“Three separate but related forces are now threatening economic activity: a credit market crisis, a decline in house prices and home building, and a reduction in consumer spending. These developments compound the general weakening of the economy earlier in the year, marked by slowing employment growth and declining real spendable income.”

“The subprime mortgage defaults have triggered a widespread flight from risky assets, with a substantial widening of all credit spreads, and a general freezing of credit markets. Official credit ratings came under suspicion. Investors and lenders became concerned that they did not know how to value complex risky assets.

In some recent weeks credit became unavailable. Loans to support private equity deals could not be syndicated, forcing the banks to hold those loans on their own books. Banks are also being forced to honor credit guarantees to previously off-balance-sheet conduits and other back-up credit lines, further reducing the banks' capital available to support credit of all types.

The inability of credit markets to function properly will weaken the overall economy in the coming months. And even when the credit market crisis has passed, the wider credit spreads and increased risk aversion will be a damper on economic activity.

In addition to these general credit market problems, the decline of house prices and home building will be a growing drag on the economy….Falling house prices would not only cause further declines in home building but would also shrink household wealth and thus consumer spending.”


The rate cuts tell us that the Fed is now planning to balance the current account deficit on the backs of the American middle class. Prices at the supermarket and gas pump will rise immediately; probably within the next few months if not weeks. It will be harder to get credit. Wages and living standards will decline. Stocks will fall. Consumer spending will shrivel.


The Fed’s cuts coincide with the dismal earnings reports from Wall Street’s investment giants; Lehman Brothers, Morgan Stanley, Bear Stearns and Goldman Sachs. The four banks have taken a combined 22% haircut in the last quarter and are expected to sustain heavy losses from the billions of dollars of subprime CDOs they’ll have to either downgrade or write-off. So far, Bernanke’s rate cuts have diverted attention from the grim news and falling profits from America’s investment core.

According to Satyajit Das, a respected authority on derivatives trading, “A single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion — or eight times total global gross domestic product of $60 trillion.” (Are We Headed for an Epic Bear Market” Jon Markman)
http://www.atlanticfreepress.com/content/view/2452/81/




What are the Feds doing? Can anyone give some ideas on the situation?:confused:

Or is it just a case of:

"Give me control over a nation's currency and I care not who makes its laws."
-Baron M.A. Rothschild

WHy U hate 'merica?

WHy U hate 'merica?

because she lives in it.

WHy U hate 'merica?

Won't the feds strategies make things worse for the people? What do they gain by covering for the bad bets of a few against the real problems the rest of the people will face? How does it make economic sense?

Won't the feds strategies make things worse for the people? What do they gain by covering for the bad bets of a few against the real problems the rest of the people will face? How does it make economic sense?

You assume they have the best interests of the "masses" at heart. Every loan shark collects sometime, even if all they get is blood.

http://www.atlanticfreepress.com/content/view/2452/81/




What are the Feds doing? Can anyone give some ideas on the situation?:confused:

Or is it just a case of:

Hopefully, you've been watching the news enough to know that much of what you quoted is inacurate. the stock market has NOT plunged, there's NO indication on the horizon that prices in general will rise, and credit is once again becoming avaliable. All of which is due to the recent rate cut by the FED.

If the housing sitiuation doesn't soon start showing more signs of an upturn (there are already some positive indications INCLUDING an increase in consumer spending), the FED may make another cut of perhaps 1/4 percent.

It's far from over but meanwhile the markets are recovering across the world and there are still more bullets that can be fired if really needed. The fat lady hasn't yet even appeared on the stage, much less sung.

You assume they have the best interests of the "masses" at heart. Every loan shark collects sometime, even if all they get is blood.

Seems rather redundant putting them in charge, if they are not working for the people.:confused:

Seems rather redundant putting them in charge, if they are not working for the people.:confused:

Charge of what?

Hopefully, you've been watching the news enough to know that much of what you quoted is inacurate. the stock market has NOT plunged, there's NO indication on the horizon that prices in general will rise, and credit is once again becoming avaliable. All of which is due to the recent rate cut by the FED.

If the housing sitiuation doesn't soon start showing more signs of an upturn (there are already some positive indications INCLUDING an increase in consumer spending), the FED may make another cut of perhaps 1/4 percent.

It's far from over but meanwhile the markets are recovering across the world and there are still more bullets that can be fired if really needed. The fat lady hasn't yet even appeared on the stage, much less sung.

Yeah, I posted the Feds response to the crisis quoted in the OP; the reduction in interest rates is what has caused the stock markets to look so attractive.

But this only helps people who invested in the stock market, people who play the market are likely to have risk averse investments anyway. Isn't there any way the Feds could ease the burden on consumer home loans instead?

Charge of what?

Managing inflation, credit and interest rates.

How do these changes affect the Canadians?

Managing inflation, credit and interest rates.

What part of that is "for the people"?

What part of that is "for the people"?

Ostensibly, isn't that what government is supposed to be?

Ostensibly, isn't that what government is supposed to be?

Ahhh ha, we are getting somewhere. What is the relationship between banks(particularly the Federal "reserve") and the U.S Government?

Ahhh ha, we are getting somewhere. What is the relationship between banks(particularly the Federal "reserve") and the U.S Government?

Are you telling me the Federal Reserve has no government oversight?:eek:

Wow, that is creepy.

Yeah, I posted the Feds response to the crisis quoted in the OP; the reduction in interest rates is what has caused the stock markets to look so attractive.

But this only helps people who invested in the stock market, people who play the market are likely to have risk averse investments anyway. Isn't there any way the Feds could ease the burden on consumer home loans instead?

You're not seeing the whole picture, Sam. The rate cut, the rebounding stock markets DO help the consumers. Many home loans are being re-written right now with lower rates. Home loans aren't the ONLY problem many of those people have - they've overextended themselves in many other areas also. And a rising market also contributes to keeping jobs available where people might otherwise be out of work and loose their homes completely.

On big fact that it seems a lot of people (like your other respondent who talks about loan sharks) simply don't understand at all is that NO ONE holding home loans wants to foreclose. What could they do with the house? The market is flooded with them already! They will come out FAR ahead to work with the home buyers to help them hang on - and the FED rate cut is a major assist in that effort.

I'm afraid that far too many people take a MUCH too narrow a view of economic issues.

Are you telling me the Federal Reserve has no government oversight?:eek:

Wow, that is creepy.

I'm asking you, go read up on it. My own investigations tell me it's actually the government has a Federal Reserve oversight.

You're not seeing the whole picture, Sam. The rate cut, the rebounding stock markets DO help the consumers. Many home loans are being re-written right now with lower rates. Home loans aren't the ONLY problem many of those people have - they've overextended themselves in many other areas also. And a rising market also contributes to keeping jobs available where people might otherwise be out of work and loose their homes completely.

On big fact that it seems a lot of people (like your other respondent who talks about loan sharks) simply don't understand at all is that NO ONE holding home loans wants to foreclose. What could they do with the house? The market is flooded with them already! They will come out FAR ahead to work with the home buyers to help them hang on - and the FED rate cut is a major assist in that effort.

I'm afraid that far too many people take a MUCH too narrow a view of economic issues.

And what does that tell you man, they don't want to foreclose and have to actually do some WORK and fuggin fix up a house and sell it, that requires actually some real work. Banks hate that.

So basically the goal is to tank the currency reap the "crop" another way.

I'm asking you, go read up on it. My own investigations tell me it's actually the government has a Federal Reserve oversight.

Is it like this?

http://en.wikipedia.org/wiki/Reserve_Bank_of_India#Main_objectives

http://en.wikipedia.org/wiki/Banking_in_India#Current_scenario

Bank of India looks like Bank of Canada, federal reserve is a bit different...

You're not seeing the whole picture, Sam. The rate cut, the rebounding stock markets DO help the consumers. Many home loans are being re-written right now with lower rates. Home loans aren't the ONLY problem many of those people have - they've overextended themselves in many other areas also. And a rising market also contributes to keeping jobs available where people might otherwise be out of work and loose their homes completely.
.

How many home loans are rewritten?

http://seattlepi.nwsource.com/money/332728_real22.html

Mortgage rates don't follow Fed
Homeowners can't expect lower interest in wake of cut

By HOLDEN LEWIS
BANKRATE.COM

Yes, the Federal Reserve cut short-term rates. No, that doesn't mean that mortgage rates will inevitably go down, especially in the short term.

A look at mortgage rates must begin with a history lesson. From Jan. 3, 2001, to June 25, 2003, the Federal Reserve reduced its target for the federal funds rate 13 times. Here's what happened to the average 30-year mortgage rate in the month after each cut: It fell eight times and rose five times. It's simply not true that a Fed rate cut automatically leads to a drop in fixed mortgage rates.

Because that point is so widely misunderstood, mortgage people wax passionately about it. Such is the case for Dan Dowling, president of United Mortgage Capital Corp. in Altamonte Springs, Fla., who declares emphatically, "There is zero causation between mortgage rates and the Fed reducing its target for the federal funds rate."

And what does that tell you man, they don't want to foreclose and have to actually do some WORK and fuggin fix up a house and sell it, that requires actually some real work. Banks hate that.

So basically the goal is to tank the currency reap the "crop" another way.

Nope, you're missing the boat completely. It has NOTHING to do with "fixing it up" (the market is saturated) and just what other way IS there for them to "reap the crop"???????????????:bugeye: What they ARE doing is working with the home buyers so they can stay in their homes and pay off the loans. You seem to think there's some other hidden agenda that would pay off for them - that's pure nuts!:bugeye:

I think the Federal move is a trick to increase market liquidity of dollars and force others (like Asian markets) to purchase dollars so that their currency does not appreciate more than their markets can handle.

Frankly, it seems like an irresponsible move to me.

I think the Federal move is a trick to increase market liquidity of dollars and force others (like Asian markets) to purchase dollars so that their currency does not appreciate more than their markets can handle.

Frankly, it seems like an irresponsible move to me.

That makes no sense at all, Sam! How can they "force" others to buy dollars?

And it was an excellent move - exactly what was needed at the time. And perhaps again next month (more than likely skipping a month).

Won't the feds strategies make things worse for the people? What do they gain by covering for the bad bets of a few against the real problems the rest of the people will face? How does it make economic sense?
I'm not an economist, but I can offer a little perspective as I have been through these things before.

Yes, inflation is not a good thing, but it is better in the long run than a recession for many people, especially those heavily indebted. Those with substantial cash will see their money lose purchasing power, of course. That is why Billy T likes Reals, they are gaining purchasing power while dollars are losing it in the global economy. But for a small family (young) with a large mortage and car payment, they can actually come out ahead if their food and gasoline costs are not a substantial percentage of their income. The income of many working people, retirees, and those drawing entitlements, is indexed to the inflation rate in America. As their monthly income slowly increases due to inflation, their financed loan obligations become a smaller percentage of their gross income. Inflation will reverse the downward trend in the value of those homes and automobiles they have already bought and financed. Those with large families and that are not homeowners may be hurting. Their rental and food costs will increase and buying a new home may be out of reach for them until the economy stabilizes. When the dollar falls relative to other currencies, it makes America's exports more competitive on the world market and imported goods more expensive for Americans to buy. That would help to equalize the large trade imbalance we Americans now suffer, and hopefully provide more jobs producing stuff rather than importing it. So, all in all, it will be difficult for both the very poor and the businessmen that make their money off offshore produced products. But it could be a blessing in the long run. You guessed it, oil is the 600 pound gorilla in all of this. JMHO. ;)

So, the market is correcting for all the blood suckers living off the U.S. economy.

Illegal aliens not finding work are going back home to enjoy their wire-transfered largesse, and everyone else is spending their similar profitable windfalls taking more vacations and feeling good about their natural abilities.

I love the market. It's self-correcting. :D

How many home loans are rewritten?

http://seattlepi.nwsource.com/money/332728_real22.html

I can't give you an actual number - just relating what been in the news here. Simply think about it for a minute - the stuff in the article you quoted was BEFORE the housing bubble burst, comprende? But now that it has, the people that are holding the loans have two choices - either foreclose on property that they cannot possibly recover their money from in a fully-saturated market OR refinace at terms the borrowers can afford - which keeps them in the homes AND keeps payments coming in.

You're an intelligent person, which would you do: take posession of an asset you can't possibly liquidate or rework the loan at a lower rate (yes, make less profit) and stay in business??? Is that so hard to see??

According to Satyajit Das, a respected authority on derivatives trading, “A single dollar of "real" capital supports $20 to $30 of loans. This spiral of borrowing on an increasingly thin base of real assets, writ large and in nearly infinite variety, ultimately created a world in which derivatives outstanding earlier this year stood at $485 trillion — or eight times total global gross domestic product of $60 trillion.” (Are We Headed for an Epic Bear Market” Jon Markman)
Talk about "leverage"!!! LOL!!!!! :D:D

Money is the root of all evil!

the root, the root the rooot:mad:

Money is the root of all evil!

Incomplete statement:

"The love of money is the root of all evil." Money is just a medium of exchange for things and labor that makes life a lot eaiser. It's no different from anything else that people can form an obsession for.

So, basically we will keep seeing a slide downward in the dollar and its all for the good?

So, basically we will keep seeing a slide downward in the dollar and its all for the good?

Of course not. Eventually, the housing situation will stabilize and values will begin to rise again.

Of course not. Eventually, the housing situation will stabilize and values will begin to rise again.


How will the housing conditions stabilise? I know homeowners in the US and they don't have the same opinion, so what do you see different?

Traders are betting U.S. house prices will fall further, more than 20 percent in San Francisco and Miami, and remain weak through 2011, according to futures contracts that started trading this week.

http://www.reuters.com/article/bondsNews/idUSN2136792320070921

How will the housing conditions stabilise? I know homeowners in the US and they don't have the same opinion, so what do you see different?



http://www.reuters.com/article/bondsNews/idUSN2136792320070921

I would say the year 2011 (and even beyond) falls well within the realm of "eventually." I certainly didn't say tomorrow or next year.

I would say the year 2011 (and even beyond) falls well within the realm of "eventually." I certainly didn't say tomorrow or next year.

So what is the best outlook for young couples who have bought their homes in the last few years? Some have taken advantage of the drop in interest rates to move from variable to fixed interest (30 years). Will that be sufficient to protect them from a downsliding market?

So what is the best outlook for young couples who have bought their homes in the last few years? Some have taken advantage of the drop in interest rates to move from variable to fixed interest (30 years). Will that be sufficient to protect them from a downsliding market?

Yes, it certainly should. The important thing for them is to NOT abuse their credit and fall into the credit card chasm AND to make wise choices in their jobs.

Many that are in trouble now got that way not just by going over their heads in buying a home but by not using credit wisely and by living life to the max on two incomes to the extent that they set themselves up to fail.

If I'm not mistaken this rate cut also helps the banks to stock extra cash on hand in case lots of people decide to stuff money under their mattresses and in the freezer instead of in their accounts.

What is the point of more money that is worth less?

What is the point of more money that is worth less?

It burns better

What is the point of more money that is worth less?
I think I covered that already S.A.M. Those 'young couples' that are in debt for homes and cars will see those payments take up a smaller percentage of their monthly income. Those payments will remain the same, or even decrease if refinanced at a lower rate, but their monthly income will rise due to inflation. It IS rather simple.

Some of the credit problems we have now were due to speculation by a few investors. They bought houses in 'hot' markets such as San Francisco and Miami, betting that home values would continue to increase at a fast rate. If the values increased quickly, they could either 'flip' the house (resell it quickly at a profit) or borrow more money against the equity in the house for investing. Those practices drove up the value of homes in the hot markets until they were overpriced. When the 'correction' hit, they were left with homes that they owed more on than the homes would bring on the open market. Home prices really haven't changed much in my more rural area of the country, as in most areas. Young homebuyers that bought their houses for their families aren't really affected by market fluctuations, unless they have over-extended themselves and need to borrow money against the equity.

What is the point of more money that is worth less?

It'll go up tomorrow!

Baron Max

Of course not. Eventually, the housing situation will stabilize and values will begin to rise again.
I don't think so. The sub-prime mortgages pretty much destroyed the economy. LOL!!! :D

The only reason why american economy is still standing is because a lot of people have blind faith on the damn currency. The value is ridiculously artificially inflated. Think about oil and hedgefunds, for instance. :rolleyes:

Aside from that, there's also the consumer debt. The average debt is of around at least $10,000 per household! :rolleyes:

I don't think so. The sub-prime mortgages pretty much destroyed the economy. LOL!!!

The only reason why american economy is still standing is because a lot of people have blind faith on the damn currency. The value is ridiculously artificially inflated. Think about oil and hedgefunds, for instance. :rolleyes:

Aside from that, there's also the consumer debt. The average debt is of around at least $10,000 per household! :rolleyes:

Wrong as usual on all points. And it's those factual errors that points out the fallacy in all your thinking about financial considerations.
:bugeye:
For example, the last statement above. The actual figure is less than half what you so blindly state. It's much more like $ 4,700 per household.

Reference for your education: http://www.usatoday.com/money/perfi/general/2004-03-17-debtcover_x.htm