[sdduuuude]

[quote=davelj]A thought experiment.

You work at a bank. A woman comes to borrow money from the bank. Here are the basics of her financial situation (admittedly incomplete, but in the ballpark):

She earns $140K/year after-tax. She’s a consultant and her job is very stable. In a really bad year her income might dip 5% (as it did recently), but it rarely increases by more than 3% in real terms. But, again, over the long term her income is quite stable. The current outlook is that her income will be basically flat for the next 5-10 years. She has been spending a bit more than her income for the last several years but says that she’s gotten this under control. She has $360K in debt. About half of that – or $180K – is a mortgage fixed at 4.5% for 30 years. She has no equity in her house, however. Although clearly there’s plenty of income to cover the mortgage. The other $180K in debt is a revolving credit line (interest-only) at 4% that matures every five years. The current five year term is up and she’s looking to renew it through your bank.

Now, from a collateral perspective, she doesn’t look too great – not much net worth there. On a cash-flow basis, however, she looks pretty good because her income is very stable and her ability to cover her fixed payments is good. Also, with a little discipline, she should be able to reduce her spending to a break-even level as well.

How do you feel about this borrower from an underwriting perspective?[/quote]

Just one question. If I loan her money, will the Fed backstop the loan ? If so, I’m in.

[sdduuuude]

[quote=davelj]A thought experiment.

You work at a bank. A woman comes to borrow money from the bank. Here are the basics of her financial situation (admittedly incomplete, but in the ballpark):

She earns $140K/year after-tax. She’s a consultant and her job is very stable. In a really bad year her income might dip 5% (as it did recently), but it rarely increases by more than 3% in real terms. But, again, over the long term her income is quite stable. The current outlook is that her income will be basically flat for the next 5-10 years. She has been spending a bit more than her income for the last several years but says that she’s gotten this under control. She has $360K in debt. About half of that – or $180K – is a mortgage fixed at 4.5% for 30 years. She has no equity in her house, however. Although clearly there’s plenty of income to cover the mortgage. The other $180K in debt is a revolving credit line (interest-only) at 4% that matures every five years. The current five year term is up and she’s looking to renew it through your bank.

Now, from a collateral perspective, she doesn’t look too great – not much net worth there. On a cash-flow basis, however, she looks pretty good because her income is very stable and her ability to cover her fixed payments is good. Also, with a little discipline, she should be able to reduce her spending to a break-even level as well.

How do you feel about this borrower from an underwriting perspective?[/quote]

Just one question. If I loan her money, will the Fed backstop the loan ? If so, I’m in.

[sdduuuude]

[quote=davelj]A thought experiment.

You work at a bank. A woman comes to borrow money from the bank. Here are the basics of her financial situation (admittedly incomplete, but in the ballpark):

She earns $140K/year after-tax. She’s a consultant and her job is very stable. In a really bad year her income might dip 5% (as it did recently), but it rarely increases by more than 3% in real terms. But, again, over the long term her income is quite stable. The current outlook is that her income will be basically flat for the next 5-10 years. She has been spending a bit more than her income for the last several years but says that she’s gotten this under control. She has $360K in debt. About half of that – or $180K – is a mortgage fixed at 4.5% for 30 years. She has no equity in her house, however. Although clearly there’s plenty of income to cover the mortgage. The other $180K in debt is a revolving credit line (interest-only) at 4% that matures every five years. The current five year term is up and she’s looking to renew it through your bank.

Now, from a collateral perspective, she doesn’t look too great – not much net worth there. On a cash-flow basis, however, she looks pretty good because her income is very stable and her ability to cover her fixed payments is good. Also, with a little discipline, she should be able to reduce her spending to a break-even level as well.

How do you feel about this borrower from an underwriting perspective?[/quote]

Just one question. If I loan her money, will the Fed backstop the loan ? If so, I’m in.

[sdduuuude]

[quote=davelj]A thought experiment.

You work at a bank. A woman comes to borrow money from the bank. Here are the basics of her financial situation (admittedly incomplete, but in the ballpark):

She earns $140K/year after-tax. She’s a consultant and her job is very stable. In a really bad year her income might dip 5% (as it did recently), but it rarely increases by more than 3% in real terms. But, again, over the long term her income is quite stable. The current outlook is that her income will be basically flat for the next 5-10 years. She has been spending a bit more than her income for the last several years but says that she’s gotten this under control. She has $360K in debt. About half of that – or $180K – is a mortgage fixed at 4.5% for 30 years. She has no equity in her house, however. Although clearly there’s plenty of income to cover the mortgage. The other $180K in debt is a revolving credit line (interest-only) at 4% that matures every five years. The current five year term is up and she’s looking to renew it through your bank.

Now, from a collateral perspective, she doesn’t look too great – not much net worth there. On a cash-flow basis, however, she looks pretty good because her income is very stable and her ability to cover her fixed payments is good. Also, with a little discipline, she should be able to reduce her spending to a break-even level as well.

How do you feel about this borrower from an underwriting perspective?[/quote]

Just one question. If I loan her money, will the Fed backstop the loan ? If so, I’m in.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=Arraya][quote=CA renter]

Which is why QE3 will only make matters worse.[/quote]

Well, it will make some things worse. It certainly won’t fix long term structural problems that absolutely need to be addressed. Though, it does stave off a deflationary collapse. Which, uncontrolled, is the sum of all fears for TPTB – because it would be revolutionary.[/quote]

Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.

I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.

I liken this whole situation to jumping off an elevator that is going up and the top floor of the building is on fire. You have to jump or you’ll burn to death and the sooner you jump (i.e. stop stimulating), the better off you’ll be but you know the landing is gonna hurt. And if you wait, the landing hurts even more.

The more QE’s that we see, the harder it gets to pay those bills.

[sdduuuude]

[quote=Arraya][quote=CA renter]

Which is why QE3 will only make matters worse.[/quote]

Well, it will make some things worse. It certainly won’t fix long term structural problems that absolutely need to be addressed. Though, it does stave off a deflationary collapse. Which, uncontrolled, is the sum of all fears for TPTB – because it would be revolutionary.[/quote]

Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.

I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.

I liken this whole situation to jumping off an elevator that is going up and the top floor of the building is on fire. You have to jump or you’ll burn to death and the sooner you jump (i.e. stop stimulating), the better off you’ll be but you know the landing is gonna hurt. And if you wait, the landing hurts even more.

The more QE’s that we see, the harder it gets to pay those bills.

[sdduuuude]

[quote=Arraya][quote=CA renter]

Which is why QE3 will only make matters worse.[/quote]

Well, it will make some things worse. It certainly won’t fix long term structural problems that absolutely need to be addressed. Though, it does stave off a deflationary collapse. Which, uncontrolled, is the sum of all fears for TPTB – because it would be revolutionary.[/quote]

Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.

I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.

I liken this whole situation to jumping off an elevator that is going up and the top floor of the building is on fire. You have to jump or you’ll burn to death and the sooner you jump (i.e. stop stimulating), the better off you’ll be but you know the landing is gonna hurt. And if you wait, the landing hurts even more.

The more QE’s that we see, the harder it gets to pay those bills.

[sdduuuude]

[quote=Arraya][quote=CA renter]

Which is why QE3 will only make matters worse.[/quote]

Well, it will make some things worse. It certainly won’t fix long term structural problems that absolutely need to be addressed. Though, it does stave off a deflationary collapse. Which, uncontrolled, is the sum of all fears for TPTB – because it would be revolutionary.[/quote]

Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.

I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.

I liken this whole situation to jumping off an elevator that is going up and the top floor of the building is on fire. You have to jump or you’ll burn to death and the sooner you jump (i.e. stop stimulating), the better off you’ll be but you know the landing is gonna hurt. And if you wait, the landing hurts even more.

The more QE’s that we see, the harder it gets to pay those bills.

[sdduuuude]

[quote=Arraya][quote=CA renter]

Which is why QE3 will only make matters worse.[/quote]

Well, it will make some things worse. It certainly won’t fix long term structural problems that absolutely need to be addressed. Though, it does stave off a deflationary collapse. Which, uncontrolled, is the sum of all fears for TPTB – because it would be revolutionary.[/quote]

Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.

I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.

I liken this whole situation to jumping off an elevator that is going up and the top floor of the building is on fire. You have to jump or you’ll burn to death and the sooner you jump (i.e. stop stimulating), the better off you’ll be but you know the landing is gonna hurt. And if you wait, the landing hurts even more.

The more QE’s that we see, the harder it gets to pay those bills.

[sdduuuude]

Sounds like a guy could make ALOT of money with some good Photoshop skills …

[Author]

Posts