Thursday, Mar 15, 2007
Fantastic explantion of how CDS led to the extreme end of the boom in the first place
TheStreet.com: Kass: Finding the Next Shoe to Drop
The credit spigot is being turned off. No more cash-out refis. No more cash-back-at-close flips. No more Hummer H2s. No more trips to Greece. No more no-money-down-do-doc-interest-only loans. No more bidding wars on condos. And no more price appreciation on homes.
It's going to be real ugly, real quick.
Posted by lvmreader @ 05:44 AM (166 views) Add Comment
5 Comments
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1. lvmreader said...
This chap also gives a good account: http://housingpanic.blogspot.com/2007/03/given-sheer-size-and-significance-of.html
2. lvmreader said...
What happens when the so-called insurer of the mortgage contracts has gone under itself?
== In Defence of Currency ==
3. dohousescrashinthewoods said...
Can I ask what the significance of the phrase "In Defence of Currency" is?
Why is it so important and aren't governments looking to inflate away debt?
4. lvmreader said...
Have a look at the Argentina articles posted earlier.
http://www.mises.org/story/868
http://www.rcwhalen.com/_articles/barrons_argentinas_failure_could_be_contagious.asp
In some cases deflation helps those wealthy industrialists who have huge debts, but have earnings in other currencies (August Thyssen in the Weimar Republic springs to mind, but any of the folk who eventually ended up bankrolling Hitler fared really well under the collapse of the German Mark).
5. lvmreader said...
What caused the inflation?
Our thesis is simple: The inflation was caused by the government issuing a flood of new money, causing prices to rise. Then, as the inflation gained momentum, events seemed to demand the printing of larger and larger issues of currency. To half the process would have taken political courage, and this was lacking. As usual, the true facts were hidden behind a barrage of excuses, explanations and propaganda laying blame on everyone except the true culprit.
First, it would be wrong to think that everyone was opposed to inflation. Many big business leaders accepted it cheerfully. It wiped out their debts. They knew how to protect themselves and even profit--by speculating in foreign exchange, by converting money into goods and fixed plant, by borrowing money from the bank and using it to buy up cheap stocks and competing companies. Their wage costs, in true value, decreased, swelling their profits. Yet many workers also thought that they were benefiting, at least in the earlier stages of the inflation. Their wages were increased, and it took time before they recognized that, with prices soaring even faster, they were actually suffering a cut in true income.