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Fed Cuts Interest Rates Again  
User currently offlineAirCatalonia From Spain, joined exactly 7 years ago today! , 568 posts, RR: 0
Posted (6 years 11 months 3 weeks 3 days 4 hours ago) and read 1369 times:

http://news.bbc.co.uk/2/hi/business/7139040.stm

Will we see the EUR over the 1.50-dollar mark soon?

49 replies: All unread, showing first 25:
 
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 1, posted (6 years 11 months 3 weeks 3 days 4 hours ago) and read 1354 times:

It's an embarrassment. The Fed should be raising rates not lowering them. People gambled and loss and now want everyone else to pay for their mistakes.

The quickest way to fix the economy is to pop the asset pricing bubble that exists.

IMO, this artificially low level of interest rates which depreciates the US$ versus other currencies means that the US government is as big as a currency manipulator as China.


User currently offlineTUNisia From United States of America, joined Aug 2004, 1845 posts, RR: 5
Reply 2, posted (6 years 11 months 3 weeks 3 days 4 hours ago) and read 1348 times:

Glad I set up my trust in Euros a few years ago  Smile


Someday the sun will shine down on me in some faraway place - Mahalia Jackson
User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 3, posted (6 years 11 months 3 weeks 3 days 3 hours ago) and read 1333 times:



Quoting Pope (Reply 1):
The quickest way to fix the economy is to pop the asset pricing bubble that exists.

The government, again, is late to the party.

The bubble popped long time ago, and only now are they getting in the game, with a 'cure' that is worse than the disease. How typical.

Quoting Pope (Reply 1):
People gambled and loss and now want everyone else to pay for their mistakes.

Some gambled and loss. Others played the 'my house is a piggybank' game and now are deep in debt. Let the chips fall where they fell.

Quoting AirCatalonia (Thread starter):
Will we see the EUR over the 1.50-dollar mark soon?

Probably.


User currently offlineD L X From United States of America, joined May 1999, 11501 posts, RR: 52
Reply 4, posted (6 years 11 months 3 weeks 3 days 3 hours ago) and read 1327 times:



Quoting Pope (Reply 1):
The quickest way to fix the economy is to pop the asset pricing bubble that exists.

How would you do that? And, isn't that what gave us the depression?

Quoting Pope (Reply 1):
IMO, this artificially low level of interest rates which depreciates the US$ versus other currencies

You sound like you know a lot about this (and I admitedly don't!), but how does the interest rate effect the dollar? The reason I asked is because as a person about to refinance a house, I'm jumping for joy that I can get a better rate.



Send me a PM at http://www.airliners.net/aviation-forums/sendmessage.main?from_username=NULL
User currently offlineAGM100 From United States of America, joined Dec 2003, 5407 posts, RR: 17
Reply 5, posted (6 years 11 months 3 weeks 3 days 3 hours ago) and read 1304 times:

WOA ! Stocks dropped like rocks on that news ,, I was up now I am down ! guess that is how it goes.  fight 

Kudlow was right , .50 was the number ... well we will see how it works out.

Quoting D L X (Reply 4):
I'm jumping for joy that I can get a better rate.

Thats right DLX .. You should be ! Its all about the consumer ,lower rates let people move money and that is always good. Now go buy yourself a nice Plasma or something with you extra $$$$ !



You dig the hole .. I fill the hole . 100% employment !
User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 6, posted (6 years 11 months 3 weeks 3 days 2 hours ago) and read 1289 times:



Quoting D L X (Reply 4):
How would you do that? And, isn't that what gave us the depression?

The depression occurred when people realized that wildly overpaying for assets with money that you don' t have is not always a good idea. At it was a slow unwinding into full depression, with the tariff act passed by the government as a cure being a worse problem.

http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act

At the same time, the cut in interest rates caused worse problems, as people are not interested in investing or saving money when the returns of your investments are so low. In other words, a cut in interest rates causes money to be moved to places where a higher return will be provided. Hence, lowering rates causes credit to shrink further.

Quoting D L X (Reply 4):
The reason I asked is because as a person about to refinance a house, I'm jumping for joy that I can get a better rate.

But the price for your better rate is much higher prices for everything else.

Quoting AGM100 (Reply 5):
Now go buy yourself a nice Plasma or something with you extra $$$$ !

'Don't buy stuff you can't afford'



User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 7, posted (6 years 11 months 3 weeks 3 days 2 hours ago) and read 1281 times:



Quoting D L X (Reply 4):
You sound like you know a lot about this (and I admitedly don't!), but how does the interest rate effect the dollar? The reason I asked is because as a person about to refinance a house, I'm jumping for joy that I can get a better rate.

It affects the value of the dollar to other countries. If the US interest rate is lower, then Money invested in US funds gains less interest. This causes the value of the dollar to fall relative to other countries, as it would be better to invest your funds in a currency that pays better average returns on it's investment.


Like you, I look at this as a good thing, since I now have to pay less for my HELOC, and this frees up money for me to spend. This is what the Fed wants. They want to stimulate spending, borrowing, and keep the economy from going into a recession, by introducing more funds(ie. inflate the economy).

On the flip side of this, imports from countries and travel too countries, with currencies that appreciate , grows more expensive. This means goods will grow more expensive that rely on imports from such countries.

The Fed has to balance how much it cuts funds, because too much of a cut could bring on heavy inflation if the ecomomy get's going too strong to quick. Too little of a cut and the Economy goes into a recession.


In the recent case, we are really where we are now, due to unscrupulous lending practices done during the last round of fed cuts. for Awhile I had a HELOC at 4.5 percent, and some people had interest only/ARM loans at as little as 3 or 4 %. It was these loans that reset after 2-3 years for their borrowers that has caused the current crisis. 2 to 3 percent can be a big dollar amount to certain strained budgets and this caused the current crisis.


Some could argue that the FED under Greenspan was far too aggressive cutting rates after the Dot-Com bust and 9/11, and also was far too aggressive raising rates after a 1-2 year lull at the extremely low rates.

When people have access to a lot of cash, they get addicted, and they do things that are unwise in leaner(less recessive) times. These people, some knowingly, and some unknowingly, are what got us into this crisis.


The rest of the world(Europe) is not pleased with a lower dollar, as it makes the US (the biggest consumer nation) harder to sell too. The Chinese peg on the dollar makes it easier on the US, as we tend to buy most of our imports from the Chinese. Airbus, Volkswagon, Nokia, and other corporations are going to have a hard time with a lower US dollar. Of course you can argue, that many of these companies are multinational compaines and have taken steps to balance currency deficits. However when Airbus makes deals in Dollars, it hurts when the dollar falls, and they have so many people to pay in Euros. Competition from US companies also increases, as companies that previously were not competitive on a world stage, now will be with a better cost structure from which to work from.


The whole mess gets extremely complicated from scenerio to scenerio. The End result though is that the Economy keeps growing in the US, and people don't loose jobs.



Older than I just was ,and younger than I will soo be.
User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 8, posted (6 years 11 months 3 weeks 3 days 2 hours ago) and read 1271 times:



Quoting D L X (Reply 4):



Quoting CasInterest (Reply 7):

Hopefully you both won't have any housing problems. But from where I stand all I see is trouble brewing, with plenty of people not even coming close to addressing the big issues.

1. In many places, housing became way overpriced, with the fundamentals not supporting the price increase at all.
2. Due to the 'sure' bet that housing was going up, speculation and construction became rampant. This is to the tune of about 40-50% above normal levels.
3. There is so much housing out there, that it will take several years for the excess inventory to be absorbed.

In the meantime, bubbles are called bubbles for a reason, and that is because they POP! Any attempt to support the current pricing takes money of out people's hand who could have used it in other ways.

WARNING!!

The popping of a bubble has never been pleasant. All government should do is try to have it unwind in a proper way, not try to keep it up.


User currently offlineFuturecaptain From , joined Dec 1969, posts, RR:
Reply 9, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1262 times:



Quoting AGM100 (Reply 5):
WOA ! Stocks dropped like rocks on that news ,, I was up now I am down ! guess that is how it goes.

 checkmark  And it's not only today, the entire year of 2007 has been horrible for me and the market. My stock investments have lost nearly 40% this year.

Quoting AirCatalonia (Thread starter):
Will we see the EUR over the 1.50-dollar mark soon?

It's our plot between the government and Boeing to run Airbus out of business.  devil 


User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 10, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1262 times:



Quoting AndesSMF (Reply 8):
The popping of a bubble has never been pleasant. All government should do is try to have it unwind in a proper way, not try to keep it up.

That is what the Fed's actions are all about. If they don't lower interest rates, the market pops harder since way too many people cannot refinance at the higher rates. The hope is that the people refinance, and less mortgages are defaulted. This keeps the economy going. This does not come without a cost though. It makes saving money by people less affordable, and generally encourages people to spend. Which will cause inflation. However at this point it is more important for the Fed to keep Mortgages afloat, thant to worry about inflation.

In 6 months time, it may be that the economy is humming along, and then interest rates will rise again.



Older than I just was ,and younger than I will soo be.
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 11, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1257 times:



Quoting D L X (Reply 4):
You sound like you know a lot about this (and I admitedly don't!), but how does the interest rate effect the dollar? The reason I asked is because as a person about to refinance a house, I'm jumping for joy that I can get a better rate.

It's all about supply and demand. If you had two choices where to invest and both had the same level of risk where would you put your money? The rational choice is the one that pays the higher return. Therefore when the Fed eases interest rates debt securities whose interest rates derive from US interest rates become less attractive to investors willing to assume that level of risk. The less money that flows into the country the less the demand for US$. The lower the demand for dollars the low the price people are willing to pay for dollars.

Quoting D L X (Reply 4):
How would you do that? And, isn't that what gave us the depression?

If you raise interest rates (thereby making monthly payments higher for people who finance their home purchase through mortgages [most of us]) then the price of housing has to fall because of supply and demand. The demand for housing is weaker because less people can afford it. The supply remains essentially the same and housing prices fall.

By artificially propping up housing prices in the US, the fed is dragging out the inevitable. The truth is, the person who bought a $500,000 house that is only really worth $300,000 has to lose $200,000 at some point. By ripping the band-aid off quickly housing prices will fall and the economy essentially resets itself.

Granted the guy who now owes $500,000 on a house he can only sell for $300,000 is screwed but it was his bad decision that got himself into the problem in the first place.

Quoting CasInterest (Reply 7):
Like you, I look at this as a good thing, since I now have to pay less for my HELOC, and this frees up money for me to spend. This is what the Fed wants. They want to stimulate spending, borrowing, and keep the economy from going into a recession, by introducing more funds(ie. inflate the economy).

But that's exactly the problem. Without speaking about your personal financial situation in particular - as I know nothing about it - many people took what they thought was equity out of their house to spend during the last economic down cycle. However this equity was really just a figment, it was paper gains because until you sell your house (or any non-exchange traded asset) you're not exactly sure what it's worth. It's no different than all those people who claimed to be Enron millionaires because their 401k's had Enron stock worth $1M in them. Unless you sell that asset at that particular moment, it's unlikely that it's worth exactly what you think it is.

By artificially propping up the housing market, we reward people who gambled on an ever increasing real estate market by subsidizing their gamble. I as many others on this forum decided not to speculate. While all my colleagues were buying bigger and bigger homes, I was paying down the debt on mine. Risk and reward have become detached. People who gambled and lost need to pay the economic price for this gamble. People who bet correctly need to be rewarded (relatively) to those who bet incorrectly.


User currently offlineAirCatalonia From Spain, joined exactly 7 years ago today! , 568 posts, RR: 0
Reply 12, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1253 times:



Quoting Futurecaptain (Reply 9):
It's our plot between the government and Boeing to run Airbus out of business.

See, just as I suspected...  Wink

Actually it's not that I care much about Airbus. I think I am going to take the oportunity to travel to the US at bargain prices Big grin


User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 13, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1251 times:



Quoting CasInterest (Reply 10):
If they don't lower interest rates, the market pops harder since way too many people cannot refinance at the higher rates.

This is the crux of the problem. For many, the only way out was thru foreclosure the moment they signed the papers.

Without going thru all the figures, this is the way it goes.

For every $100,000 financed, it costs about $1000/month. This is the typical conventional loan.

The creative loans allowed people to make only partial payments. So instead of paying PITI (principal, interest, taxes, insurance) they paid either only interest, or part of the interest, never principal.

This is the way that many were able to 'afford' a $500,000 house. They had initial rates that gave them a payment of $2000/month. If they refinance into a conventional loan, their payment jumps to $4000/month. See the problem? You are assuming that people can refinance their way out of their financial problems, when there is NOTHING out there that can make their payments affordable in the first place.

That this shit was allowed to happen for so long is a damn shame.


User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 14, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1239 times:



Quoting AndesSMF (Reply 13):
For every $100,000 financed, it costs about $1000/month. This is the typical conventional loan.

Depends on interest rate, at 6% it would cost about 600 a month. Assuming a 30 year fixed mortgage.

Quoting AndesSMF (Reply 13):
The creative loans allowed people to make only partial payments. So instead of paying PITI (principal, interest, taxes, insurance) they paid either only interest, or part of the interest, never principal.

Yes,
Someone who only had a 6% interest only loan, only had to pay interest on 100K

Comes out to about $500 a month
( of course most loans with interest were much lower around 3%......300 a month,) and bingo yes, this was part of the issue.

Don't forget ARMS which adjusted after a certain timeout 3-5-7.

Everyone was betting the house would appreciate more, and when the time came to refinance, they would be able to do so easily, since the house would have more value, or they could sell.

Quoting AndesSMF (Reply 13):
This is the way that many were able to 'afford' a $500,000 house. They had initial rates that gave them a payment of $2000/month. If they refinance into a conventional loan, their payment jumps to $4000/month. See the problem? You are assuming that people can refinance their way out of their financial problems, when there is NOTHING out there that can make their payments affordable in the first place.

You pretend I don't see the issue, when I have layed out the reasons for the cut. I understand what has occurred.
People made the assumption that increases in home values would cover the losses. In places such as NYC, California, and other places this was mostly true. A lot of them are still able to sell the house at a gain and get in somewhere cheap. Like most such incidents, the last one in gets screwed royally. IE you bought at the top of the market and you bought with bad credit There are a lot fewer of these incidents in affluent areas where the houses really shot up, then you would think.

The real crisis is occurring in the Midwest where factory closings and weak economies have been progressivly lowering the value of the houses that people bought at the subprime terms. These are the people that can't refinance, becasue the housse is now worth less than they owe. This is why the goverment is lowerign rates. So these people can refinance the home and not force all the banks to eat the loss, because they can't ever regain the loan money lost. on a house that is worth less than the mortgage. The banks really don't want defaults. They would rather you pay the loan somehow. This is how the Fed is helping the banks, by making it more affordable for the homowners to refinance than to default on their loan.



Older than I just was ,and younger than I will soo be.
User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 15, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1236 times:



Quoting Pope (Reply 11):
By artificially propping up the housing market, we reward people who gambled on an ever increasing real estate market by subsidizing their gamble. I as many others on this forum decided not to speculate. While all my colleagues were buying bigger and bigger homes, I was paying down the debt on mine. Risk and reward have become detached. People who gambled and lost need to pay the economic price for this gamble. People who bet correctly need to be rewarded (relatively) to those who bet incorrectly.

Totally agree here Pope.

I bought my house in 2003, my heloc was part of an 85/15 loan with a 5% down payment on a standard 30 year mortage.. I was probably one of the few who took the old 1/4 gross income for house payment to heart. i am suffering no pain. In fact I use my Heloc to offset worse loan deals, and am able to easily make payments.

I myself see no Joy in the goverments plan to freeze the subprime lendors rates, However most of them will already be higher than those with good credit. The alternaitive to thsi freeze though is much worse. I would prefer not to go into a recession, and have the possiblilty of job loss tossed on top.



Older than I just was ,and younger than I will soo be.
User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 16, posted (6 years 11 months 3 weeks 3 days 1 hour ago) and read 1231 times:

Quoting CasInterest (Reply 15):

I see that we are mostly in the same page.

But some of the other problems have nothing to do with interest rates, but the excess construction that went on. A lot of gamblers get left holding the bag, regardless. Since there was too much housing built, there are more homes than people in the US available to occupy them all.

The question is whether the government action will stop the inevitable.

Quoting CasInterest (Reply 14):
you bought at the top of the market and you bought with bad credit

This wasn't the only problem. The other is those who took advantage by using their current homes as ATM, with the promise that they could refi out of trouble later.

My question then is:

Refi into what?

For example. (true story) How do you help the couple that bought a $500,000 home on a trucker's salary? How do make the loan affordable to them?

[Edited 2007-12-11 16:23:47]

User currently offlineN174UA From United States of America, joined Jun 2006, 994 posts, RR: 0
Reply 17, posted (6 years 11 months 3 weeks 2 days 22 hours ago) and read 1208 times:



Quoting AndesSMF (Reply 3):
Others played the 'my house is a piggybank' game and now are deep in debt. Let the chips fall where they fell.

 checkmark  It all comes down to how you manage your money, not how much you make. It's entirely possible for someone making $30,000 a year to be in better financial health if they live within their means than someone making $300,000 who spends like there's no tomorrow. A fool and their money soon part ways.

Quoting CasInterest (Reply 7):
good thing, since I now have to pay less for my HELOC, and this frees up money for me to spend. This is what the Fed wants. They want to stimulate spending, borrowing, and keep the economy from going into a recession, by introducing more funds(ie. inflate the economy).

But that's the whole problem....that's what got us to where we're at now! Loose credit guidelines that put money into people's hands now and propped up the economy through spending. People don't understand that when they factor in the costs of interest on the amount they borrowed, all of a sudden that $5,000 trip to Europe becomes $5,750 or $6,000 when/if its finally paid off. Same for the boat, kitchen remodel, etc. etc. You're better off saving in advance for those things, instead of borrowing. Have a savings reserve in place, so that when the or dishwaster fails, you have the funds, so you don't have to borrow and pay interest on it later. Worked for my parents...they had two kids and both retired at 58.  Smile

Quoting CasInterest (Reply 7):
The rest of the world(Europe) is not pleased with a lower dollar

I'm sure glad I don't own a small hotel in Europe somewhere. With a strong Euro and a weak dollar, Europeans are coming here, and Americans stay home. So that hotel owner loses...TWICE!

Quoting AndesSMF (Reply 13):
That this shit was allowed to happen for so long is a damn shame.

Banks and other financial institutions that just lent money to people who had no chance of paying it back are just as guilty as those who signed up for a loan without understanding the terms of the loan, i.e. variable rate and what can happen to their payments if rates adjust upwards.


User currently offlineThreeIfByAir From United States of America, joined Aug 2007, 705 posts, RR: 1
Reply 18, posted (6 years 11 months 3 weeks 2 days 22 hours ago) and read 1207 times:

Disappointing news, but not at all unexpected.

We are going to see some serious moral hazard issues if these cuts keep coming. It is bad enough right now.

What I really don't like about these cuts is that they punish the Americans who actually save some money and live within their means. My 4.75% APY online savings account with WaMu better not decline again. I'm hoping WaMu's (serious) pain will continue to be my gain. Even with the Fed's cuts so far, that account has only dropped .25 so far. WaMu needs the deposits badly, I think, and they are a whole lot cheaper than the preferred stock they are planning to issue.


User currently offlineAndesSMF From , joined Dec 1969, posts, RR:
Reply 19, posted (6 years 11 months 3 weeks 2 days 21 hours ago) and read 1199 times:



Quoting ThreeIfByAir (Reply 18):
What I really don't like about these cuts is that they punish the Americans who actually save some money and live within their means

Bingo!

For a healthy society, you have to punish the wrongdoers and reward the producers. This is the reverse.


User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 20, posted (6 years 11 months 3 weeks 2 days 21 hours ago) and read 1191 times:



Quoting ThreeIfByAir (Reply 18):
What I really don't like about these cuts is that they punish the Americans who actually save some money and live within their means. My 4.75% APY online savings account with WaMu better not decline again. I'm hoping WaMu's (serious) pain will continue to be my gain. Even with the Fed's cuts so far, that account has only dropped .25 so far. WaMu needs the deposits badly, I think, and they are a whole lot cheaper than the preferred stock they are planning to issue.

I am currently rebalancing my Mutual fund with my heloc. Might as well pay off the higher interest loan with the lower interest savings.

Quoting N174UA (Reply 17):
But that's the whole problem....that's what got us to where we're at now! Loose credit guidelines that put money into people's hands now and propped up the economy through spending.

Correct...... to a point. But remember not all Non Qaualifiend lendee's are the same. Some are college studernts or otherwise just graduated, that have low credit scores. Others are folks who have always rented and hoped to own. In Other words, there is a whole gammit of folks who have never purchased a new home... who acutally become more so, or fully qualified to do so under the fed's rate cut.

Not only do some people get allowed to keep a home they could't preiviosly afford: but others who couldn't afford a home whithout the credit, but who had the cash, they can now purchase. It is a highly fickle and delicate ax that the fed swings.


Make no mistake, the US Fed cares more for the US economy than the world economy. They will easily tank the short term dollar strength for the long tern US economic gain..

The item that particularly irates the rest of the world and even the US is that China and India have pegged to the dollar. It does the whole world no good service to have 40% of the wordl population, serving less than 20%. -



Older than I just was ,and younger than I will soo be.
User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 21, posted (6 years 11 months 3 weeks 2 days 10 hours ago) and read 1162 times:

Here are a few points as I see it:

1. Yesterdays cut will delay, but not prevent the inevitable, which is a severe recession if not an outright depression. Maybe that's been the tactic all along: delay, delay, delay. But it cannot and will not be put off indefinitely as some hope. The longer it gets put off, the harder we will (eventually) be blindsided with it.

2. Any way you look at it, the party is over. The fundamentals were never there to begin with. For the last ten years, our entire economy has been propped up with nonexistant money that was "created" out of thin air: A speculative bubble that was feeding on itself; homeowners refinancing over and over and over and over on the runup of their home values. That was the money that was used to buy everything from jacuzzis to Ipods to new kitchen cabinets to snazzy SUV's.

Well now that home price appreciation has essentially stopped and in some cases is declining, how are those 'habits' (read: the economy) going to be supported now? Not only are many of these folks up to their eyebrows in debt, but there is no more equity to tap into. Because all of these loans were sliced and diced into an alphabet soup of 'securities', of which ownership is now an amorphous blob, who in their right mind is going to buy them now? Anyone who owns them (which means investors and bankers worldwide) are stuck holding the bag with piles of worthless paper. Once bitten, twice shy. Who's to say that this can't or won't lead to WWIII? If China, for example, were to decide and call the margins it's owed, and America stomps its foot down and says "we can't pay", and China comes back and says "well you owe us. We DEMAND it". More foot stomping, and the next thing you know, the missiles are flying. Granted, this is a pretty remote worst-case scenario. But I do think it is possible nonetheless, no matter how remote the odds.

3. The Stock Market: Although I have no information or proof besides a strong gut feeling, I am convinced that there is a whole lot of manipulation going on and the entire show being controlled by a handful of traders who are playing everyone else like a fiddle: Run it up one day, take it down the next, run it up, take it down, and so on, all making a killing along the way and laughing all the way to the bank. Seems strange that it is perpetually stuck in the range of never going (or staying) above 14,000 or below 13,000. If a Democrat wins the White House next year, I can almost guranatee you that two things will happen: One is that the Dow will plunge about 4000 points. The other is that you will see a raid on Wall Street, kind of like the Immigration Raids you hear about from time to time looking for illegal aliens. Only this time, you'll see a bus full of shiny suits getting dragged off to prison.

4. I absolutely, 100%, no questions asked believe that there is a money trail between Bernanke and Wall Street. If the scenario described in above #3 plays out, I'd bet both testicles that our Fed Chairman will be one of the ones wearing shackles.

5. It's only a matter of time before you start seeing 1930's style runs on banks. The bad news is that there is not enough money out there to cover everyones deposits. Likewise, even with FDIC insurance in place covering everyone up to 100K, that too would become insolvent should it actually be needed. The good news is that, thanks to negative savings, most people being in debt up to their necks as well as Offset Laws, few people will actually HAVE anything to pull. This is why it's NEVER a good idea to have a loan and a savings account at the same bank. However, with todays trend towards "one stop" shopping and "everything in one place", account separation is probably the exception more than the rule. The person who has little or no debt, lives within their means, and pays for things in cash...in short...todays "losers" who don't rely on one-upping one another with material goods....will eventually be the winners and the ones who escape with little or no pain.

6. Recession is treated as a dirty four-letter word. But our economy has been predicated on the premise and expectation of indefinite and perpetual growth. Obviously that is just not sustainable and even though there are many out there who would lie, cheat, and murder to stave off a recession, a recession is EXACTLY what's needed. Maybe when we finally find bankers and traders splatted on sidewalks and hanging from chandaliers, sanity and common sense will finally return to the markets. And the fleecing of the rest of us will finally come to an end.


User currently offlineCasInterest From United States of America, joined Feb 2005, 4751 posts, RR: 3
Reply 22, posted (6 years 11 months 3 weeks 2 days 9 hours ago) and read 1156 times:



Quoting Matt D (Reply 21):
which is a severe recession if not an outright depression

Doubtful, The economy is still going strong.

Quoting Matt D (Reply 21):
. Any way you look at it, the party is over. The fundamentals were never there to begin with. For the last ten years, our entire economy has been propped up with nonexistant money that was "created" out of thin air

All Money is created out of thin air. There is no gold standard anymore. It is based on value and security.

Quoting Matt D (Reply 21):
3. The Stock Market

The undelying economy is still strong and consumers are spending. the dollar's drop in value is actually decreasing the trade debt and increasing US product demand oversees.

Quoting Matt D (Reply 21):
4. I absolutely, 100%, no questions asked believe that there is a money trail between Bernanke and Wall Street. If the scenario described in above #3 plays out, I'd bet both testicles that our Fed Chairman will be one of the ones wearing shackles.

Why run on the banks? We live in a cashless society of credit.



Ridiculous. The tie between Wall Street and Bernake is related to the underlying strength in the Economy.

Quoting Matt D (Reply 21):
It's only a matter of time before you start seeing 1930's style runs on banks



Quoting Matt D (Reply 21):
6. Recession is treated as a dirty four-letter word.

Recession and Inflation are natural parts of the economic cycle. Inflation always follows recession just as recession always follows inflation.



Older than I just was ,and younger than I will soo be.
User currently offlineAGM100 From United States of America, joined Dec 2003, 5407 posts, RR: 17
Reply 23, posted (6 years 11 months 3 weeks 2 days 9 hours ago) and read 1147 times:

OK.. Moving back up people ... should have bought more yesterday. Fed Ex is taking a nice move up .. good news . GOOG may move over 750.00 now ...

Who needs casinos when you have stocks !



You dig the hole .. I fill the hole . 100% employment !
User currently offlineMatt D From United States of America, joined Nov 1999, 9502 posts, RR: 47
Reply 24, posted (6 years 11 months 3 weeks 2 days 9 hours ago) and read 1147 times:

Quoting CasInterest (Reply 22):
Doubtful, The economy is still going strong.

Based on what? Lines at Wal-Mart?

Quoting CasInterest (Reply 22):
All Money is created out of thin air. There is no gold standard anymore. It is based on value and security.

Agreed. I should've been more clear on that point. But that aside, where is the money to support the economy going to come from this time? It's not going to come from overseas. Not after the way we screwed them over. Or is Fed & Co just going to crank out the ol' Xerox machine? Is the day soon coming where, in order to fill your pocket at the supermarket when you leave, you better arrive pushing a wheelbarrow?

Something is only worth what someone is willing to pay for it. You can sit there and swear up and down that your two bedroom house is worth a million dollars. But guess what? If no one willing (or able) to pay that, then it's NOT worth a million dollars. And as for "extending credit" to fund such a purchase, sooner or later those bills WILL come due. SOMEONE will need to pay. The idea of keeping the economy going "at all costs" is EXACTLY what landed us in this mess in the first place.

Quoting CasInterest (Reply 22):
The undelying economy is still strong and consumers are spending. the dollar's drop in value is actually decreasing the trade debt and increasing US product demand oversees.

That would be fantastic if we actually manufactured anything besides mediocre cars, YouTube videos, and press releases. Next?

Quoting CasInterest (Reply 22):
Why run on the banks? We live in a cashless society of credit.

That's not totally true. Don't confuse your plastic card and E-Z Pass keychain or pixels on a screen with actual wealth. Credit cards can be maxed out. Savings Accounts exhausted. But good ol paper currency is still a foolproof, guaranteed way to complete a transaction, no matter how much of it you need. Besides, if (or when) banks start collapsing under the weight of their own debt and credit, those cards won't be worth the plastic they're made of. More to the point: Good luck using a Washington Mutual issued credit card to buy groceries ( a problem in and of itself) if Washington Mutual were to go under.

Quoting CasInterest (Reply 22):
Ridiculous. The tie between Wall Street and Bernake is related to the underlying strength in the Economy.

Again I ask: Where is the strength? When it now takes two people to earn same lifestyle it took one person just a generation ago, SOMETHING is amiss. You can show me the charts and graphs all you want, but in the real world, where my food and energy bills are doubling every 18 months (while my salary only goes up about 5% during the same period and my levels of consumption remain unchanged), its very easy to paint a rosy picture when the basics of living are omitted from the equation. And I suspect most will agree.

[Edited 2007-12-12 08:15:52]

25 PPVRA : Inflation is a result of variations of the money supply, which in the case of the U.S. (and most places AFAIK) is the Fed cranking the printing machi
26 CasInterest : Economies got through recession and inflation, it is a natural part of the Economic cycle. It aways occurrs.
27 CasInterest : Where do you live? Detroit? This ecomomy produces tons of value. we have tons of Natural resources. The US dollar is backed by the governement. If it
28 HuskyAviation : This is one of the most patently absurd things I have ever read. The only way you'd get runs on banks is (1) hyper-inflation or (2) a complete and ut
29 Pope : How does that explain Northern Rock in the UK? But that's not a fair comparison. A generation ago conspicuous consumption wasn't the rule. People mad
30 Matt D : If resources are defined as raw materials (i.e shiploads of scrap metal) shipped overseas and sent back to us as finished products counts as "tons of
31 CasInterest : Read my earlier responses. All is the wrong, and failrly ignorant statement. The US produceslservices and complex items in the US, , we import from C
32 Pope : No, we perform the R&D Domestically and then outsource the manufacturing to local facilities for non-domestic markets. The US assembles planes whose
33 Matt D : ...that get reverse engineered overseas then resold here at half price. ...made from parts manufactured everywhere from Japan to Korea to Sweden I'll
34 CasInterest : Only until it is cheaper to produce in the US. The US still produces goods. People still have jobs.
35 Matt D : Explain to me what these goods are. What do we produce here that is A) essential to our day-to day well being and economy in general *AND* B) is NOT
36 HuskyAviation : Inflation running high? How do you figure that? It has been consistently historically low even with oil prices up. Because we have a strong Fed actin
37 Post contains links Pope : But the single point of failure in that argument is that the financial statements prepared in accordance with GAAP accurately reflect the market valu
38 AndesSMF : But part of the problem WAS too much liquidity, too much money chasing too few assets. There is no justification for keeping housing prices up too hi
39 CasInterest : You can still buy stuff made in the US, you just choose not too because it is cheaper to buy the chinese product. Nothing has been 100% outsourced to
40 Post contains images N174UA : I couldn't agree more. Instead of teaching kids how to pass a worthless standardized test, teach them instead how to create and keep a budget, live w
41 Pope : Today I just finished teaching an 8 week Junior Achievement class at a local high school. The HS is ranked in the top 10 h.s. in the country by US Ne
42 AndesSMF : That still applies to some adults, as I am certain that you have encountered those who believe most of the rich got rich by stepping on the backs of
43 Post contains images Aaron747 : Perhaps so, but I think you haven't taken a look at quoted figures for the oil and agricultural subsidies the Chinese government has laid out this la
44 Pope : I'm very aware of Chinese subsidies across all industries. In fact the US government doesn't generally (it made one exception recently) in pursuing c
45 AndesSMF : Japan, circa 1989 to now?
46 Matt D : As long as you don't look at the cost of food, gas, electricity, heating oil, or fuel surcharges, then yes. I agree. Inflation is, or at least has be
47 Post contains links AndesSMF : There are way too many sources for this, but I would begin with this one: http://en.wikipedia.org/wiki/Bubble_%28economics%29 Economic history is lit
48 Aaron747 : This should be the new forum mantra for all those who still have their heads in the sand. Thanks Matt. Bingo buddy. Is it any surprise the media repe
49 CasInterest : Are you honestly this ignorant about how money flows into the US economy? If so, then you have no business spouting your doomsday scenerios. The FED
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