So interest rates on subprimes are frozen for 5 years. Then after 5 years they shoot back up, because surely interest rates will be sky high by then (they CAN’t get any lower!). Ahh, I see. We debase the dollar as much as possible, therefore, wages will probably have to go up (but not in real terms, of course). Therefore, a 50k job today will be earning 100k in 5 years, and that could make the loan affordable when the loans reset. To be continued…
I believe the correct answer is “See Japan in the 1990’s.”
After 5 years Bush will no longer be in office so he couldn’t give a rat’s ass what happens. The president at that time could either deal with the problem, or extend the rate freeze another 5 years so he can make it someone else’s problem (just like this guy did). I will hopefully have liquidated everything by then and be living in Cape Town…
In 5 years, a number of these homes will literally be under water. Out of sight, out of mind. Will the IRS let you write off your home if you donate it to charity as an artificial reef?
Eddie Deezen Wrote: ------------------------------------------------------- > I believe the correct answer is “See Japan in the > 1990’s.” My thoughts exactly. Exhibit A!
> I believe the correct answer is “See Japan in the 1990’s.” Did they bail out people in Japan? Don’t remember. I left there in mid 90s. Anyway, I wonder what Larry Kudlow would say about this. Last time I heard him, I thought he worshiped Bush.
zigy Wrote: ------------------------------------------------------- > > I believe the correct answer is “See Japan in > the 1990’s.” > > Did they bail out people in Japan? Don’t remember. > I left there in mid 90s. > > Anyway, I wonder what Larry Kudlow would say about > this. Last time I heard him, I thought he > worshiped Bush. basically the government looked the other way while banks maintained bad loans on their balance sheet instead of writing them down and taking the loss. Since they held so much impaired assets they were hesitent to lend and inorder to stimulate the economy the central banks cut interest rates to zero. It seems like we have a recipe for disaster in the united states. It would be better in the long run if they just let these mortgages reset. Its bad to have people lose their homes but in the long run a short sharp pain at the beginning is better then drawing it out and letting these structural imbalances continue to build.
>basically the government looked the other way while banks maintained bad loans on their balance sheet instead of writing them down and taking the loss. Since they held so much impaired assets they were hesitent to lend and inorder to stimulate the economy the central banks cut interest rates to zero. Oh, yeah, thanks for refleshiing my memory. I guess then, US is doing both bailing out people, and cutting rates like crazy. So much about mkt economy and small gov. >It would be better in the long run if they just let these mortgages reset. I absolutely agree.
Well, when the loans eventually do reset, the effect will be muted significantly assuming that the loans amortize during the period, although that certainly isn’t a given. At least the government itself isn’t forking over the cash to pay for this crazy scheme. Oh well, I don’t think there’s anyone out there who needs me to tell them that holding on to IO RMBS is a bad trade… I guess it beats default…