Allright as a foreigner I must say that the US government is driving me crazy. For some reason, they are continuing their quest to stimulate consumer spending. After some ten years of excess consumer spending, that is the problem for this crisis and not the solution. What we need is a recession and US citizens to start saving and exporting domestically produced goods. What the government continues to promote is spending (read: going deeper in debt) and consume foreign products. You don’t have to be a genius to know what we need: - higher interest rates leading to reduction of borrowing and reward those who save - falling dollar which reduces the possibility to buy foreign goods and stimulate exporting US goods as global competitiveness is improved Higher government spending, continuously worsening BOP… it’s all making the picture worse and worse. No pain no gain. We all have to start to realise that the economic boom was the real problem, not the recession we are going into.
um,no. this is the prescription when crises happen in the rest of the world.the us consumer is blameless. the asians who save too much are the problem.
Have fun in whatever crappy foreign market you are living in. Recessions can’t be avoided but your ideas for a fix a could be thought out better. America needs (I don’t care what your country needs): -Stable or lower interest rates. Savers don’t create economic growth. The credit markets are as active as the residents of a graveyard…higher rates aren’t going to help anything. -Higher dollar to support economic recovery. I typically like a weak dollar to support exports…but foreign economies are in the toilet, might as well concentrate on domestic strength…US will be in better position to buy up foreign assets and also increase exports (when dollar declines again) when things do finally get better. I do agree that the government needs to cut its spending. I would end SS for all citizens currently under the age of 35 for one.
most of the banking system is not creditworthy to begin with.thats why they arent keen to lend to each other or anyone else. it isnt the interest rates or lack of money. savings dont create economic growth?. you have drunk the kool aid too long to believe more credit is the answer to problems caused by excessive credit.
Less credit is not the answer.
restoring the creditworthiness is the answer then. that doesnt happen by supplying more credit. but no luck, no such thinking seems to have entered the mortgage industry even now.just do a google search. http://www.personalmortgagebrokers.com/nodownpay.php . No money down is a horrible idea even if you have an excellent credit rating.
FINforLIL Wrote: ------------------------------------------------------- > Less credit is not the answer. Please tell me you’re kidding.
I think there’s two different debates going on here. Firstly, increased credit availability has to occur within the realm of loans to corporations and small businesses. Secondly, credit needs to remain more tightly controlled in the consumer sector. I believe that to facilitate this, U.S. consumers will have to curb their consumer expenditures to a more reasonable level and live more within their means. The reasoning is pretty plain here. Obviously consumer spending is paramount to the U.S. economy. It is needed to stimulate growth in boom years and to help pull the economy out of downturns. However, high levels of debt increase the sensitivity of consumers to cyclical downturns and thus causes them to severely limit consumer expenditures in downturns just when it’s needed the most, adding volatility to the business cycle. Decreased consumer leverage and thus lower levels of average expenditure would result in lower growth rates during “normal growth” periods, but would also mitigate the impacts of financial crisis and add overal stability to the economy. I think it’s a simple choice, either remain highly leveraged and experience a volatile business cycle, or lower consumer leverage and add stability at the cost of growth. I don’t believe you can have your cake and eat it too here. On a side note, I believe the solution to ensuring a similar MBS rating induced meltdown does not occur again is pretty simple. First and foremost, we need to eliminate mortgage related GSE’s. Government subsidation of credit through garuntees associated with these entities reduced counterparty surveilance via reduced percieved risks. Many agencies and investors were lulled into a false sense of security due to assumed higher recovery rates due to the government backing of these securities. Any time you involve a government subsidation in any sector risks will result from the modified market equilibrium. Secondly, and perhaps equally importantly, we need to mandate clawback provisions allowing for certain portions of defaults to be born by the entities originating mortgage loans. Much of the current problem arose because loan officers and their firms collected the fees associated with creating the loan, then faced no near term repricussions associated with default. The severe agency risks are not difficult to see here. This lead to lack luster standards in credit review, including these no-document mortgage loans. Clawback provisions will force the proper steps involving a credit check to be taken from the beginning, by spreading risks throughout the system and creating a more cohesive process throughout. These two steps will in no way fix the current crisis, instead they are preventative measures aimed at ensuring this doesn’t rear its ugly head again in 8 years.
MBS would perform better if there was more transparency. A systematic set of processes need to be developed so that the pool of mortgages can be evaluated in a cost effective manner. Most of the problematic debt securities are being unfairly discounted not due to some aspect of their intrinsic value but simply because it is too difficult to determine the true default rates (and probability of such) that affect a pool. This problem is only exacerbated when you extend it out to CDS.
Transparancy isn’t the big problem here. Y ou need good and sensible mortgages and lenders that HAVE to go keep a certain amount of risk on their balance sheet. They now sold their entire risk off to the Wall Street firms who packaged it into MBS’, resulting in lenders that didn’t care if the mortgage made any sense whatsoever. They just had to sell a mortgage, anything to anyone. If you stop that, MBS is a beautiful product as you know your interest is well aligned with that of the lender.
mcpass Wrote: ------------------------------------------------------- > Allright as a foreigner I must say that the US > government is driving me crazy. > > For some reason, they are continuing their quest > to stimulate consumer spending. After some ten > years of excess consumer spending, that is the > problem for this crisis and not the solution. What > we need is a recession and US citizens to start > saving and exporting domestically produced goods. > What the government continues to promote is > spending (read: going deeper in debt) and consume > foreign products. > > You don’t have to be a genius to know what we > need: > > - higher interest rates leading to reduction of > borrowing and reward those who save > - falling dollar which reduces the possibility to > buy foreign goods and stimulate exporting US goods > as global competitiveness is improved > > Higher government spending, continuously worsening > BOP… it’s all making the picture worse and > worse. > > No pain no gain. We all have to start to realise > that the economic boom was the real problem, not > the recession we are going into. the whole fundamentals of the american economy have been f’ed since the mid seventies. its going to be a very painfull adjustment
Dsylexic Wrote: ------------------------------------------------------- > um,no. this is the prescription when crises happen > in the rest of the world.the us consumer is > blameless. the asians who save too much are the > problem. what is the colour of the sky in the world you live in? with some of the posts i read in here I’m surprised that some of you have the audacity to call yourselves analysts.
> the whole fundamentals of the american economy > have been f’ed since the mid seventies. > > its going to be a very painfull adjustment I thought the US looked pretty good in the early eighties but I haven’t got those stats here. I do know that the last six years have been awful and you’re right. It’ll be very painful.
mcpass Wrote: ------------------------------------------------------- > > the whole fundamentals of the american economy > > have been f’ed since the mid seventies. > > > > its going to be a very painfull adjustment > > > I thought the US looked pretty good in the early > eighties but I haven’t got those stats here. I do > know that the last six years have been awful and > you’re right. It’ll be very painful. im talking more about the current account switch, reduction in exports, failure to innovate in the manufacturing sector, reduction in savings rate. the manufacturing sector may not be sexy but it keeps people employed and not everyone has the capacity to be software engineer or professional, etc. on the other hand the development of information technology was nascent in the early eighties and that has had some profound consequences. however, thats lost steam and there hasn’t been any other innovation/technology to replace it yet. my personal feeling is that the last 6 years have just been a bear rally and we are in a secular bear market because we still haven’t really accounted for the excesses of 90’s. im just a pessimist anyway
SeanC Wrote: ------------------------------------------------------- > Dsylexic Wrote: > -------------------------------------------------- > ----- > > um,no. this is the prescription when crises > happen > > in the rest of the world.the us consumer is > > blameless. the asians who save too much are the > > problem. > > what is the colour of the sky in the world you > live in? > > with some of the posts i read in here I’m > surprised that some of you have the audacity to > call yourselves analysts. sar-chasm eh? . read again if you dont get the tone