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bsrsharma
Participant“we need an “economic crash” to reset our value system and remind people what is most important in life.”
Wow Contraman!
I see political attention focussing on this still incipient crisis. Hillary Clinton shed some crocodile tears on the fate of all the poor borrowers, there were segments on NPR/PBS radio & TV. Even President Bush spoke rationally on the topic – No bailout, no increasing GSE limits/purrchases.
Global liquidity is getting squeezed. Europeans are crying uncle. Their central bank injected $130B to prevent a run. (Fed injected only $10B so far). Since US needs to borrow $2B per day to keep going, this is going to get very expensive soon.
I think this may turn worse than S & L crisis. Significant recession/stagflation seems all but certain. It is starting to look like late 1970s/early ’80s rather than late 80s.
Contraman is going to get his wishes. But it will be very ugly. In the end, he will be liking to retract his wishes!
ParticipantStrong article by an ex-treasury secretary in Reagan administration:
————————————————————–
http://www.counterpunch.org/roberts08082007.htmlUncle Sam, Your Banker Will See You Now …
In the Hole to ChinaBy PAUL CRAIG ROBERTS
Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. It is China’s decision whether it calls in the US ambassador, and delivers the message that there will be no attack on Iran or further war unless the US is prepared to buy back $900 billion in US Treasury bonds and other dollar assets.
The US, of course, has no foreign reserves with which to make the purchase. The impact of such a large sale on US interest rates would wreck the US economy and effectively end Bush’s war-making capability. Moreover, other governments would likely follow the Chinese lead, as the main support for the US dollar has been China’s willingness to accumulate them. If the largest holder dumped the dollar, other countries would dump dollars, too.
The value and purchasing power of the US dollar would fall. When hard-pressed Americans went to Wal-Mart to make their purchases, the new prices would make them think they had wandered into Nieman Marcus. Americans would not be able to maintain their current living standard.
Simultaneously, Americans would be hit either with tax increases in order to close a budget deficit that foreigners will no longer finance or with large cuts in income security programs. The only other source of budgetary finance would be for the government to print money to pay its bills. In this event, Americans would experience inflation in addition to higher prices from dollar devaluation.
This is a grim outlook. We got in this position because our leaders are ignorant fools. So are our economists, many of whom are paid shills for some interest group. So are our corporate leaders whose greed gave China power over the US by offshoring the US production of goods and services to China. It was the corporate fat cats who turned US Gross Domestic Product into Chinese imports, and it was the “free trade, free market economists” who egged it on.
How did a people as stupid as Americans get so full of hubris?
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: [email protected]
————————————————————ParticipantStrong article by an ex-treasury secretary in Reagan administration:
————————————————————–
http://www.counterpunch.org/roberts08082007.htmlUncle Sam, Your Banker Will See You Now …
In the Hole to ChinaBy PAUL CRAIG ROBERTS
Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. It is China’s decision whether it calls in the US ambassador, and delivers the message that there will be no attack on Iran or further war unless the US is prepared to buy back $900 billion in US Treasury bonds and other dollar assets.
The US, of course, has no foreign reserves with which to make the purchase. The impact of such a large sale on US interest rates would wreck the US economy and effectively end Bush’s war-making capability. Moreover, other governments would likely follow the Chinese lead, as the main support for the US dollar has been China’s willingness to accumulate them. If the largest holder dumped the dollar, other countries would dump dollars, too.
The value and purchasing power of the US dollar would fall. When hard-pressed Americans went to Wal-Mart to make their purchases, the new prices would make them think they had wandered into Nieman Marcus. Americans would not be able to maintain their current living standard.
Simultaneously, Americans would be hit either with tax increases in order to close a budget deficit that foreigners will no longer finance or with large cuts in income security programs. The only other source of budgetary finance would be for the government to print money to pay its bills. In this event, Americans would experience inflation in addition to higher prices from dollar devaluation.
This is a grim outlook. We got in this position because our leaders are ignorant fools. So are our economists, many of whom are paid shills for some interest group. So are our corporate leaders whose greed gave China power over the US by offshoring the US production of goods and services to China. It was the corporate fat cats who turned US Gross Domestic Product into Chinese imports, and it was the “free trade, free market economists” who egged it on.
How did a people as stupid as Americans get so full of hubris?
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: [email protected]
————————————————————ParticipantStrong article by an ex-treasury secretary in Reagan administration:
————————————————————–
http://www.counterpunch.org/roberts08082007.htmlUncle Sam, Your Banker Will See You Now …
In the Hole to ChinaBy PAUL CRAIG ROBERTS
Early this morning China let the idiots in Washington, and on Wall Street, know that it has them by the short hairs. Two senior spokesmen for the Chinese government observed that China’s considerable holdings of US dollars and Treasury bonds “contributes a great deal to maintaining the position of the dollar as a reserve currency.”
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
If Western financial markets are sufficiently intelligent to comprehend the message, US interest rates will rise regardless of any further action by China. At this point, China does not need to sell a single bond. In an instant, China has made it clear that US interest rates depend on China, not on the Federal Reserve.
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. It is China’s decision whether it calls in the US ambassador, and delivers the message that there will be no attack on Iran or further war unless the US is prepared to buy back $900 billion in US Treasury bonds and other dollar assets.
The US, of course, has no foreign reserves with which to make the purchase. The impact of such a large sale on US interest rates would wreck the US economy and effectively end Bush’s war-making capability. Moreover, other governments would likely follow the Chinese lead, as the main support for the US dollar has been China’s willingness to accumulate them. If the largest holder dumped the dollar, other countries would dump dollars, too.
The value and purchasing power of the US dollar would fall. When hard-pressed Americans went to Wal-Mart to make their purchases, the new prices would make them think they had wandered into Nieman Marcus. Americans would not be able to maintain their current living standard.
Simultaneously, Americans would be hit either with tax increases in order to close a budget deficit that foreigners will no longer finance or with large cuts in income security programs. The only other source of budgetary finance would be for the government to print money to pay its bills. In this event, Americans would experience inflation in addition to higher prices from dollar devaluation.
This is a grim outlook. We got in this position because our leaders are ignorant fools. So are our economists, many of whom are paid shills for some interest group. So are our corporate leaders whose greed gave China power over the US by offshoring the US production of goods and services to China. It was the corporate fat cats who turned US Gross Domestic Product into Chinese imports, and it was the “free trade, free market economists” who egged it on.
How did a people as stupid as Americans get so full of hubris?
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: [email protected]
————————————————————Participant“heated debate”
No need. Follow the facts.
1. 80% or so of homes sold after about 2002 have explosive ARMs. When they reset, the owners have no alternative but sell if they can. Of course, most can’t for money they owe causing foreclosure. REO properties eventually go down in price.
2. Credit crunch means no mortgages of funny kind. Definitely very few Jumbos. Without qualified buyers where is the market? We don’t even have to introduce affordability logic here.
3. If your friends like to just take a walk around they can see “For Sale” signs everywhere. And they are not going away after 3,6,9,…months. Questions?
4. Let them take a look at $/sqft statistics from Sandicor/DataQuick/RealtyTrac etc., It is coming down fast!
5. Population movement. Are people moving in or out of SD? I think it is out. (leaving aside illegals, who can’t buy, at least not right away) What does that do to demand and supply? And prices…
6. Are they not reading about mortgage companies going out of business like dot-coms of 2000? Show them implode-o-meter website. What do they think will happen when most are out of business. Yep, the rates will skyrocket. Just like credit cards.
7. They should read sites like piggington, patrick.net, calculatedRisk etc.,
Participant“heated debate”
No need. Follow the facts.
1. 80% or so of homes sold after about 2002 have explosive ARMs. When they reset, the owners have no alternative but sell if they can. Of course, most can’t for money they owe causing foreclosure. REO properties eventually go down in price.
2. Credit crunch means no mortgages of funny kind. Definitely very few Jumbos. Without qualified buyers where is the market? We don’t even have to introduce affordability logic here.
3. If your friends like to just take a walk around they can see “For Sale” signs everywhere. And they are not going away after 3,6,9,…months. Questions?
4. Let them take a look at $/sqft statistics from Sandicor/DataQuick/RealtyTrac etc., It is coming down fast!
5. Population movement. Are people moving in or out of SD? I think it is out. (leaving aside illegals, who can’t buy, at least not right away) What does that do to demand and supply? And prices…
6. Are they not reading about mortgage companies going out of business like dot-coms of 2000? Show them implode-o-meter website. What do they think will happen when most are out of business. Yep, the rates will skyrocket. Just like credit cards.
7. They should read sites like piggington, patrick.net, calculatedRisk etc.,
Participant“heated debate”
No need. Follow the facts.
1. 80% or so of homes sold after about 2002 have explosive ARMs. When they reset, the owners have no alternative but sell if they can. Of course, most can’t for money they owe causing foreclosure. REO properties eventually go down in price.
2. Credit crunch means no mortgages of funny kind. Definitely very few Jumbos. Without qualified buyers where is the market? We don’t even have to introduce affordability logic here.
3. If your friends like to just take a walk around they can see “For Sale” signs everywhere. And they are not going away after 3,6,9,…months. Questions?
4. Let them take a look at $/sqft statistics from Sandicor/DataQuick/RealtyTrac etc., It is coming down fast!
5. Population movement. Are people moving in or out of SD? I think it is out. (leaving aside illegals, who can’t buy, at least not right away) What does that do to demand and supply? And prices…
6. Are they not reading about mortgage companies going out of business like dot-coms of 2000? Show them implode-o-meter website. What do they think will happen when most are out of business. Yep, the rates will skyrocket. Just like credit cards.
7. They should read sites like piggington, patrick.net, calculatedRisk etc.,
Participant“I doubt that China would take this route”
I think if you read the main story carefully, you can see that China wants to achieve its ends, not by any action but by the threat of action. I think it is indicative of their relative strength (and US weekness) when all China has to do is threaten and the bonds go down. I think that is why that economist in China used the phrase “nuclear option” – not so much to harm as much as merely threatening unimaginable catastrophe. If it causes our treasury and Congress to back off, they have achieved the purpose without moving a finger. Now that is real power. Not dropping bombs.
Participant“I doubt that China would take this route”
I think if you read the main story carefully, you can see that China wants to achieve its ends, not by any action but by the threat of action. I think it is indicative of their relative strength (and US weekness) when all China has to do is threaten and the bonds go down. I think that is why that economist in China used the phrase “nuclear option” – not so much to harm as much as merely threatening unimaginable catastrophe. If it causes our treasury and Congress to back off, they have achieved the purpose without moving a finger. Now that is real power. Not dropping bombs.
Participant“I doubt that China would take this route”
I think if you read the main story carefully, you can see that China wants to achieve its ends, not by any action but by the threat of action. I think it is indicative of their relative strength (and US weekness) when all China has to do is threaten and the bonds go down. I think that is why that economist in China used the phrase “nuclear option” – not so much to harm as much as merely threatening unimaginable catastrophe. If it causes our treasury and Congress to back off, they have achieved the purpose without moving a finger. Now that is real power. Not dropping bombs.
Participant“Comparing San Diego to NYC is a dumb comparison”
I have been to NYC only for a short time. Can some one please explain what is its attraction (to live, not visit). People with right skill can probably make a lot of money. Besides that?
San Diego’s Balboa park area is not too bad to spend free time. There is quite a bit of theatre, music and other cultural stuff going on. TJ is so nearby. LA isn’t too far. What is to complain?
Participant“Comparing San Diego to NYC is a dumb comparison”
I have been to NYC only for a short time. Can some one please explain what is its attraction (to live, not visit). People with right skill can probably make a lot of money. Besides that?
San Diego’s Balboa park area is not too bad to spend free time. There is quite a bit of theatre, music and other cultural stuff going on. TJ is so nearby. LA isn’t too far. What is to complain?
Participant“Comparing San Diego to NYC is a dumb comparison”
I have been to NYC only for a short time. Can some one please explain what is its attraction (to live, not visit). People with right skill can probably make a lot of money. Besides that?
San Diego’s Balboa park area is not too bad to spend free time. There is quite a bit of theatre, music and other cultural stuff going on. TJ is so nearby. LA isn’t too far. What is to complain?
August 8, 2007 at 10:36 AM in reply to: Why are Jumbo loan rates (aka. california loan rates) sky-rocketing #71793Participant“Won’t most if not all home loans in SD be a Jumbo since most people even with 20% down still will be above $417k?”
Only in recent past. Not so pre-bubble. So this is another Tip of the Spear in puncturing (more like bursting) the bubble. No money -> No buyer -> price has to climb down, else the seller will sit on it till time does its job (either by inflation or death).
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