Sub Prime Tsunami – A Lesson in Unending Superficial Stupidity
Interest rates are rising. Home Mortgages with adjustable rates are starting to index to the higher interest rates. People are not seeing the increases in their salaries that they had anticipated. Many homeowners will find themselves having to choose between eating and paying their mortgages. The spin machine is saying that this scenario is limited to a few unqualified buyers and a few unscrupulous mortgage lenders. People will loose their homes. Greedy investors will loose their investments. The truth is much more drastic and will touch every part of the US economy.
The simpleminded, or those wanting to spin to the simpleminded, will say that the individuals headed for foreclosure should never have been able to get a loan. The Bush administration is pimping that this is a great economy. Federal Reserve Chairman Bernanke is pumping liquidity into the financial system. The FED is also lowering its lending standards enabling financial institutions to access these funds. The FED’s intervention to protect Corporate America has long term and far reaching consequences. It can be argued that were it not for the FED’s stance artificially stimulating financial services that the “ALT A” borrower would not be in the trouble they are today.
Excess liquidity and low interest rates created easy access to money. Interest rates were negative in real money (Interest return – Inflation). Too much money at low interest rates made houses easier to buy. More houses without a significant increase in supply drives up housing prices. Investors looking for greater returns start buying property and houses for investment returns further exasperating the problem. Returning to “ALT A” citizen, with housing prices now twice what they should be, “ALTA A” borrower has to take a second mortgage or pay a higher rate because his 20% no longer is 20%.
The problem will only get worse. The extra liquidity will not resolve the problem. The problem is that people do not make enough money to pay their bills. The FED will decrease interest rates to stimulate the economy instead of allowing the market to work out its problems. So we will have more of the Service Economy, no meat just more smoke and mirrors. As the money supply increases inflation will increase. It is a never-ending cycle of stupidity. We will continue to intervene, to patch this failing economy until it will no longer be able to be fixed.
The Administration will claim that our current economic instability is due to this period of credit instability. They will not talk about the negative results of Reaganomics. They will not talk about the disastrous fiscal policies of the past 30 years. They will not talk about 12% unemployment or how open borders distort the free market.
We can talk about that. We can ask our politicians to be upfront about our difficulties. They will not listen. They are too busy trying to figure out how to save Corporate America’s balance sheets at the expense of the taxpayer.
Tags: Government Politics China Corporate America Finance Economy
The simpleminded, or those wanting to spin to the simpleminded, will say that the individuals headed for foreclosure should never have been able to get a loan. The Bush administration is pimping that this is a great economy. Federal Reserve Chairman Bernanke is pumping liquidity into the financial system. The FED is also lowering its lending standards enabling financial institutions to access these funds. The FED’s intervention to protect Corporate America has long term and far reaching consequences. It can be argued that were it not for the FED’s stance artificially stimulating financial services that the “ALT A” borrower would not be in the trouble they are today.
Excess liquidity and low interest rates created easy access to money. Interest rates were negative in real money (Interest return – Inflation). Too much money at low interest rates made houses easier to buy. More houses without a significant increase in supply drives up housing prices. Investors looking for greater returns start buying property and houses for investment returns further exasperating the problem. Returning to “ALT A” citizen, with housing prices now twice what they should be, “ALTA A” borrower has to take a second mortgage or pay a higher rate because his 20% no longer is 20%.
The problem will only get worse. The extra liquidity will not resolve the problem. The problem is that people do not make enough money to pay their bills. The FED will decrease interest rates to stimulate the economy instead of allowing the market to work out its problems. So we will have more of the Service Economy, no meat just more smoke and mirrors. As the money supply increases inflation will increase. It is a never-ending cycle of stupidity. We will continue to intervene, to patch this failing economy until it will no longer be able to be fixed.
The Administration will claim that our current economic instability is due to this period of credit instability. They will not talk about the negative results of Reaganomics. They will not talk about the disastrous fiscal policies of the past 30 years. They will not talk about 12% unemployment or how open borders distort the free market.
We can talk about that. We can ask our politicians to be upfront about our difficulties. They will not listen. They are too busy trying to figure out how to save Corporate America’s balance sheets at the expense of the taxpayer.
Tags: Government Politics China Corporate America Finance Economy
Labels: Economy, Financial Institutions, Free Trade, Reaganomics
posted by Small Business USA at 4:35 PM
2 Comments:
I thought that by now government's had learned the lesson of controlling the money supply and not to intervene in the free market economy, boy was I wrong.
Lexcen It all comes back to how politicians see "public service". I believe that politicians do not think about the "good of America" instead they think about the "good of their pocket books".
The result is that their corporate cronies tell them they need help then the politicians give them help. If the "public servants" are intelligent enough to understand the consequences they think that it will not affect them. It will be someone else's problem and in the meantime they will get perks from the their corporate buddies.
Even if a crisis does occur in the short term it is better to have cash when the difficult times come. In other words it is a no brainer, take the money and run...
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