Posted on 09/13/2007 9:32:29 AM PDT by Hydroshock
NEW YORK (CNNMoney.com) -- Problems in housing, the financial markets and the first job decline in four years have made a Federal Reserve rate cut next week all but certain. But it has also raised talk about a recession -- and whether the Fed is able to prevent one.
While most economists still don't believe the nation will fall into a recession, there is general agreement that the economy now faces a greater risk than there was only a month or two ago.
It's not clear how much Federal Reserve Chairman Ben Bernanke will be able to do if the U.S. economy does start to slide towards recession.
Problems in the financial credit markets are only part of the risk faced by the U.S. economy.
But many economists also say that the Fed can do little at this point to address many of the factors threatening continued economic growth. Some economists even argue that rate cuts could make matters worse.
The mortgage market would seem to be where the Fed could have the most effect. Most directly, a rate cut will reduce the rates for adjustable rate mortgages, one of the types of loans that has caused the problems for lenders and subprime borrowers, those with less-than-perfect credit.
An estimated 2 million homeowners face sharply higher mortgage payments when their current loans reset over the next year. So a Fed rate cut could possibly stave off a wave of foreclosures.
That's key since more foreclosures could have the potential to hurt consumer spending as a whole, said David Wyss, chief economist for Standard & Poor's.
(Excerpt) Read more at money.cnn.com ...
“Some think” sounds awfully like Katie Couric (er, I mean Qaty al-Khouriq).
I can’t read Fed anymore without initally misreading it as Fred.
You can always find some economist somewhere who will make whatever point you want.
Nah, it's Paul Al Qrugman.
Take a side, there will be a recession or there will not be a recession. Either way you have a 50% chance of being right. If the Fed cuts rates then as in the past the economy will be stimulated and growth will ensue. Now THAT is almost a 100% certainty and another certainty is that as rates comes down those mtg resets will be at a lower rate thereby removing another stone in the “we are going to hell in a hand basket” wall being built by the glass is half empty crowd.
The only people who don’t want lower rates and lower taxes are liberals who want a trashed economy more then they want us to lose in Iraq (well, almost)
I do not want lower rates at this time because it will further weaken the dollar and risk increased inflation.
Don't these geniuses remember the "stagflation" of the Bernes-era Fed? We might as well call for a return of polyester, herpes, and the Captain and Tennille...
I think the Fed should hold, but have a feeling that they won't over the next three months. We really do need a shakeout in the home market.
Oh I remember, that is why I am dreading any rate cut.
LOL, you just want the housing market to crash. All you do is post negative stories about the economy and housing.
Who cares what the dollar is worth if the economy goes down the toilet. Besides, the best thing for the dollar is to keep the economy going, which requires a rate cut. The impact to the dollar has already been factored in.
You contradict yourself. First you state a rate cut is just to prop up one sector, then you state that sector is dragging down the whole economy. The rate cut is to save the whole economy from recession. Besides, the housing market has seen most of its correction (sorry, the 40% ain’t happening). Another slow year in the housing market with roughly flat pricing is the ‘correction’.
The idea that a rate cut will damage the economy is ludicrous. Making sure economy doesn’t fall into recession is a good thing for everyone and even helps protect the dollar in the long run.
Housing is going down no matter what we do. Nothing is going to keep the values in many markets up. Better to let it fall and be done with it before it does more damage.
A rate cut will raise the chances of a recession, by increasing inflation and eroding the value of the dollar. And as for price drops, last year (2/2006) my Mother In Law in nothern MA had her house appraised at $270K, she took out a $30K loan to fix it up. She had a realtor come to price it to sell, she is moving to TX. The realtor told her the best she could do is $225k to $230K even after the repairs and improvements. Prices are falling.
The question is, are we gonna allow a soft landing as I have predicted and called for, which won't take down the entire economy. Or are we gonna force a housing crash, that will cause massive bankruptcies, put more people out of jobs, slow down the entire economy, cause a major recession going into an election year which worst of all will make Hillary a shoe-in for the White House. There is no reason we can't use wise fiscal policy to prevent this.
If a decline in the dollar happens, it will boost exports and help the economy. Inflation is not a major concern, outside of energy and a handful of commodities. Thank goodness, 90% of the market, including the Fed I believe, agree with me.
You and your anecdotal evidence.
I do not see a soft landing is possible anymore. A rate cut will not stop the arms resetting. Or the drop in home values. The only way to effectively cut rates to stop the majority of the subprime from loosing their shirts is to cut down to near zero. And the will wreck the rest of the economy. Better to let the 1% or 2% of the homes with these bad loans take their lumps. And of course no banker bailouts.
This is the same story for most of New England. A fairly considerable sixed part of the US in population. Take a look at many Markets in California, most markets around LA are down noticably. I could go on and on.
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