Today: Fed announces $750 Billion to purchase Freddie & Fannie MBS.

Opinion:

Today the Fed announced a significant plan to purchase an additional $750 Billion in mortgage backed securities from agencies Freddie Mac and Fannie Mae. The proposal is hopeful in that it will stimulate the housing market and refinance business by producing exceptional mortgage rates lower than where they are today.

Will this impact the markets in a meaningful manner that will stimulate home sales and refinance activity? I believe it may and one reason is this:

A stumbling block to overcome in refinancing relates to the challenge of finding viable sold comps to support favorable LTV’s (loan to values) needed to move forward with the refinance. An enormous number of existing homeowners have two mortgages that encumber their homes. I’m told of appraisals that have comments from the appraiser indicating specific market areas have essentially stalled in home sales along with falling home values. This produces LTV problems and can derail a refinance transaction. One alternative is for high LTV households to consider FHA which has higher LTV guidelines.

With that in mind, the additional $750 Billion in stimulus is meant to drop the rates to such attractive levels that it will encourage home sales and refinance activity. The sales going forward will theoretically place a building block or foundation for holding values at a point that will at least slow or level off further declines. This is a positive development for those both refinancing and for sellers, if it can take root. Whether or not it will take root remains to be seen due to many other factors.

Have a great day,

S-Crow

0.00 avg. rating (0% score) - 0 votes

About S-Crow

"S-Crow" (Tim Kane) is co-owner (with spouse Lynlee, LPO-Designated escrow Officer) of Legacy Escrow Service, Inc., an authentic independent escrow firm closing residential purchase/sale and refinance transactions.

96 comments:

  1. 1
    David Losh says:

    Great post,

    You know there will be a firestorm here about this. In my opinion what we have seen this week end and this week has been all that will be done. From now on the banks, financials, and credit should be able to stand on thier own two feet.

    I think in August, maybe sooner, that prices will decline further for Real Estate. Any moves that banks want to make should be made now. Reducing principle balances should be on the table. It’s the only way to correct the market place.

  2. 2
    shane says:

    You’ll probably get your refinance boost, but I doubt you’ll get much of a sustained increase in buyers. This move, coupled with the spring season, might see some increase but come summer we are still in the same situation. We are still broke as a nation, how does this solve that? Many trillions of dollars in wealth, phony wealth but it made people feel good, has been wiped out. Many people still won’t be too eager to add debt to their balance sheets.

    This is Bernankes Hail Mary, he better hope that it works or it won’t end well.

  3. 3
    Ray Pepper says:

    It is a very positive development………..however the foreclosures/shortsales will continue to escalate and these will remain the homes that will ALWAYS be bought first. Forget the new construction! Why is this?

    Because people will NOT stay in their upside down homes. Even at 4% refi’s the home must eventually get placed on the market. We are a mobile society. Sure some will stay. But, 1 year, 2 years, 4 years…the home will still be a short sale at some point….the values are not coming back for a very long time. Its a bandaide on a very deep cut. The Fed knows this but what is the alternative? An utter collapse in housing where 20% walk?

    Until Mtg cramdown is initiated the short sales and foreclosures will continue through this next decade. People will scream at the Fed how very unfair it is that people have vast amounts wiped away from their Mtg and how their neightbor got a FREE 4% refi with no appraisal…over and over this is what we will hear.

    A simply terrible mess that has a very long path to recovery. **Remember its not the homeowners choice that they got transferred, lost job, has to move, divorce, illness, better deal, etc……Eventually the home will be sold short and it may make people happy now, but when the time comes to sell, they will be in the same position and owing more then the home is worth. Mtg cramdown (debt forgiveness) IS the only real answer on a broad scale.

    Don’t shoot the messenger and GO FIND A GEM!

  4. 4
    Jonness says:

    So much for living within your means and responsibly saving.

  5. 5
    bob says:

    Mr Crow, nice post and best wishes with the additional business.

    As a fence sitting, cash-buying (yielding 2% and certain to fall further) SBer, I found the news unsettling.

    Disheveled or not, will it change my outlook and behavior? No, and for reasons akin to David’s statement, “Any moves that banks want to make should be made now.”

    I suspect this is but a pregnant pause giving those paying attention an opportunity to de-leverage before the great un-wind picks up it’s inevitable momentum.

    but hell, I could be wrong, I’m just a renter.

  6. 6
    S-Crow says:

    If home sales gain traction (certainly we are entering into prime buying season and this is probably not lost on the Fed’s move) regardless of whether it is a short sale or normal sale, it will provide a building block to provide some sort of bottom or backstop to falling housing prices. Those sales are used as viable comps for other sales and refinances. Confidence is everything right now. With the lower house prices and potential for incredible low interest rates, that will be quite an incentive for people to at least consider a home that meets their long term objectives.

    I do say this with much reservation and skepticism (not surprising) though because this was something that I was dead wrong about before: thinking rates going from 6.125% range down to 5% would ignite the market. Really, it just opened up opportunity for a pool of borrowers to refinance. Housing prices did decline from that period about a year ago or so. And then we had the incredibly difficult period last Fall when the markets essentially came to a halt.

    Oh, and then watching the Charlie Rose interview today with Meredith Whitney and gang pretty much put me back into a wait and see mode.

  7. 7
    magnolia44 says:

    i have said it before and will say it again, govt is going to do whatever they can to prevent disaster. 4.5% rates ok..not quite but sub 5% rates and the homeonwer mod, and refi programs are just a few of those options. In the meantime unemployment ticks up and its not looking too rosy in Seattle jobs wise.

  8. 8
    Eleua says:

    Ask yourself this:

    Does a lifeguard jump in the water if nobody is in immediate danger of drowning?

    Why would the FED do this and in this way? What, exactly, is the condition of our bond market? How close are we to financial Armageddon?

    This isn’t about the housing market. This is about preventing a wholesale slaughter of the credit markets so Congress can continue to roll their debt.

  9. 9
    patient says:

    I think it will mean little to nothing for the Seattle housing market. We will continue to chug along with low volumes and declining prices. It could help markets that are further along in their correction to slowly find a bottom though. When they do, Seattle might be slammed with higher interest rates and much tougher regulations before we get to the bottom and thereby deepen and prolong our road to recovery. All this intervention is very dangerous and will come with some kind of nasty repurcussions.

  10. 10
    patient says:

    Eleua, do you happen to know where the money for this is coming from? Is it borrowed or “printed”

  11. 11
    Eleua says:

    What interest rate would be needed to reinflate the bubble?

    I doubt zero would work. Moving the rate down 100bp isn’t going to do squat to keep people paying on a house that is 35% underwater against a population where almost 1 in 6 is forceably unemployed.

    Alt-A is just now starting to hit. Subprime was the trigger. Alt-A is the main charge.

  12. 12
    Scotsman says:

    Here’s the best explanation I’ve read so far:

    Imagine you’ve got $80,000 in credit card debt, and can barely pay the interest. No one is willing to lend you any more money, so you take the only alternative left- you create your own credit card company, and lend money from yourself, to yourself. That takes the pressure off for a while. But what have you really fixed? And who would be stupid enough to lend any kind of money to you now? You’re toast- it’s only a question of how long it takes the other players to figure out you’re a fraud.

  13. 13
    Mikal says:

    RE: Eleua @ 11 – You had said they wouldn’t print. What other brilliant advice do you have?

  14. 14
    Eleua says:

    RE: patient @ 10

    If it is “borrowed,” that is just a bigger version of paying your VIsa with your MC. That will last a very short while before the bond market sells it off. Borrowing money to pay off the money you borrowed with a rising interest rate is certain doom. If they can roll it into a lower rate, then they can dribble this out a few more months. By having the FED (falsely rumored to be an infinite source of cash) buy down the rate, they can keep the charade going just a little longer.

    If it is “printed” (without a corresponding debt sterilization), then I would imagine that the bond market will also realize that the FED and/or Congress is tapped-out, and will sell it off. They may try to print a few, limited issues, but it will be inadequate to keep the larger market solvent.

    Ask yourself, if the City of Seattle offered to pay 2007 prices for homes, how many homes would be proffered for sale at those prices? Too many for the city to absorb. Bonds work the same way.

    Either way, the credit markets are just too big for the .gov to backstop.

    The harder they try, the dumber they look. Personally, I wish they could drag this out for another 12 months.

  15. 15
    Eleua says:

    Mikal,

    Show me the printing on the scale needed to pay off the bonds. You can’t. All you can show is a limited edition of a certain flavor to keep the panic at bay for another quarter. This has been happening since mid-August of 2007, and at every turn, it has failed miserably. Unless I am missing something, they are borrowing the money, or at least issuing a debt against it. It isn’t “printing” if they issue a debt to remove the money at a future date.

    If “printing” was so obvious, Skeletor would have done it in 2007. Why go through all these illusions if they were just going to print anyway?

    If they smoke the currency by wholesale hyperinflation printing (the kind needed to pay down the debt of the .gov and banks), then the only use for gold is to knock your neighbor over the head so you can steal the rats off his dinner plate.

    As I have always said, I can expect three things when I come to SB. You accomplished one. Now all I need is Angie and 98115 to chime in with their politics to complete the perfunctory trifecta.

    Ask yourself, what have you contributed to any discussion in your history at SB?

  16. 16
    Mikal says:

    RE: Eleua @ 15 – Boy, I guess I struck a raw nerve. Lets see. I pointed out to you that there is money to be made in real estate which you claim to be impossible. Nonetheless it has been well over four years that I have had to come up with a dime for my living expenses. Maybe the only thing I bring is pointing out you are wrong on occasion. You claimed the Fed wouldn’t do what they are doing. In fact you had said it wouldn’t happen at all. They are planning on bouying housing prices while at the same time inflating away the debt. If this country can figure out how to live within it’s means, and I actually doubt that, who cares who holds our debt?

  17. 17
    patient says:

    Thanks Eleua, I have no doubt that either way is bad, I was just curious about which one it was this time.

  18. 18
    Mikal says:

    Right now every investor in the world should be running from the dollar, but it seems most are embracing it.

  19. 19
    Eleua says:

    RE: patient @ 17

    I’m trying to digest this. If this is an outright “print,” then we have just telegraphed to the world that the only thing that US currency is worth is green paper and not the industrial output of American commerce.

    If that is the case, then how does the bond market react? Would you loan money to someone if they could just give you scrap paper in return? Nope. You will have to demand higher interest rates to attempt to gain enough return to justify the risk.

    Even after the problem stabilizes, nobody will lend to us at anything less than Guido rates again. Guess what interest rate the rest of us will be borrowing? Guido plus.

    Unless the money gets into the hands of the average consumer (and that’s not where it is headed), if interest rates are 40%, how much does a tasty Ballard Craftsman with bamboo, granite, stainless, and close proximity to a “green” organic grocery store go for?

  20. 20
    Eleua says:

    Mikal,

    You didn’t strike a raw nerve. You are just annoying white noise in the room where people are trying to have an intelligent discussion.

  21. 21
    Kary L. Krismer says:

    By David Losh @ 1:

    I think in August, maybe sooner, that prices will decline further for Real Estate.

    That’s hardly an insightful call for anyone with access to NWMLS figures. Last I looked the median list price on King County SFR pendings was about $350,000, which is well below February’s median, and those are list prices, not sale prices. With that large of a drop the only question is how fast. Sometimes the pendings can be deceiving, but it’s very unlikely with that large of a difference.

  22. 22
    Kary L. Krismer says:

    By Eleua @ 8:

    Ask yourself this:

    Does a lifeguard jump in the water if nobody is in immediate danger of drowning?

    Why would the FED do this and in this way? What, exactly, is the condition of our bond market? How close are we to financial Armageddon?

    This isn’t about the housing market. This is about preventing a wholesale slaughter of the credit markets so Congress can continue to roll their debt.

    I still think it’s to get past Congress and to effectively buy troubled assets from financial entities via the refinance route.

    But they can’t get past Congress entirely in other areas of the credit market. So they’re fighting blindfolded with one hand tied behind their back being hindered by financial morons like Maria Cantwell.

  23. 23
    Scotsman says:

    Part of the motivation is they have a ton of debt to roll over on the federal level in a couple of weeks. Some think this is a head fake to drive rates lower and ease the cost of the roll-over. All we have so far is an announcement of intent- no real substantive action has taken place. But it does show the feds are running on empty- best guess is the Chinese said they weren’t interested in buying any more of our debt. I have read that foreign money has been leaving the t-bill market over the last several months. It’s a huge commitment, that’s for sure, especially on top of all that has already been spent and added to the deficit. Looks like we might be down to the end game.

  24. 24
    Imee says:

    That bailout could make or break the entire real estate/housing sector of the country. Positively thinking as I am, I think this just might work. I’m not completely sold on the idea but I’m willing to give this a shot.

  25. 25
    Ray Pepper says:

    I look simply brilliant. 20k ABK at .60. Went down to .35 and I bought 5k more at .40. Now 25k long and would not think of selling it based on the Feds plans. However, I do believe this will not have a positive outcome over this decade. I continue to hold 70% cash no matter how much more worthless it becomes.

    I pound the table when I say people will NOT stay in their upside homes and this will NOT bring any appreciation into housing. This will delay the inevitable but what a great time for people to “attempt” to get rid of their toxic assset. The media will be clammoring over this 4% and it just may trigger the sale of your home.

    **If you become a Buyer, be very patient, and let the price come down to you. Focus on the VAST amount of Foreclosures coming and short sales. Skip the new construction and confused homeowners unless they are distressed. Its not worth your time. Do not let anyone talk to you about “comps”. Comps are out the window and provide no support in a deteriorating asset environment. Also, please DO NOT look at tax assessed value as a guide. In the past if you could buy AT or below it was a score.

    Do your own DD and YOU will determine the value based on your own research and STICK TO IT!! It will be very likely you will see the price come to you 3-6 months later. The Bubble readers here are very astute(at least all the ones I met)………..Help educate others on what you already know.

  26. 26
    Gary says:

    I don’t think this will help at all, the banks have already shown that.
    When they received the bailout money they didn’t start lending they started foreclosing even more because they “recouped” part of the loss for foreclosure from us taxpayers.
    If you see laws passed allowing judges to decide values (cramdowns) then maybe a bottom could be found.
    Personally I don’t think any of it is fair to those of us who have saved our money.

  27. 27
    David Losh says:

    RE: Eleua @ 8

    No problem, because we live in a world larger than the United States. It’s a question of if we can pay our debts. Of course we can. The United States exported the credit game. We have money out all over the world. Pick a corner on earth and you will find the United States political and financial machine churning away.

    We are in Iraq, Somalia, Ethiopia, China Egypt, Costa Rica, Chile, Columbia, and we have resources we haven’t come close to touching in this country.

    Can the United States pay debt? Absolutely.

  28. 28
    DaveyDave says:

    RE: Scotsman @ 23 – Ben is good at manipulation through public announcement and Scotsman, this argument for manipulating the rollover rates is a good one. Essentially it’s an admission there isn’t enough bond demand to keep the rates low enough, so now we have to purchase the bonds ourselves. It has the smell of cold hard fear… Of all the gov’t. initiatives that have come out to ease the credit crisis and reinflate the economy, this one telegraphs the highest level of desperation to me. This is the moment of the rollercoaster ride where you say, ‘Hold on tight !’

  29. 29
    David Losh says:

    RE: Kary L. Krismer @ 21

    In taking a tour of Real Estate blog sites I see a lot of business as usual, multiple offer hype.

    It’s over. The economy we once knew is done. This housing starts, consumer confidence barometer of economic health is completely played out. I’ll leave the bond market bs alone because it means absolutely nothing in the scheme that is the United States economy.

    Banks, lender, insurance, and corporations have tons of cash. We all pay daily into the cash machine. We all have insurance, pay taxes, pay mortgages, credit cards, keep our FICO scores, buy food, cars, gas, and all the other stupid things Americans buy. Oh, maybe you don’t, but the person next door does. There is tons, upon tons of cash money in our little economic system.

    The source of concern is credit. Can we pay? Absolutely. We in the United States, the richest country in the world, can pay for anything. We’re rich. Are you not rich? Do you eat every day? Put it in perspective.

    All we are talking about is that credit is dead. I refuse to believe any one in the United States today is going to be taking on more debt. Maybe they will in the short term, but long range we will be going to a cash economy. There is tons of cash in this country. We are rolling in cash. Cash is not a problem.

    The government simply gave the credit market s bone to gnaw on. As credit declines prices will need to deflate. The push should be to get consumers to pay off debt, or not pay it at all.

  30. 30
    Mikal says:

    RE: Eleua @ 20 – Well, they were, and then we showed up.

  31. 31
    Herman says:

    By Mikal @ 16:

    They are planning on bouying housing prices while at the same time inflating away the debt.

    I’m going with Mikal on this. I think that’s the .gov’s plan. Printing dollars helps counteract the risk of deflation and pays debts (banking debts) at the same time. The only losers are the savers, but they’re not the ones in trouble. The debt holders won’t be happy but as long as the money supply is kept under control, the inflation won’t kill them and it’s better than a collapse.

    Of course they can’t tell us that, or else the jig would be up.

    And I don’t think they’ll be able to control inflation. I think they’ll overcorrect.

  32. 32
    Sniglet says:

    The Fed’s decision to buy treasuries is nothing more than yet ANOTHER of the “extraordinary” series of bailouts they have undertaken in the past year. Seeing as how every other bail-out/stimulus effort has failed, I find it hard to see how this one is going to do any better. If anything, each of these stimulus/bail-out efforts are even more dire sell signals, foreshadowing even deeper pain ahead.

    Don’t forget that we have already been operating in an environment of historically low interest rates, yet these low rates haven’t done much to shore up the economy. Lower interest rates don’t help when people are scared about continued asset price declines, and lenders tighten criterion as to who can qualify for loans in the first place.

    I agree with Eleua that there is still a lot of uncertainty around this recent plan to buy T-bills. We just don’t know how they are getting the money for this. Regardless, it doesn’t really matter too much one way or the other. A trillion dollars isn’t really all that much in the grand scheme of things. The global private credit markets were generating new credit at the rate of some $50 trillion a year up until 2007, and the paltry trillions the US government has pledged to use in various bail-outs and stimulus don’t come close to making up the difference.

    In short, this decision to buy more T-bills doesn’t change the prognosis for far greater asset price declines one bit. If anything, it will encourage asset price declines even faster, as more people decide to flee government bonds in favour of cold hard cash.

  33. 33
    Mikal says:

    RE: Herman @ 31 – There aren’t that many savers.

  34. 34
    Kary L. Krismer says:

    By David Losh @ 29:

    All we are talking about is that credit is dead. I refuse to believe any one in the United States today is going to be taking on more debt. Maybe they will in the short term, but long range we will be going to a cash economy. There is tons of cash in this country. We are rolling in cash. Cash is not a problem.

    Businesses need credit to function at the level we need them to function. If you want to have an economy that functions on cash you’ll get an economy that looks like Afghanistan.

  35. 35
    what goes up must come down says:

    Mikal I think you did hit a nerve has Eleau ever admitted he was wrong — oh that’s right that could NEVER happen.

  36. 36
    gameboy says:

    For those of you who thought the government couldn’t “print” money, this must have come as a shock…

    But make no mistake. This is Fed printing money.

    And if you are still wondering how this all works, there is a very nice basic primer on PBS: http://www.pbs.org/newshour/bb/business/jan-june09/solman_03-17.html Be sure to watch the video.

  37. 37
    BubbleBuyer says:

    Comrades, normally I would rail against the debasement of the dollar caused by the treasury revving up the printing presses and Obama’s grand plan for social realignment but I am happy to ride the refinance mortgage rate train down to zero. When I purchased my overpriced SFR 2 years ago my rate was 6.25%. I refinanced down to 5.6% and now it looks like I will be refinancing just short of 4.5%. With principle pre-payment and interest rate drops my monthly P+I payment will be $1593 less than when I first purchased my home. It takes the pain out of the loss I would take if I was forced to sell and gives me massive peace of mind knowing I can afford my home even if my salary was cut in half which, these days looks increasingly likely!

    I’m off to refinance and then put all my remaining cash into gold, weapons and ammo to fend off the marauding mobs from my basement once the dollar collapses and hyper inflation sets in. Good luck to all and viva the socialist republic of America!

  38. 38
    Kary L. Krismer says:

    By BubbleBuyer @ 37:

    I’m off to refinance and then put all my remaining cash into gold, weapons and ammo to fend off the marauding mobs from my basement once the dollar collapses and hyper inflation sets in. Good luck to all and viva the socialist republic of America!

    I have a one word tip for you–something you’re forgetting: Food! ;-)

  39. 39
    deejayoh says:

    Anybody know why trading on Citibank shares has been halted?

    http://www.reuters.com/article/newsOne/idUSN1853577920090319

  40. 40

    GREAT TOPIC SELECTION S-CROW:

    STOCKS GOING UP, HOME PRICES TO RISE AGAIN TOO?

    I see the federal government put a trillion dollars into bad overpopulation debt Freddie/Fannie and propped gov’t bonds [by printing $300B out of thin air, because no one wants to buy our debt]. The stock market reacted [just like it did when the $767B bailout was announced last Fall], by spiking up some.

    Granny bar the door on inflation; the dollar value sank another 4% yesterday and today….pitty the stupid savers with their 1% money markets.

    Did any of the trillion go to like developing long-term jobs for America [like industrial base jobs that provide a domestic tax base]? Nope.

    It all went down the overpopulation toilet. Kiss it good-bye.

    Does the stock market increase mean anything? Nope, its just an adjustment to inflation as the dollar shrinks in value to pay for the bad overpopulation loans.

    Will companies be hiring again? LOL

  41. 41
    Kary L. Krismer says:

    There was talk of a reverse stock split on Citi, but they wouldn’t have to do that during trading hours.

  42. 42
    DaveyDave says:

    RE: deejayoh @ 39 – As far as I can tell, DJO, they’ve been trading all day. Here’s a daily price chart from Google Finance…
    http://www.google.com/finance?q=c

  43. 43
    Scotsman says:

    Sorry guys, no hyperinflation. Let’s go back to the basics- inflation is driven by wage increases. None of this money is going to make it down to the wage earner. It’s all going to the upper level of the banking system, and to treasury buyers in the form of interest premiums. The rest goes to government spending, but the net gain in spending and GDP is still negative. Wait and see. But we have just pushed the government over the brink. It can’t effectively fund itself out of thin air, and in the face of declining revenues and escalating costs will eventually collapse as we know it.

    Best estimates/models have the government being able to realistically sustain not much more than half of the current level of expenditures. Get ready to say good-bye to half of social security, Medicaid, etc. The market is already back peddling, with 10 year rates back up, oil up hard, the dollar down. Another FAIL for Ben and his crew.

  44. 44
    patient says:

    “Another FAIL for Ben and his crew.” I couldn’t agree more. Ben has been a failure since day 1. He missed the credit bubble and have already burnt a huge whole in the reserves pocket, money is pouring out to no gain. What more does he need to do for people to wake up and realize he is in way over his head. Get this guy out quickly and some could still be saved.

  45. 45
    bob says:

    RE: Scotsman @ 43

    So Scotsman, where do you put your cash?

  46. 46
    jon says:

    “inflation is driven by wage increases. ”

    Sometimes, but that is not what the Fed is hoping for this time. They are driving up prices by adding money to the banking system while the government spends money also. With unemployment high, the production level is low, so the extra demand from the government spending will increase prices. This will hopefully motivate companies to increase production to take advantage of the higher prices, and hire people in the process.

    With credit still contracting, the inflationary effect of this will be moderate as the new money cancels out the destroyed money. But once the economy turns around, the Fed will want to destroy money to prevent inflation. Whether that happens under and a President and Congress with unlimited spending agendas remains to be seen.

  47. 47
    Kary L. Krismer says:

    Did wage increases drive the inflation of the 70s?

  48. 48
    Scotsman says:

    Just adding money to the banking system doesn’t drive up prices. Where is that “new” money going? Some is going into reserves, some is going overseas where it works to devalue the dollar in terms of our international purchases (i.e., oil and other imports get more expensive), and some is going to zero out existing losses. But most of these new dollars are going to replace falling tax revenues and a weakening market for treasuries. They will in effect only allow the government to continue operating at current levels plus perhaps some of the planned expansion.

    The reality is that demand is still collapsing, unemployment is rising, and the consumer and most small businesses are tapped out and unwilling to borrow more. So while the banks may be more liquid and willing/able to lend, the demand isn’t there. The new dollars never make it to the consumer, which means sales never increase, and employment/wages don’t go up. Keeping the current economy/government on life support isn’t the same as curing the disease. The government allows itself to get deeper in debt without generating any new productive capacity. Remember, only about 12% of the stimulus was really for an increase in productive capacity, and only 40% of the 12% gets spent before 2010. That’s nothing, and too late. The rest effectively maintains the status quo in the face of a declining economy.

    For inflation to be maintained as more than a one time increase in prices, wages have to adjust up. And wages won’t adjust up until unemployment falls leading to a shortage of labor that forces employers to bid for available labor with higher wages.

  49. 49
    David Losh says:

    RE: softwarengineer @ 40RE: BubbleBuyer @ 37RE: Kary L. Krismer @ 34

    I also took in software engineers comment because his is a little Apocalyptic also.

    Kary you want things to go back to the way they were the same as all the Real Estate bloggers do. It’s not happening. We turned a corner on the economy. We have the New World Order Bush Senior promised and George Junior delivered. Actually Bernake delivered.

    At the first rise in interest rates and the response was immediate Bernake choked and back peddled. That is in my opinion what caused the crash. If he would have stayed to the game plan and fought inflation, whether real or perceived the global economy could have dealt with it’s own mess.

    Bernake blinked, backed down, and cowered in a corner. George in response to economic extortion started giving away money. That was the end.

    Obama just finished what George started, but there was no need to. He should just forget about the economy, he has done more than enough and get on to international détente.

  50. 50
    Scotsman says:

    Here’s an immediate consequence- these guys don’t want our money if we’re just going to devalue it. Add the major oil producers to this list and we have a problem:

    MOSCOW, March 19 (Reuters) – China and other emerging nations back Russia’s call for a discussion on how to replace the dollar as the world’s primary reserve currency, a senior Russian government source said on Thursday. Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

    Calls for a rethink of the dollar’s status as world’s sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

    Russia met representatives of China, India and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decision-making globally. Their first ever joint communique did not mention a new currency but the source said the issue was discussed.

  51. 51
    jon says:

    “Did wage increases drive the inflation of the 70s? ”

    It was caused by increased spending on the War on Poverty, the Vietnam war, and then the oil shocks. Labor was able to keep up because Europe and Japan manufacturers had not yet gotten their quality up to American standards yet. When then those standards did catch up, we responded with import quotas, which motivated the Japanese and Germans to focus on high end products where the profit per unit was higher, and that meant American cars got stuck with the low quality reputation.

    “For inflation to be maintained as more than a one time increase in prices, wages have to adjust up.”

    That just allows the standard of living to be maintained. You can have inflation without wage increases, that just means that the standard of living is falling. But that is exactly what Obama promised when he was campaigning, saying that our consumption was killing the world through CO2.

  52. 52
    Sniglet says:

    Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions

    This is nothing more than bluster. You can’t purposefully create a widely accepted reserve currency because you want to. The US dollar is the world’s reserve currency because of it’s relative stability over 100 or more years, and the sheer size of the economy behind it.

    It will take a LONG time for any new currency to gain the kind of credibility that the dollar has.

    The whole idea of trying to “create” a new reserve currency is crazy to begin with: there already is an already accepted global currency: gold. The fact that the Russians aren’t proposing a move to use gold as the global reserve currency speaks volumes about their intentions (i.e. they aren’t REALLY serious about supplanting the dollar).

  53. 53
    Kary L. Krismer says:

    RE: Sniglet @ 52 – Not to mention look at the issues that Europe is dealing with now using the Euro. There’s concern that spending to stimulate the economy by some will deflate the currency for all.

    For there to be a new standard it would have to be something better, not something new.

  54. 54
    Scotsman says:

    Snig, you’re looking backwards. If the dollar devalues, it’s value as a reserve currency rapidly diminishes. As you say, it’s past stability caused it to be seen as the reserve. But when/if that stability disappears then so does its value as a reserve. Those who have what we want or need get to set the terms. Less than a year ago there was serious talk of the oil producers switching to the Euro for pricing as a preliminary move toward changing the reserve. Up until the end of WW2 the reserve was a basket of currencies that evened out national variations. The point is this has changed in the past, and can certainly change again.

    Gold’s days are over as anything except a speculative medium. Its value floats against all other currencies, a mirror of their current status. Many who hold gold as some sort of ultimate currency will be rudely surprised should world economic systems collapse.

  55. 55
    Mikal says:

    RE: Eleua @ 15 – I have been thinking about that all day, well, maybe at just the ocassional gamebreak. Maybe nothing. Sometimes I drink a little and make silly comments. I was one of the people that claimed that the US might try to inflate their way out of this. You pompously said that would never happen. The real question should be “What do you bring to SB?” How is that “think” tank working out for ya?

  56. 56
    ARRA says:

    The real impact of the Stimulus Act won’t be known for three years due to delays in the construction projects. It may represent all that the government can do by that point!
    Go past gold to true commodities for value;water, food, and beer.

  57. 57
    Jonness says:

    Patient @10:

    As Gameboy says, this is the printing of money right off the presses. This is the economic equivalent of the first of a long series of atom bombs dropped on the economy.

    Some argue that it’s not meaningful to print $1.2 trillion and flood the system because we’ve seen $20 trillion in wealth destruction. I think they should consider that Helicopter Ben has the authority to print as much money as he wants. There’s not a darned thing anyone can do about it. He laid out his plans long ago on how to address a Japan-style bubble bursting. He will make good on his promise and print however much money he feels is necessary. He has said that deflation trivial to stop. All’s you have to do is print money until things inflate. IMHO, the printing will not stop until the dollar is toast. All the while, we will be brainwashed about the brilliant plan to pull the money back out of the system prior to the destruction of the dollar. Unfortunately, Bernanke will mis-time the market, and the U.S. will be toast.

    I’m considering picking up a conservative 10 oz. of gold just so I’ll have something left when bread goes to $50 a loaf and everybody is still out of work.

  58. 58
    deejayoh says:

    Dollar weakness is a short term phenomenon at best. We had this same conversation a year ago.

    Two things are going to happen
    1) interest rates will rise as the Fed keeps issuing more and more treasuries which will support the dollar
    2) other major currencies will come under even greater pressure than the dollar as their economies head down even faster than ours. Failing EU banks due to eastern bloc loans. Japanese export collapses. yada yada

  59. 59
    Jonness says:

    The Fed is freaked out right now because Velocity has fell into the sewer. The easy way to get Velocity moving is to print money. This works because people are afraid to hold the money. Instead, they spend as fast as they can before it loses more value.

    IOW, if the $1.2 trillion doesn’t fix the credit market, thus restoring Velocity. It’s easy to print more money and inflate our way out of this mess.

  60. 60
    Jonness says:

    deejayoh:

    Am I mistaken? I’m under the impression the $1.2 trillion Bernanke is printing is not backed by Treasuries. It’s coming off the presses and going straight into the system. If so, and his plan doesn’t work, what’s to stop him from printing $5 trillion more?

  61. 61
    David Losh says:

    Now the dollar is in trouble, from China and Russia?

    Buying T-Bills with tax dollars is a problem?

    Can the United States government pay back borrowed money?

    Did Kary actually say American business needs credit?

    Please give it a rest.

    The United States creates more money in a day, they don’t need to print it, then most economies make in a month. If our government were to ever ask the American people for money we would give it. I’d challenge any one of you to say you wouldn’t contribute if your government asked, like Clinton did.

    We can do what ever we want. I know I can.

    This government is the envy of the world because of our freedoms and opportunities. We make money. Do you not make money? I make money. Are you restricted from making more money? Why? Is there a law on the books that prevents you from making more money? Is there a class or social order that says you can not be as rich as you want to be? OK, wealthy takes a few generations, but still, has some one told you you are barred from doing what ever you want when ever you want?

    In this country the law is stacked in your favor. It depends on what you do with your opportunity. So you can talk about economic formulas all day long and it means nothing.

  62. 62
    David Losh says:

    RE: Jonness @ 59RE: Jonness @ 58RE: deejayoh @ 57RE: Jonness @ 56

    Here’s what I love, we just came off of ten or twelve years of the most economic growth the world has seen and in two years we are worried about a couple of trillion dollars. I really like the twenty trillion dollars of lost wealth figure that is thrown around.

    You are commenting on a post of a blog started by an electrical engineer who foresaw the collapse of the housing market. You pay your money you take your chances, but the money is where you wanted it to be.

    It’s all safely in some rich old white guys vault.

  63. 63
    Scotsman says:

    RE: Jonness @ 59

    Jonness- works like this: The Fed goes to Treasury and buys dollars for a few cents a piece (covers the cost of running the presses, etc.). Then the Fed goes to the government and buys T-bills, gives the government the cash and puts the T-bills (bonds) on its books and collects the interest. The government uses the cash to pay its bills. So yes, there is debt behind the new dollars, they didn’t just come out of thin air. In a normal world that debt would have to be paid back, to the Fed, a private bank that works in concert with the government, but isn’t a government entity. The Fed has been using the new dollars to buy 10 and 30 year bonds for more than the market says they are worth. By overpaying, they have been able to force down long term rates in an effort to build borrowing demand through lower rates- think mortgages. Since they already have target rates at essentially zero, and demand still hasn’t picked up, they had top try something new to manipulate rates down.

    Normally investors buy these same bonds. Having the Fed buy them, at above market rates, just adds another distortion to the markets, increases government debt, and steals from the future. The danger is that by having it all be an “inside deal” by an entity that isn’t subject to market constraints there is no real limit on how much of this new money they can create. The normal higher interest rates, a constraint, are absent. It’s rigged from the start, and forces other player in the market to go along, or get out. Until the whole hoax comes crashing down.

  64. 64
    Scotsman says:

    RE: David Losh @ 61

    No, it’s not in a vault, it’s gone. That’s the problem. The rich guy had more of a cushion to start, so he has some left, but he lost a bunch. They guy with nothing still has nothing. And the guy who, like most of us, thought he had a start on something, now has little left. That’s what hurts. Or will- we’re not done yet.

  65. 65
    Scotsman says:

    Back to post #62. It may not be clear where the real danger is in this arrangement. By overpaying for the bonds in an effort to lower the effective interest rate the Fed becomes the only real market or buyer for bonds Hey, they pay the best! After a while, no one else will buy the bonds because they want a market rate for their money. The other buyers don’t want to subsidize lower interest rates, they want a market return, so they pick up and leave. After all, who wants to subsidize a diluted fiat currency? The Fed then becomes the only buyer for the government’s debt.

    When the Fed is the only buyer left, the government is essentially trying to fund its self- by its self. Its just a big circular flow operating outside of reality. How much money do you want? Here, have some more! It’s kind of like raw printing, but legal in a weird corrupted sort of way.

    Here’s the catch- the government and the Fed can control the amount of currency in circulation. But they can’t control its value as measured by real productive capacity. And when its value goes to zero, either through dilution, inflation, or a lack of faith in its continuity, we’re done. This change was a big step toward that end.

  66. 66
    Jonness says:

    “we just came off of ten or twelve years of the most economic growth the world has seen…You pay your money you take your chances, but the money is where you wanted it to be. It’s all safely in some rich old white guys vault.”

    I was laying on my death bed amidst abstract poverty during a large part of that 12 years. I abandoned an extremely promising musical career and took up reading medical books in an attempt to figure out what the doctors who abandoned me couldn’t be bothered to figure out. I was not out partying with the rest of you. In fact, if you had seen me, my appearance was such that you would have shunned me. I know, because even my good friends wouldn’t come around anymore. Why should they? I had nothing left to take and only misery left to give.

    After many years of the hardest work I’ve ever done, I reached the point where I could run 5 miles 3x per week. And that represented a fraction of my workout routine. I climbed rocks and mountains all over the West during that time of intense physical, mental, and emotion healing. It was a testiment to what lengths people will go to in order to pick themselves up out of the sewer and build a better life.

    As for that rich old white guy, I don’t need any of the money in his safe to realize my dreams. Unlike him, I’m already living them. His deathbed experience is just around the corner, and unlike me, he won’t be able to put himself back together and live another 50 years. Hoarding money isn’t the greatest thing in life. He does it because, as menial as it is, it’s all he has. Had he donated it to intelligent medical research years ago, it might have actually done him some good. But now it’s too late, so he’ll fruitlessly and selfishly take it to his grave. “As yea sow so shall yea reap”

  67. 67
    deejayoh says:

    How has the Fed printed any money here? The US government, last time I checked, pretty much owns Fannie and Freddie. That is where the money went.

    So they took $750B out of the left pocket, and put it in the right pocket.

    Ok. Great. Not like anyone was restricting Fannie and Freddie from lending.

    In the past 6 months, since they went into “conservatorship”, the Feds have basically made it easier for them to get in more trouble. Hasn’t helped much so far.

  68. 68
    Eleua says:

    Mikal,

    Since I am obviously disgraced by my government telling everyone they are about to blow their heads off by printing currency to get us out from our debt obligations, and since you are so forward thinking in your prediction of how this printing will work, please enlighten us.

    Please, oh great fount of wisdom, tell us how this works and how you can get in front of it to profit. Since the answer is so easy, and I am so obviously flawed, please enlighten us as to how we mere dullards can profit from such a move.

    We mere mortals are requesting an audience with your brilliance and benevolence. Oh, Sensei, please show us the path less traveled. How does the .gov plan to “print” our way out of this mess and how does it not destroy the livelihoods of at least 280million Americans?

  69. 69
    jon says:

    RE: deejayoh @ 67 – Only $100B goes to Fannie and Freddie. I don’t know if that money will be used for lending or just plugging holes in their balance sheets. $850B goes out to buy MBS from the market, so that money frees up private capital for more investment. Another $300B goes to buy up Treasuries, presumably so the Chinese or whoever owned them before can do some stimulating of their own.

    Printing money is like morphine. When the pain is real, it is not addictive. But now that they have started doing it, the next time a difficult choice has to be made, they will just print a little more, “for the children.”

  70. 70
    Eleua says:

    Export nations are going to be forced to quit purchasing US debt as well as being forced to sell it. This isn’t punitive in nature, but more along the lines of national survival. They were addicted to our trade imbalance, and as the US consumer contracts, they feel the brunt of it. When we sneeze, Asia catches the flu (ironic, huh?).

    The US.gov is selling debt like mad to fund all these bailouts, the GWOT and all the institutionalized sloth in the US.

    US debt is in a bubble, which allows Congress to continue to roll its debt (think of it as a refi with teaser rates). When a bubble is showing signs of fatigue, you sell.

    With all that happening, the bond market is setting up for a huge crash, which will take the DJIA into the 3000s, if not lower. The US.gov can’t backstop the debt markets anymore than you could drain Lake Washington into the Sound to keep the tide from going out. It may look like a good idea to the masses, but it won’t work.

    It is my theory that this printing move is more jawboning than action and is designed to keep Congress’ debt going another quarter, or perhaps two. When Ben announced this, it told me that he believes that this is the perfect time to panic.

    Panic ain’t bullish.

  71. 71
    what goes up must come down says:

    hey Eleau get over it you were wrong Mikal was right “stuff” happens, I think you take yourself a little too seriously.

  72. 72
    mukoh says:

    Eleua,
    You know I use to take somewhat, of some things that you sometimes wrote as somewhat interesting. After #70 you proved that you have no #s but an agenda that is emotional. Put the #s out for us to read with charts and visual representations, or once again leave the forum for 3-4 months like you did a few months ago when you got SACKED .

  73. 73
    Kary L. Krismer says:

    RE: deejayoh @ 67 – This is just a gut feeling/guess, because I haven’t done any research, but my feeling is Freddie and Fannie were probably reaching the limits of what they could do but for this Fed action.

  74. 74
    Eleua says:

    I got sacked?

  75. 75
    Mikal says:

    RE: Eleua @ 74 – Don’t leave. I enjoy my limited knowledge understanding what the market is doing better than you. My hockey team just made the playoffs and I’m a little stewed, but I whoopped your ***** and I don’t have think tank. Or, what you and I both know I like to call it. Questions?

  76. 76
    Mikal says:

    RE: deejayoh @ 67 – Your comments are the best here always. Thank you.

  77. 77
    Mikal says:

    Now that I have had enough time to suck down another beer, the real queation is really what are things going to cost. What do I price what I do at? That will be the weird thing about all this. Read a little bit historically and it is amazing what people think at certain times. No one really knows what is going to happen. WE ARE ALL GUESSING.

  78. 78
    Stan Banks says:

    Am jumping in to say that I hope these personal attacks above are the result of competitiveness and familiarity with one another and are less serious than they read…..Eleua, I look forward to your contributions.

  79. 79
    Tim says:

    Is it possible that hyperinflation is part of the plan here? Is there any better way to rescue an indebted nation and population than by devaluing the currency? Not saying I believe this is true, but I think if we are truly as screwed as it looks like we are don’t desperate times call for desperate measures?

  80. 80
    David Losh says:

    RE: Jonness @ 66RE: deejayoh @ 67RE: Eleua @ 70RE: Eleua @ 70

    DJO hit the nail on the head. The government is moving money around.

    People still pay mortgages, buy insurance, pay taxes, buy gas, the list goes on for the number of real dollars that filter through the government.

    Money does not get lost. Money does not disappear. Dollars are a real currency. Dollars are money, dollars.

    What you are all talking about is paper, debt, a formula of economy. Paper profits have inflated the price of everything. Paper profit is what makes people rich. Dollars are what make people wealthy. The wealthy have not lost any dollars.

    I’ll tell a story about myself, I am a widower. My wife died after a year in the hospital. Illness and death changes perceptions. It also shows you how badly our health care system works, a topic for another time.

    The point is that when you take away the trappings and look at the reality of our economy we can move money around and make profits. Any one of us can become rich or wealthy. It takes a little risk.

    When you realize there is nothing any one can do to you. When you come to grips with the fact you’re going to die anyway. What’s the risk? Your money or your life?

  81. 81
    Jonness says:

    Tim@70:

    Maybe if we make dollars worthless enough, bubble prices for a house appear to be reasonable all of the sudden? I think the current crisis is proof that building an economy based on credit is the worst thing we can do. I believe building a job base that supports spending within our means is a much better plan.

    Not so long ago I went through my own personal Great Depression. It taught me how to value money and save for a rainy day. Now I have enough rotting in the bank to live like a king for years. Then again, living like a king, to me, is living in a shack and writing music while not having to worry about paying bills. There’s nothing better in this world that I can think of doing with my life.

    Great Depression 2? Bring it on baby. It sounds downright enjoyable.

  82. 82
    Mikal says:

    RE: Jonness @ 81 – There is much less uncertainty with inflation than deflation. They both suck, but at least a bank can be fairly certain that people won’t walk from a home that is worth more than the loan. If the Fed can inflate us out of this they really aren’t caring to much about the bond markets. Even if in nominal dollars the house is really worth less. Perception is reality.

  83. 83
    Mkkby says:

    I read about half of the comments, then skipped to the bottom. Some ideas I haven’t seen mentioned:

    1. Inflation will not be a problem in a recession. Someone mentioned 40% interest rates. No way. Perhaps in decades. Just look at what happened to oil and gas prices, as just one example. The loss of jobs/demand takes all the pressure off prices.

    2. Inflation was not a problem even during a massive credit bubble, because there are 3 billion people in third-world countries willing to work for a meal and roof over their heads. Once growth resumes (you decide when) it will be decades before this “excess” labor is worked out.

    3. The dollar will not become worthless any time soon. Some of you expressed shock and/or disbelief that the dollar has actually strengthened as markets tanked. While I did not predict that, I am not surprised. In every past crisis, foreigners flocked to the dollar when they were frightened. It may not be great, but it’s stronger than all the other colored pieces of paper out there. It’s the safe haven for protecting what you have.

    I’m not bullish on real estate or stocks. I just don’t agree with doomsday scenarios. They are possible but extremely unlikely. Remember, during the great depression there was 30% unemployment and very little aid for people in need. Still, people didn’t run around with torches and pitchforks and we didn’t have a revolution. Today unemployment is 8%. It’s a long way to disaster-ville.

  84. 84
    Eleua says:

    When you look at the TIC data and tax receipts, it would appear that a huge strike against buying US debt is in the very near future. That would certainly explain the panic move by Ben.

    Regarding the “print…”

    It isn’t what it seems. The speculators are out in force to try to front-run the FED buying at “above” market rates, thus the spike in US debt values, but corporate debt is being positively crushed, so we should expect GDP to get crushed with it. Down go tax revenues…

    Meanwhile…the foreigners are probably going to be very cautious about buying US debt.

    Some of the “printing” is the FED agreeing to buy some mortgage dreck at high prices from insolvent banks. The bank agrees to keep all the proceeds on reserve at the FED. In reality, no money changes hands, or is even created. All we have is a bookkeeping drill, but the banks are allowed to stave off the day of reckoning another few weeks, and we get a rally in the S&P.

    Regarding the T purchase by the FED…

    I am having lunch with a friend that is more knowledgeable in this subject this week. Hopefully he will have something interesting to say. Right now, this IS NOT a raw print, but a standard debt creation through expansion of the FEDs balance sheet. I hope to learn more of the mechanics of this.

    I now return you to Mikal’s onanistic display of financial idiocy…already in progress.

  85. 85
    jon says:

    RE: Eleua @ 84 – A dollar bill is simply a document that lays claim to a credit at the Federal Reserve. In this age, there is no need for a piece of paper since the bank has an electronic claim on the reserve. It is still the same as “printed money.”

  86. 86
    deejayoh says:

    By Eleua @ 84:

    Regarding the T purchase by the FED…

    I am having lunch with a friend that is more knowledgeable in this subject this week. Hopefully he will have something interesting to say. Right now, this IS NOT a raw print, but a standard debt creation through expansion of the FEDs balance sheet. I hope to learn more of the mechanics of this.

    Curious to hear your take on this. I am wondering if this is anything different from what was previously announced at the beginning of Dec 2008 – $500B that time, petty cash for their weekly on market buying activity. Looks like they ran out of cash and are re-upping for $750B this time.

    Doesn’t really look like a new program or approach.

  87. 87
    David Losh says:

    RE: Eleua @ 84

    “but corporate debt is being positively crushed, so we should expect GDP to get crushed with it”

    “but a standard debt creation through expansion of the FEDs balance sheet”

    It’s circular. The transfer of debt to the government puts it on broader shoulders. Investors are hammered, screwed is a better word. If you were stupid enough to buy stocks, bonds, or investment instruments based on paper profits you get what you wanted.

    The government under the Bush administration turned a blind eye to corporate greed in favor of an appearance of prosperity. I would go so far as to say it was for ego in the face of a foreign attack against the World Trade Center. That certainly came up enough in every type of speech that was an excuse for whatever debacle Bush was addressing at the time.

    GDP can be increased by research development and production. If need be we can open the borders by utilizing the NAFTA treaty. We are a great country of innovators. It was a shame George Bush didn’t have enough confidence in the American way of doing business. He let parlor tricks pass for profit.

  88. 88
    Eleua says:

    RE: jon @ 85
    Jon,

    I am describing something that doesn’t even really expand the amount of electrons. As someone else put it, “it was like the old Russian joke, ‘we pretend to work and they pretend to pay us.'” This is strictly so the banksters can “truthfully” report that their crap debt is “worth” more than it really is and prevent the bank from being declared insolvent.

    I’ll see what some of the better minds that I pick have to say about the T purchase. From what I am hearing, the “print” isn’t exactly what first meets the eye. If they wanted to “print,” they would have done so 18months ago. Geithner is STILL trying to create his toxic waste dump, and every incarnation of it since he first floated it in November 2007 has gone down in flames.

    Here is what I think is going on.

    49% of government spending is BORROWED money. Taxes can barely cover half of what Barry, Harry and Nan are doing. 39.6% of taxes are paid by 1% of taxpayers. Those taxpayers are getting creamed. What the Treasury saw on March 15 (declining quarterly tax estimates) is likely what caused the FOMC to issue the statement it did. I can’t wait until they react to what they see on April 15, when individual returns hit.

    Treasury data from overseas is also not encouraging.

    Can’t tax + Can’t borrow = Can’t spend.

    Spending = Congressional power.

    I’ll leave the rest up to the rest of you to figure out, lest Angie and 98115 get all testy.

  89. 89
    Eleua says:

    RE: David Losh @ 87

    David,

    I agree that the Bush policies were very short-sighted. I also believe that he knew we were in a bubble (since 1996) and was hoping it lasted until 2009. It popped 18mos too early.

  90. 90
  91. 91
    jon says:

    “I also believe that he knew we were in a bubble (since 1996) and was hoping it lasted until 2009.”

    The Clinton bubble popped after Y2K and 9/11. They were in serious panic at that point.

    A lot of very smart people were fooled by the bogus valuation methodologies underlying MBSs and CDOs. In retrospect the amount of oversight was ridiculously small. But the theory was those people were betting their own money. Now we know better.

  92. 92
    voight-kampff says:

    I feel compelled to comment that I enjoy most of Eleua’s posts as well ( we need a bunker builder)

    but obviously he cant stand being wrong.

    personally attacking the person who was right, just discredits him further… ( i thought that was against posting rules anyways.)

    cant you guys make cogent points without all the bluster?

  93. 93
    Mikal says:

    RE: voight-kampff @ 92 – But then I would have have never been able to have to look up a new word for me like onanistic. I’m going to try to use it every day.

  94. 94
    Jonness says:

    If you’ve read Sniglet’s case for deflation, it’s apparant that it’s way too early to call Eleua wrong. Even the liberal Nobel Prize winning economist Paul Krugman is saying Geitner’s plan is bogus and most likely won’t work.

    During the depression, it was normal for the market to rally when the government would announce a new plan. But as time went on, we’d see a new bottom tested. Most people who believe in overall deflation have predicted this time around will be no different.

  95. 95
    Mikal says:

    RE: Jonness @ 94 – This can’t be compared to the Great Depression at all. The differences in what the government does for the banks makes that an easy enough call. During the depression banks were allowed to fail. Money was also taken out of the system, not pumped in. A comparison could be made based on the lax loaning standards of banks and the fact that all the money they were loaning today was highly leveraged. Other than that, I don’t see it. Let me know when people are standing in bread lines.

  96. 96
    Eleua says:

    Just wait until the FED starts raising the FFT when the bond market crashes…

    Saying this isn’t going to be like the GD 1.0 is like judging a baseball season by the first 10 games played.

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.