Bhairitu wrote: >Billions were put into the economy last week to prop it up. The calming >is a result of that. I follow economics a bit and watched Helicopter >Ben Bernanke nervously respond to questioning in front of a Senate >Committee on C-SPAN. Why was he nervous? He was lying through his >teeth and I knew it.
What did he say that was false? Usually, hearings on the Hill involving Federal Reserve personnel take the Fed to task for a too constrictive money supply position, which slows the economy and makes the natives angrier with Congress when the economy tanks. >And printing more money can lead to hyper-inflation like the Wiemar >Republic in the 1930s. And don't forget that the dollar has been >declining in value and it takes more in stock value to make up for the >decline. That's why the market went over 14,000 at one point. The 1980s were a period of inflation-killing Fed policies that used restrictive money supply strategies that led to a deep recession. I don't think the public will now is to prevent inflation. The public wants the 'party' to continue, and the Fed will continue to placate that desire, following its 50 basis point cut in the discount rate last week. >We see the CEO of Countrywide saying today that the subprime debacle may >cause a recession. He would probably like to say "depression" as I'm >sure he thinks that is what it will really happen but if he did he would >cause a panic. As for mortgage lenders, they are experiencing a depression. When the Fed discount rate (the rate it leant money to banks ) was lower than 2%, it was a no brainer to borrow from the Fed, and lend to the public. At the time, mortgages were considered a safe investment, with low default rates for individual mortgage holders. With all the loose lending, the mortgages were bundled, mixing good with bad, and leveraged through investment vehicles like hedge funds, and sold worldwide. It was only 2005 that lenders were widely advertising loans for 125% of the purchase price of a home. Other quirky lending practices : No Documentation Loans (loans for liars). >As for 401K and IRAs I've been rebalancing mine and moving into cash (if >even that will do any good). I like to point out that during the >banking crisis in Argentina in 2000-2001 many people lost their 401K's >and IRAs and they were confiscated. This is a little reported crisis >but there have been some excellent documentaries on it. It was the IMF >that precipitated it and the IMF has been warning the US for the last >two years that it could happen here. If you were to invest your cash position, in which vehicles would you place it ? >So a lot of those monster homes that people bought over the last 10 >years will probably turn into boarding houses and where they can into >apartment complexes if the owners want to hold on to them. That's what >happened in the Great Depression. A thought keeps reminding me of an old maxim: It's best to spend less than you have coming in, anticipate unpleasant events, and act accordingly. >Be wary of stockbrokers too. Most of them have one job: to sell you
