Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

US losing confidence vote as investors flee
The Telegraph ^ | 3/17/2008 | Ambrose Evans-Pritchard

Posted on 03/16/2008 8:58:36 PM PDT by bruinbirdman

As feared, foreign bond holders have begun to exercise a collective vote of no confidence in the devaluation policies of the US government. The Federal Reserve faces a potential veto of its rescue measures.

Asian, Mid East and European investors stood aside at last week's auction of 10-year US Treasury notes. "It was a disaster," said Ray Attrill from 4castweb. "We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed."

The share of foreign buyers ("indirect bidders") plummeted to 5.8pc, from an average 25pc over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns.

Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.

It is not my view. I believe the forces of debt deflation now engulfing America - and soon half the world - are so powerful that nobody will be worrying about inflation a year hence.

Yes, the Fed caused this mess by setting the price of credit too low for too long, feeding the cancer of debt dependency. But we are in the eye of the storm now. This is not a time for priggery.

The Fed's emergency actions are imperative. Last week's collapse of confidence in the creditworthiness of Fannie Mae and Freddie Mac was life-threatening. These agencies underpin 60pc of the $11,000bn market for US home loans.

With the "financial accelerator" kicking into top gear - downwards - we may need everything that Ben Bernanke can offer.

"The situation is getting worse, and the risks are that it could get very bad," said Martin Feldstein, head of the National Bureau of Economic Research. "There's no doubt that this year and next year are going to be very difficult."

Even monetary policy à l'outrance may not be enough to halt the spiral. Former US Treasury secretary Lawrence Summers says the Fed's shower of liquidity cannot cure a bankruptcy crisis caused by a tidal wave of property defaults.

"It is like fighting a virus with antibiotics," he said.

We can no longer exclude a partial nationalisation of the American banking system, modelled on the Nordic rescue in the early 1990s.

But even if you think the Fed has no choice other than to take dramatic action, the critics are also right in warning that this comes at a serious cost and it may backfire.

The imminent risk is that global flight from US Treasury and agency debt drives up long-term rates, the key funding instrument for mortgages and corporations. The effect could outweigh Fed easing.

Overall credit conditions could tighten into a slump (like 1930). It's the stuff of bad dreams.

Is this the moment when America finally discovers the meaning of the Faustian pact it signed so blithely with Asian creditors?

As the Wall Street Journal wrote this weekend, the entire country is facing a "margin call". The US has come to depend on $800bn inflows of cheap foreign capital each year to cover shopping bills. They may have to pay a much stiffer rent.

As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to 66pc of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103). Who is jumping ship?

The Chinese have quickened the pace of yuan appreciation to choke off 8.7pc inflation, slowing US bond purchases. Petrodollar funds, working through UK off-shore accounts, are clearly dumping dollars amid rumours that Gulf states - overheating wildly - are about to break their dollar pegs. But mostly likely, the twin crash in the dollar and US agency debt reflects a broad exodus by global wealth managers, afraid that America is spinning out of control. Sauve qui peut.

The bond debacle last week tallies with the crash in the dollar index to an all-time low of 71.58, down 14.6pc in a year. The greenback is nearing parity with the Swiss franc - shocking for those who remember when it was 4.375 francs in 1970. Against the euro it has hit $1.57, from $0.82 in 2000. Against the yen it has smashed through Y100. Spare a thought for Toyota. It loses $350m in revenues for every one yen move. That is an $8.75bn hit since June. Tokyo's Nikkei index is crumbling. Less understood, it is also causing a self-reinforcing spiral of credit shrinkage throughout the global system.

Japanese investors and foreign funds are having to close their yen "carry trade" positions. A chunk of the $1,400bn trade built up over six years has been viciously unwound in weeks. The harder the dollar falls, the further this must go.

It is unsettling to watch the world's reserve currency disintegrate. Commodities from gold to oil and wheat are taking on the role of safe-haven "currencies". The monetary order is becoming unhinged.

I doubt the dollar can fall much further. What is it to fall against? The spreading credit contagion will cause large parts of the globe to downgrade in hot pursuit - starting with Europe.

Few noticed last week that the Italian treasury auction was also a flop. The bids collapsed. For the first time since the launch of EMU, Italy failed to sell a full batch of state bonds.

The euro blasted higher anyway, driven by hot money flows. The funds are beguiled by Germany's "Exportwunder", for now. It cannot last. The demented level of $1.57 will not be tolerated by French, Italian and Spanish politicians. The Latin property bubbles are deflating fast.

The race to the bottom must soon begin. Half the world will be slashing rates this year to stave off credit contraction. The dollar will have a lot of company. Small comfort.


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: bernanke; economy; endofthedollar; fed; stpatricksmassacre; subprime
Navigation: use the links below to view more comments.
first 1-5051-100101-150151 next last

1 posted on 03/16/2008 8:58:38 PM PDT by bruinbirdman
[ Post Reply | Private Reply | View Replies]

To: bruinbirdman

Gee, the rest of the world is finally catching up to US Conservatives have known for years. The US government spending spree is atrocious.


2 posted on 03/16/2008 9:01:46 PM PDT by VRWC For Truth (No mas Juan "Traitor Rat" McAmnesty)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman
Yes, the Fed caused this mess by setting the price of credit too low for too long, feeding the cancer of debt dependency. But we are in the eye of the storm now. This is not a time for priggery.

if this is trus, should the Feds be reasing the rate ?

I seem to recall japan tried to get out of their mess by having zero interest...how did that work out ?
3 posted on 03/16/2008 9:04:56 PM PDT by stylin19a
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman
"The Federal Reserve faces a potential veto of its rescue measures."

...while the veto-ers bring a veto by consumers upon themselves. Keep the hysteria going, so we can see some real deflation in everything except oil. ;-)
4 posted on 03/16/2008 9:05:00 PM PDT by familyop (Lowly, worthless male weekend warrior trash has-been with no degree.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: VRWC For Truth

I’m no longer worried about another Depression. We’re already there. The fear is gone, now it’s just a matter of dealing with the consequences.


5 posted on 03/16/2008 9:05:53 PM PDT by kms61
[ Post Reply | Private Reply | To 2 | View Replies]

To: bruinbirdman

The easier the money the less value it has.


6 posted on 03/16/2008 9:06:07 PM PDT by DB
[ Post Reply | Private Reply | To 1 | View Replies]

To: stylin19a
"I seem to recall japan tried to get out of their mess by having zero interest...how did that work out ?"

Japan continued to produce, even after importing raw materials from elsewhere for input to production.
7 posted on 03/16/2008 9:08:05 PM PDT by familyop (Lowly, worthless male weekend warrior trash has-been with no degree.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: bruinbirdman
While I like the graphic in this article, I think this one is a bit more dramatic.


8 posted on 03/16/2008 9:08:32 PM PDT by Publius (A = A)
[ Post Reply | Private Reply | To 1 | View Replies]

To: stylin19a
reasing = raising
9 posted on 03/16/2008 9:10:27 PM PDT by stylin19a
[ Post Reply | Private Reply | To 3 | View Replies]

To: familyop

What about food and ammo?


10 posted on 03/16/2008 9:10:57 PM PDT by mamelukesabre (Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?)
[ Post Reply | Private Reply | To 4 | View Replies]

To: bruinbirdman
As of June 2007, foreigners owned $6,007bn of long-term US debt. (Equal to 66pc of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133) , Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103). Who is jumping ship

Some of the big US debt Owners.......ah can you say....FREAKING SCAM.
11 posted on 03/16/2008 9:11:34 PM PDT by The_Republican (You know why Chelsea Clinton is so Ugly? Because Janet Reno is her Father! LOL! - Mac is Back!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman
US Treasury and agency debt drives up long-term rates, the key funding instrument for mortgages and corporations.

Didn't housing prices go up as mortgage rates went down? Wouldn't the opposite happen now?

Wouldn't prices drop enough to encourage buying? I knew people who purchased houses during the late 1970s stagflation. I swear I remember the mortgage interest was more than 20 percent at that time. They survived. The rest of us survived.

No one is saying that's going to be easy.

12 posted on 03/16/2008 9:12:04 PM PDT by WilliamofCarmichael (If modern America's Man on Horseback is out there, Get on the damn horse already!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman

I am sure Ben is a nice enough guy and all, he lookes pained in the pic above, too bad he has to be the front man and a whipping boy for the financial debacle our Congre$$ and many administrations has fomented before our very eyes with the reckless and wanton spending and refusal to even look at reform of entitlement programs and such.


13 posted on 03/16/2008 9:13:46 PM PDT by NormsRevenge (Semper Fi ... Godspeed ... ICE’s toll-free tip hotline —1-866-DHS-2-ICE ... 9/11 .. Never FoRGeT)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman

We all need to take a deep breath, straighten our backbones and go through what the folks went through in the 1930s. I hope and pray that this leads to realy godly change...I really hope and pray that it doesn’t lead to even deeper socialism or anarchy!


14 posted on 03/16/2008 9:15:19 PM PDT by crghill (Postmillenial, theonomic, presuppositional, covenantal Calvinist! Let reconstruction begin!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: bruinbirdman
While dramatic, Ambrose is probably not being overly dramatic here.

The race to the bottom is on.

This is the biggest crash, in slow motion progress, since 1930. It will soon show up in jobs data...falling home prices will continue (I expect 50% from peak) unwinding the entire global financial system.

The smart money has already run up the value of commodities...you only hope is FDIC insured savings, losing a REAL interest of 4-5% a year.

Of course, that beats losing everything.

15 posted on 03/16/2008 9:15:57 PM PDT by Mariner
[ Post Reply | Private Reply | To 1 | View Replies]

To: WilliamofCarmichael

I don’t know about 20%, but I knew a couple who bought a house with an 18% mortgage.


16 posted on 03/16/2008 9:16:37 PM PDT by DuncanWaring (The Lord uses the good ones; the bad ones use the Lord.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: VRWC For Truth

Ditto


17 posted on 03/16/2008 9:17:25 PM PDT by Fiddlstix (Warning! This Is A Subliminal Tagline! Read it at your own risk!(Presented by TagLines R US))
[ Post Reply | Private Reply | To 2 | View Replies]

To: stylin19a

“I seem to recall japan tried to get out of their mess by having zero interest...how did that work out ?”

10+ year recession.


18 posted on 03/16/2008 9:18:14 PM PDT by Proud_USA_Republican (We're going to take things away from you on behalf of the common good. - Hillary Clinton)
[ Post Reply | Private Reply | To 3 | View Replies]

To: mamelukesabre

The price of food will go down, if our government defaults on foreign investments due to the current engineered scare. Ammo might go up after consumer runs on it in the big cities, and that’s fine with me.

I’m looking forward to seeing the dollar go further down internationally and way up domestically. May the game of crap-on-your-neighbor backfire. We need new blood in US business.


19 posted on 03/16/2008 9:18:29 PM PDT by familyop (Lowly, worthless male weekend warrior trash has-been with no degree.)
[ Post Reply | Private Reply | To 10 | View Replies]

To: bruinbirdman

Gee, this sound like what Ron Paul has been saying for some time now. I thought that freepers considered Ron Paul to be a lunatic.

Seems like he was right all along.

Do you think that McCain has a clue? (Not that Obama or Clinton have a better grasp on reality.)


20 posted on 03/16/2008 9:18:43 PM PDT by RBroadfoot
[ Post Reply | Private Reply | To 1 | View Replies]

To: WilliamofCarmichael
our first house was 11%...next it was 10% and we thought it was great...and our third and present house, 7%......

and I remember the inflation rate at 21%.....

you work...you save...you invest a little....and now what do we do.....

bought more tomato sauce and spaghetti today....meant to buy dry milk....

21 posted on 03/16/2008 9:19:47 PM PDT by cherry
[ Post Reply | Private Reply | To 12 | View Replies]

To: VRWC For Truth

It is not going to be fun to watch CNBC today. The Demoncrats and RINOS are going to get slapped this morning. Big time. Hold on.


22 posted on 03/16/2008 9:19:57 PM PDT by Shady (The Fairness Doctrine is ANYTHING but fair!!!!)
[ Post Reply | Private Reply | To 2 | View Replies]

To: kms61

Looking at this from a historic viewpoint, I would have to say another world war was in the offing.
We already knew we were at war, but have been denying the reality of it.


23 posted on 03/16/2008 9:20:56 PM PDT by tet68 ( " We would not die in that man's company, that fears his fellowship to die with us...." Henry V.)
[ Post Reply | Private Reply | To 5 | View Replies]

To: crghill

Hillary will, of course, blame Bush, Obammy will blame bush, and the timing couldn’t be better. The blame is on Bush but every member of Congress for the past 60 years as well. The bubble is bursting. The overspending of Government is solely to blame.


24 posted on 03/16/2008 9:21:58 PM PDT by Shady (The Fairness Doctrine is ANYTHING but fair!!!!)
[ Post Reply | Private Reply | To 14 | View Replies]

To: NormsRevenge

I am no expert but it seems that Greenjeans is the culprit...not only for keeping interest rates too low and encouraging rampant real estate speculation....he has been shooting his mouth off since leaving his throne and he has undermined Big Ben......


25 posted on 03/16/2008 9:22:00 PM PDT by cherry
[ Post Reply | Private Reply | To 13 | View Replies]

To: Mariner

JP Morgan bought Bear Stearns for 3 cents on the dollar. Even at that firesale price, the US Gov guaranteed JP Morgan they would absorb their losses on the deal—think about that one and tell me things aren’t really bad. Where is our already broke Government going to come up with all this $$ when they can’t sell their devalued treasuries? And the Bear Stearns failure is probably the first of many to come. Something is going to give soon. It will not be pretty.


26 posted on 03/16/2008 9:22:02 PM PDT by rbg81 (DRAIN THE SWAMP!!)
[ Post Reply | Private Reply | To 15 | View Replies]

To: WilliamofCarmichael

“Didn’t housing prices go up as mortgage rates went down?

Wouldn’t prices drop enough to encourage buying? I knew people who purchased houses during the late 1970s stagflation. I swear I remember the mortgage interest was more than 20 percent at that time. They survived. The rest of us survived.

No one is saying that’s going to be easy.”

You bring up a good point but I’d fill in a couple of missing points. First, homes had not blown up in price so far outside of their long term price envelope, roughly equal to 3x median income. Secondly, qualifying for loans back then was quite conventional, requiring solid down payments. Most homes during that era were sold with seller-financed second mortgages. When rates later came down, there was ample opportunity to refi to lower rates. I think I was paying 13% on a first mort and 11% on a seller second on a home I bought in 1983.

Why the current situation is different is because: Despite their recent decline, homes are still selling for prices outside that 3x median income benchmark, and with rates already so low, there is likely to be no great opportunity to refi. Indeed, mort rates have actually risen in response to the Fed lowering rates just recently.


27 posted on 03/16/2008 9:25:01 PM PDT by Attention Surplus Disorder (We've checked, and all your zeroes are OK. We're still working on your ones.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: rbg81
Something is going to give soon. It will not be pretty.

I just need to hang on a few more years and collect my early Social Security, that's been a great government managed plan I can depend on. /sarc.

28 posted on 03/16/2008 9:25:12 PM PDT by rolling_stone (same)
[ Post Reply | Private Reply | To 26 | View Replies]

To: VRWC For Truth

depends on how y ou look at it. might be bargain prices to jump in and buy too. Have to research, but might be terrific time to buy up rather than sell.


29 posted on 03/16/2008 9:26:20 PM PDT by television is just wrong
[ Post Reply | Private Reply | To 2 | View Replies]

To: bruinbirdman

This is the guy who wrote the best book on the Clinton crime family. He has got just as good a handle on this story as well. Jorge made a COMPLETE fool of himself last week when babbled about America having a strong dollar policy. It was either completely dishonest or what is even worse, it was an admission that his administration has a policy which COULD NOT HAVE FAILED more, because the dollar has never been weaker.


30 posted on 03/16/2008 9:27:38 PM PDT by Biblebelter (I will NEVER EVER vote for McCain or any other current Senator.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: familyop

I don’t understand how the price of anything can go down if oil keeps going up up up. Fuel costs affect everything.


31 posted on 03/16/2008 9:28:49 PM PDT by mamelukesabre (Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?)
[ Post Reply | Private Reply | To 19 | View Replies]

To: bruinbirdman

As of last Friday, US treasuries looked extremely popular to me, and I bet they’ll be even more popular on Monday.


32 posted on 03/16/2008 9:30:45 PM PDT by Moonman62 (The issue of whether cheap labor makes America great should have been settled by the Civil War.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: RBroadfoot

McCain didn’t even know Congress had banned lightbulbs! He pooh-poohed the idea to an interviewer, and when it was pointed out that it had already been done, he changed the subject. I guess you have to give him points for having that much presence of mind.


33 posted on 03/16/2008 9:31:00 PM PDT by dr_lew
[ Post Reply | Private Reply | To 20 | View Replies]

To: crghill
We all need to take a deep breath, straighten our backbones and go through what the folks went through in the 1930s.

Unfortunately, what folks went through in the 30s was a grand repurposing of the federal government towards socialism, entitlements, nanny-statism, and an outright confiscation of Constitutional money, namely gold. I have little faith that things will turn out much better in this, the era of the ME ME ME generation.

34 posted on 03/16/2008 9:31:39 PM PDT by coloradan (The US is becoming a banana republic, except without the bananas - or the republic.)
[ Post Reply | Private Reply | To 14 | View Replies]

To: bruinbirdman

Let those sovereign wealth funds flee. Let the Chinese government take their investments with them too.


35 posted on 03/16/2008 9:32:23 PM PDT by hedgetrimmer (I'm a billionaire! Thanks WTO and the "free trade" system!--Hu Jintao top 10 worst dictators)
[ Post Reply | Private Reply | To 1 | View Replies]

To: All
So we owe China 870 billion, I thought it was a trillion dollars.

What happens if we stop buying Chinese and even pay them in full? That's less than one thousand dollars per citizen over there.

It's going to take a lot more than that to stave off revolution with millions more out work and all the corruption and other state-threatening problems in Red China.

The euro blasted higher anyway, driven by hot money flows. The funds are beguiled by Germany's "Exportwunder", for now. It cannot last. The demented level of $1.57 will not be tolerated by French, Italian and Spanish politicians. The Latin property bubbles are deflating fast.

I believe it's true, no group of sovereign countries have ever shared a single currency successfully.

Either they combine into one country or give it up. It's been a picnic now there's trouble abrewing. Will the Euro survive? No. I bet.

(Though some like the Euro's protection against an individual country's currency being devalued.)

The northern countries are not happy with the southern countries performances, I believe. Real trouble abrewing.

36 posted on 03/16/2008 9:32:32 PM PDT by WilliamofCarmichael (If modern America's Man on Horseback is out there, Get on the damn horse already!)
[ Post Reply | Private Reply | To 12 | View Replies]

To: bruinbirdman
The dollar will have a lot of company. Small comfort.

Well, I don't know. It might be worth it to see the Arabs eat sand.

37 posted on 03/16/2008 9:34:47 PM PDT by dr_lew
[ Post Reply | Private Reply | To 1 | View Replies]

To: stylin19a

“I seem to recall japan tried to get out of their mess by having zero interest...how did that work out ?”

Wll. Bernanke is smarter than the Japs. You see, if you cause the sub prime debacle by printing money, then the cure must be to print money.


38 posted on 03/16/2008 9:35:28 PM PDT by FastCoyote (I am intolerant of the intolerable.)
[ Post Reply | Private Reply | To 3 | View Replies]

To: mamelukesabre
I can only understand things from my personal life experiences......

if we are all paying MORE of our money on gasoline, that leaves LESS for food,entertainment, clothing, cars, etc......

people can't really cut off the food, but surely the entertainment,retail and auto industries have got to be feeling the pinch from slow sales....so why aren't they discounting greatly?...no one is buying their stuff and they have to unload it....so why haven't THOSE prices at least come down....

in a real good and normal recession, one can usually make up for losses by picking up "deals"...so where are the deals?

39 posted on 03/16/2008 9:36:19 PM PDT by cherry
[ Post Reply | Private Reply | To 31 | View Replies]

To: mamelukesabre
"I don’t understand how the price of anything can go down if oil keeps going up up up. Fuel costs affect everything."

It works that way, until fear keeps consumers from buying anything unnecessary. And most imports are unnecessary items. ;-)

Oil might go down considerably, too, if the rest of the middle class is laid off and has no need for commuting. One drawback to that, though, would be having Obama as our next president.
40 posted on 03/16/2008 9:37:19 PM PDT by familyop (Lowly, worthless male weekend warrior trash has-been with no degree.)
[ Post Reply | Private Reply | To 31 | View Replies]

To: Biblebelter

Better start nailing shut the windows on Wall Street. That huge crane that fell on NYC is a bad omen.


41 posted on 03/16/2008 9:38:46 PM PDT by tenthirteen
[ Post Reply | Private Reply | To 30 | View Replies]

To: bruinbirdman
*BUMP* !
42 posted on 03/16/2008 9:44:23 PM PDT by ex-Texan (Matthew 7: 1 - 6)
[ Post Reply | Private Reply | To 1 | View Replies]

To: cherry
"in a real good and normal recession, one can usually make up for losses by picking up "deals"...so where are the deals?"

Go starchy? Rice can go a long way for little cash.

There are no good deals, BTW. The importers and merchants are playing chicken with our economy to try to keep the dollar propped up (for their fat margins from foreign slave labor).

Non-sticky, low-cost Rice:

1. Fill about quarter of a cooking pot with rice (the basic kind that comes in 25 lb. bags)

2. Fry with margarine, oil, or whatever until browned. Add other ingredients to taste (celery salt, worcestershire sauce, or the like). The frying will give it a tiny bit of a nutty taste (or something like that).

3. Add water, until the water is about 1/2 inch to 3/4 inch deeper than the rice (depth depending on your elevation above sea level—about the length of a clean thumbnail being the rule of thumb).

4. Bring to a light boil, turn the heat down as low as you can get it then cover with a lid.

5. Leave covered and cooking on lowest heat for about 20 - 40 minutes (length of time depending on elevation. Experiment!).

Check it. Add water and simmer longer if necessary. You’ll get the hang of it. If it’s fat, soft and non-sticky, it’s done.

Try it with veggies and your favorite sauce (soy...whatever) and little or no meat. Or,...

Try it topped with pinto beans (and *small* amounts of spices like chili powder, cumin, jalapeno peppers, black pepper, red pepper, cajun spice—whatever), and a little cheese sauce on top of the beans.

Add home sliced, egg-battered and fried onion rings, hush puppies,...
43 posted on 03/16/2008 9:44:31 PM PDT by familyop (Lowly, worthless male weekend warrior trash has-been with no degree.)
[ Post Reply | Private Reply | To 39 | View Replies]

To: WilliamofCarmichael
When I first moved here to the high desert in L.A. County (1996), there were a ton of houses in what they called an "upside down" status. The owners owed more in their mortgage than the homes were worth. This had been going on for about five years at the time.

Our agent told us there were deals to be had, but that if we wanted to buy a home in foreclosure, we had to be prepared to deal with a LOT of red tape, misc paperwork, extra hoops, etc. Plus it would take a lot longer than a conventional purchase. Plus since the good ones had already gone, many were in pretty tough shape. We didn't buy a repo.

Fast forward to today, and I think the prevailing logic is that people currently trying to sell are going to have to start competing with the perceived foreclosure prices. Agents and brokers will push all those notions, of course. It will take a bit of time to sort out. The thing is, pricedropping is only one half of the story. The other half is that the seller still holds the mortgage at the original price.

It's my understanding that the bad subprime loans have been sold so many times, it's kind of tough to even figure out who the mortgage holder *is* in some cases, which will add even more time to the process. (That is, if Steve Kroft's 60 Minutes reporting is to be believed, and I'm not saying that it is.)

Another major difference this time is the sheer number of these foreclosed homes. I'm talking about California, but, of course, this is happening all over.

Here's an article from today's SF Chronicle: Mortgage crisis is creating new 'slumburbs'

So I thought I'd throw my two cents in, from the practical man-on-the-street standpoint. In the long run, what you said is true, I think. There is a lot of back-and-forth in the process.

44 posted on 03/16/2008 9:45:31 PM PDT by lainie ("You had your time, you had the power, you've yet to have your finest hour" (Roger Taylor, 1984))
[ Post Reply | Private Reply | To 12 | View Replies]

To: Attention Surplus Disorder
RE: "qualifying for loans back then was quite conventional, requiring solid down payments."

That is soooo important! Back then lenders handed out toasters and calendars, we joked that the only way you could get a loan was to not need it.

So I wonder, why bail out lenders who started handing out loans? They lost. Why bail out those who bundled the mortgages on a global scale and exploded the credit bubble. They lost. Look at $2/share Bear Stearns. They lost. Hey! it's capitalism. You takes your chances. I thought all these guys hated "government interference." Now look at 'em crowding around Washington.

And you're correct. The housing prices are still relatively high. But what about next year? I wonder.

45 posted on 03/16/2008 9:45:51 PM PDT by WilliamofCarmichael (If modern America's Man on Horseback is out there, Get on the damn horse already!)
[ Post Reply | Private Reply | To 27 | View Replies]

To: bruinbirdman

I wouldn’t want to have debt tied to the prime - get it “fixed” and quickly...


46 posted on 03/16/2008 9:47:34 PM PDT by GOPJ (Obama's Rev shows blacks too can be hateful small minded bigots. Toss white guilt-it's a new day.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: cherry

They say that during the great depression when everyone was broke and starving, somehow or another booze was flying off the shelves and they couldn’t make enough of it at any price...of course it was illegal, so that kinda dampened the production of it a little. But still, somebody always finds a way to get rich, no matter how bad it gets.

You got me where the deals are this time around. Maybe it will be realesate by the end of the year.


47 posted on 03/16/2008 9:49:35 PM PDT by mamelukesabre (Quantum materiae materietur marmota monax si marmota monax materiam possit materiari?)
[ Post Reply | Private Reply | To 39 | View Replies]

To: WilliamofCarmichael

Why bail out those who bundled the mortgages on a global scale and exploded the credit bubble. They lost.


Because the consequences of not bailing them out are far worse.


48 posted on 03/16/2008 9:49:53 PM PDT by durasell (!)
[ Post Reply | Private Reply | To 45 | View Replies]

To: Moonman62
"As of last Friday, US treasuries looked extremely popular to me, and I bet they’ll be even more popular on Monday."

If someone is dumping treasuries wholesale, interest rates would have to go up.

Now, ChiComs might not be buying U.S. treasuries, but they ain't dumping.

If Uncle Sam had a problem unloading new debt (AEP, "Asian, Mid East and European investors stood aside at last week's auction of 10-year US Treasury notes."), interest rates would have to go up.

Everything I see at Bloomberg is down http://www.bloomberg.com/markets/rates/index.html

I think smart money is taking profits in euros and pounds and sending it to safety (U.S.A.).

yitbos

49 posted on 03/16/2008 9:52:43 PM PDT by bruinbirdman ("Those who control language control minds." - Ayn Rand)
[ Post Reply | Private Reply | To 32 | View Replies]

To: lainie
Thank you for the extra detail. This is not a normal bear market -- at least the recovery is likely to require some real doing. Opportunity galore for some very clever people, I guess. We got anyone that smart? :)
50 posted on 03/16/2008 9:53:55 PM PDT by WilliamofCarmichael (If modern America's Man on Horseback is out there, Get on the damn horse already!)
[ Post Reply | Private Reply | To 44 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-100101-150151 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson