Posted on 08/17/2007 5:22:20 AM PDT by Hydroshock
Fed declares "downside risks" to economy have increased, OKs half percentage point cut in discount rate on loans to banks. (Breaking
(Excerpt) Read more at cnn.com ...
Why does it matter? Did the drop in the Euro ruin their economies?
I’m not arguing that a short term deficit is going to crash our economy.
No, you said it would cause inflation. You just haven't explained how.
Go ahead, and believe there is no risk in a weakening dollar, but like I said iy is a reflection of your economic health.
Remember, other countries invest in the US not just for the return, but for the security. On that point I will agree with you, its safer here right now than in other areas, but investments are fickle and a slow down in our economy will scare many of those investment dollars elsewhere.
Yes there was slow growth in Europe during the time the euro was declining.
Please explain how.
Thank goodness we won’t let some hedge funds and banks that made bad loans pay the price.
A money losing CDO is still a money losing CDO.
Since we are socializing and monetizing all the crap mortgage loans, who wants dollars anymore?
How are we socializing and monetizing all the crap mortgage loans?
Toddster, for the love of God, I don’t know how you persist with these people. LOL
Have to go to work now, but it has been a good conversation. Talk to you later.
It’s a public service.
It seems more akin to lecturing on quantum physics in a psych ward.
Really? How slow?
I’ll wait to hear how trade and budget deficits cause inflation.
I doubt if Wachovia and WaMu would have to file, they are banks and have a lot of other revenue streams. But CFC was close until they tapped those loans. The future will tell what happens there, but I sure would not put my money in their stock for the rest of the year. Will the paper start selling?
I think there’d be more learning going on in the psych ward.
We’re in a deflationary period. Anyone who uses or thinks “inflation” is stuck in a long-gone cycle.
NOTE: home prices do not tend to decline during periods of inflation. Debt prices (the inverse of interest rates on debt), do not tend to decline during periods of inflation.
Credit crunches from a lack of money do not tend to occur during inflationary periods, either.
SHORT VERSION: NOT INFLATION...DEFLATION.
You maybe right, but I do think throwing money at this is now the wrong thing to do. It is not going to fix the underlying problem. many, many bad loans to people who can not pay them. What do you do with a consumer driven economy where the consumers can not afford to consume?
Throwing money at deflation will fix deflation. Companies with bad loans on their books will still have bad loans on their books. They will still lose money.
No, the underlying problem is *not* a few hundred thousand bad sub-prime mortgages. The core problem is vastly larger.
Right now, the fight is against the liquidity crisis that has killed the secondary market for debt (even triple A corporate paper).
If lending institutions have no secondary market, then they can’t sell old loans to obtain the money to make new loans.
With a fiat currency, that sort of situation almost immediately (a few months at most) dries up most economic activity.
So to prevent that sort of credit crunch, fiat economies have central banks that are tasked with providing enough liquidity to handle emergencies.
It’s how fiat systems work. It’s by design.
...And it’s much, much larger than just a few mortgages.
If there is no inflation, what triggered the sub prime situation? What activated all those ARMs?
I think it is nto a lack of money but a lack of buyers in the secondary markets.
I never said there was no inflation. I'm still waiting for your proof that trade and budget deficits cause inflation. Any luck with that yet?
what triggered the sub prime situation?
Investors stopped buying low quality paper. Mortgage writers got stuck with low quality inventory, had a cash crunch, went out of business.
What activated all those ARMs?
Rates rose over the last few years. Teaser rates expired.
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