell wins! Too bad for the bagholders.
Blackhalo says:Today, 6:17:27 PM PDT
"Bordered In Black"
Damn good short story. Larry is at least 40yrs ahead of his time.
Everything that's going to happen has already been written about in sci-fi over the last half century. "Chocolate dollars" most likely (flash mobs) and "chocolate covered manhole covers" in the extreme (full reset) come to mind.
The FED is a joke. 4.5% will do nothing for Calif underwater homeowners nor the vast unemployed now receiving government checks. This is about the fact that nobody will buy GSE debt except the government itself. It will take the market a few days to figure it out but once it does, good bye and good night.
Guest, Cal. is terminal ,nothing can repair that mess.
OB is the third clueless president on economics."
Should have put in a row. =-O
FUBO!
Armed Guards at AIG
Euro Watch
BHO should save his sales pitch for the CHinese and Japanese. They might have some concerns. - bearly
They only have one concern and only one - when will we start buying again so they can send their hundreds of millions of rural rubes back to work? It it takes 36 trillion banana bucks so be it - they'll recycle it back - just get it done. Get it done now.
That is the other side of the insanity so many here on this forum fail to grasp. Grasp it - with two fucking hands around the neck. That is half of what is required to 'fix' the problem. We have to do less day trading and more work... you up for that?
[/end rant]
"BHO should save his sales pitch for the Chinese" - bearly
"That is the other side of the insanity so many here on this forum fail to grasp."
That is the next bubble, yet to burst. Depegging the Yaun and breaking the cycle. Far bigger than the housing bubble and with a lot more risk and uncertainty. But, ultimately, unsustainable.
We have to do less day trading and more work... you up for that?
Why work, when you can print print print?
They only have one concern and only one - when will we start buying again so they can send their hundreds of millions of rural rubes back to work?
BoJ needs to make non-recourse loans directly to the American consumer.
I don't mind having to work for 2 days for a loaf of bread. This is 'Change,' afterall, and that's what we wanted.
Does anyone know the nutritional information on municipal grasses? I'm thinking iceplant can be processed and eaten from the freeway onramps, but I'm lost on harvesting food from a park or golf course.
" Does anyone know the nutritional information on municipal grasses? "
Don't be silly. Keep the brakes on your car in good shape so you'll be able to beat the crowd in the scramble for new fresh road kill.
They only have one concern and only one - when will we start buying again so they can send their hundreds of millions of rural rubes back to work - dryfly
They don't care what the 'ef happens to their surplus millions as long as those millions don't get uppity. And I do mean uppity in the very worst way.
Lower Mortgage Rates as Economic Stimulus
Calculated Risk: Lower Mortgage Rates as Economic Stimulus
You want me to go all in for the good of America? Ok I'll bite, make it 3.5% for thirty years and I am t┘ts up all in.
03/18/2009 Freedom Watch 6: Alex Jones, Ron Paul, Lew Rockwell, Peter Schiff, Andy Levy, Mark Skousen, Cody Willard
Freedom Watch With The Judge » “Stay Free” – Judge Napolitano
Blackhalo says:Today, 6:40:56 PM PDT
I personally do not think globalism is wrong,..
It is all about externalities. When brown clouds from China trigger EPA restrictions on Ventura County economic activities the whole intent gets hazy.
"When brown clouds from China trigger EPA restrictions on Ventura County economic activities the whole intent gets hazy."
Part of the problem is that with the devalued Yaun, there is little chance for China to form their own consumer economy. The vast majority can not afford to buy the products they make. They have yet to develop a real "middle class" who would want things like non-toxic food and air, and healthy babies to care for them in a longer, old age. I think this is particularly out of fear that an enriched middle class might want troubling things like an EPA, OSHA, FDA and most troubling of all to career communists, Democracy.
world a powder keg?
Acme Industries provides the fuse.
Matches, that's your problem.
"most troubling of all to career communists, Democracy."
these days career democracy politicians could hardly trouble the career chinese bureaucrats, so called communists
"these days career democracy politicians could hardly trouble the career chinese bureaucrats, so called communists"
Bureaucrats do not like change and for all their shortcomings, democrats are accustomed to it.
is the government subsidiary that benefits an industry overloaded with excessive supply an economic stimulus?
haha
sorry CR
haha
New Thread: 2007 Data: Record Number of Babies Born in U.S.
http://www.calculatedriskblog.com/2009/03/2007-data-record-number-of-babies-born.html ( 0 comments ...You could be FIRST! )
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what we ve got to do is to switch ideas with chinese, we should subsidize production efficiency and they should subsidize consumption, otherwise most of the both stimuli will be wasteful.
Loan Brokers are gone.The Banks no longer need a legal buffer because they are no longer encouraging mortgage fraud.It is all in house and GSE.And not much is being done with hard money because prices are falling so fast.A 65% CLTV might look good until you see a yoy fall of 28% in the prior year and it appears to be accelerating this year.A 12%-15% return is nice if the borrower pays it...
Kleptocracy v. Kleptocracy Smack Down on CNBC! Larry Kudlow referees as as Yuan "the upstart" Chicomm takes on the aging Bucky "the beleaguered" Bureaucracy for global supremacy in a misguided quest for respect and dubious standing in a crumbling world economy. Maria and Erin will carry the round cards.
BoJ needs to make non-recourse loans directly to the American consumer.
You mean as opposed to passing through our agency & treasury 'middlemen first'? The only gov'ts serving their people more poorly than the US gov't are the Asian merchantilists. And those folks understand 'killing fields' 'cultural revolutions' and 'reeducation camps'...
My bet is that the Saudis sell first.
A good bet IMHO.
saudis cant sell, need more suvs on the road, look at this from their pov. good nite, thxs all
"The FED is a joke. 4.5% will do nothing for Calif underwater homeowners nor the vast unemployed now receiving government checks. This is about the fact that nobody will buy GSE debt except the government itself. It will take the market a few days to figure it out but once it does, good bye and good night."
Thank god for that. There are many of us out here that would contemplate armed insurrection if our government started taking on huge new debt in our names, just to pay the mortgages of people in CA who have no job or income any more, so they can stay in houses in sunny CA while we here in flyoverland continue to labor at lower salaries to keep paying rent or mortgages on houses that aren't worth a fraction of those ...
Your sense of ENTITLEMENT is glaring, sir. We working taxpayers (and our children) are not your serfs, existing to continue laboring in the fields while you idle in your Manor House ...
A serious question for all of you well educated, intelligent folks who follow these things.
If we as a nation have spent trillions in stimulus, why would it not make more sense for the Treasury to be selling 30 year bonds at 3.5% in order to lock in a low interest rate to finance Tarp money etc which is being lent out at 6% or higher?
I understand the desire for lower mortgage rates, but mortgage rates in the range of 6% are reasonable by any historic standard, and adding another trillion of debt, when we do not have the money, which will be repaid with deflated dollars as inflation goes into high gear as a result of the printing presses running overtime, seems to be foolish economic policy.
If I am not understanding something here, please let me know.
I have to agree w/ Bill. Even if mortgage rates get to 2% it doesn't matter if the banks still are not loaning out money. At 4.5-5% the credit really hasn't eased up. You still seem to need a mid 700 credit score and 20% down to get a loan.
This economy is just plain crazy now. Perhaps they should have paid off all mortgages in the country that were behind and handed the deed to the "proud" homeowner. We might have come out cheaper than what all of the packages are going to end up costing us.
I would hate to be the one trying to figure this all out. Nuts I tell ya!