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Realistbear

Fed: Great Crash 2 To Be Very Prolonged With Tight Credit

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http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

Fed chairman warns on US housing market

By Richard Blackden
Last Updated: 12:48am BST 06/06/2007
# Comment: Ambrose Evans-Pritchard on the global free lunch
The chairman of the US Federal Reserve has warned that the American housing market* will remain in the doldrums for longer than expected as lenders make it
tougher to get mortgages
.
Ben Bernanke said that measures taken by sub-prime mortgage lenders to protect themselves against defaults will ''restrain housing demand, although the magnitude of these effects is difficult to quantify."

"Tougher to get new mortgages." The kind of thing we are hearing from the VIs here.

___________________________________

* http://www.telegraph.co.uk/money/main.jhtm...C-mostviewedbox

Fed chief reignites 'stagflation' fears

By Ambrose Evans-Pritchard
Last Updated: 12:48am BST 06/06/2007
Ben Bernanke, the chairman of the US Federal Reserve, has doused hopes of an interest rate cut in coming months, warning that inflation is still the chief risk to the American economy.
In remarks that sent shivers through Wall Street, Mr Bernanke said the US faced double pressure from a deep housing downturn and "somewhat elevated" levels of core inflation.

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tightening credit is THE cause of the downturn that is starting now in the UK. It is also going to be a downturn most unlike the 89/90 market. Exactly the same is happening in the US - booming economy, low inflation, low unemployment, but a falling housing market.

A falling housing market due to credit tightening is exactly what the economy needs. House price will plummet, but interest rates will not soar. This means that mortgages remain affordable for all and keep spending and the economy going.

property speculators get wiped out financially. House prices drop 30-40% and lenders lend responsibly from now on.

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Guest wrongmove
Fed: Great Crash 2 To Be Very Prolonged With Tight Credit, Merv will have to follow suit as credit crunch strikes

:P

Why do you always have to make the uberbear case look so weak?

Fed says "slowdown will last longer than expected". RB reports "great crash will be very prolonged".

Fed say "nothing at all about BoE", RB reports "Merv will have to follow suit"

Any neutral reading this is going to conclude that the uberbear case is based on exageration and self-delusion and can safely be dismissed. Don't you see that you are harming the cause, not helping it?

Edited by wrongmove

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:P

Why do you always have to make the uberbear case look so weak?

Fed says "slowdown will last longer than expected". RB reports "great crash will be very prolonged".

Fed say "nothing at all about BoE", RB reports "Merv will have to follow suit"

Any neutral reading this is going to conclude that the uberbear case is based on exageration and self-delusion and can safely be dismissed. Don't you see that you are harming the cause, not helping it?

Blah blah blah blah blah.................................. :rolleyes:

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Guest wrongmove
Blah blah blah blah blah.................................. :rolleyes:

:lol:

Oh, that's better - a well reasoned and coherent response to my points! I'll take it that you don't really have a counter argument then. ;)

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:lol:

Oh, that's better - a well reasoned and coherent response to my points! I'll take it that you don't really have a counter argument then. ;)

Blah blah bl;ah blah blah............................

Feeling a bit trollish today are we? :P

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Guest wrongmove
Blah blah bl;ah blah blah............................

Feeling a bit trollish today are we? :P

:rolleyes:

RB, if someone says to you "Your house is falling down", you rush back home to find a tile has fallen off the roof.

The next day, the same guy says "Your wife is seriously injured", you rush home and find she has broken a fingernail.

How much longer do you take that guy seriously?

This is the feeling newbies will get when they click on one of your threads.

If the Fed were calling the current situation a "great crash", and saying it would be "very prolonged", this would be very big news.

In reality, they are calling it a "slowdown", and saying it will last for "somewhat longer than expected".

Speaking to a conference in Cape Town, Mr Bernanke added that the "slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected.''

Preaching to the converted is great fun - they will shout, they will cheer, they will say what a great guy you are. But it has exactly zero effect. Convincing the neutrals is what changes sentiment.

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:rolleyes:

RB, if someone says to you "Your house is falling down", you rush back home to find a tile has fallen off the roof.

The next day, the same guy says "Your wife is seriously injured", you rush home and find she has broken a fingernail.

How much longer do you take that guy seriously?

This is the feeling newbies will get when they click on one of your threads.

If the Fed were calling the current situation a "great crash", and saying it would be "very prolonged", this would be very big news.

In reality, they are calling it a "slowdown", and saying it will last for "somewhat longer than expected".

Preaching to the converted is great fun - they will shout, they will cheer, they will say what a great guy you are. But it has exactly zero effect. Convincing the neutrals is what changes sentiment.

You are taking a very straightforward statement from the Fed and spinning into a meaningless commentary on irrelevant issues. The thread has been moved from a newsworthy comment from Bernanke to a pedantic exercise of micro-parsing and spin.

What Ben said was this:

The chairman of the US Federal Reserve has warned that the American housing market* will remain in the
doldrums
for
longer than expected
as lenders make it
tougher to get mortgages.

Ben Bernanke said that measures taken by sub-prime mortgage lenders to protect themselves against defaults will ''
restrain housing demand
, although the
magnitude of these effects is difficult to quantify
."

1. Its worse than expected.

2. Credit is tightening adding to the prolonged slowdown or "doldrum."

3. The magnitude of the problem is difficult for the Fed to begin to quantify.

4. Housing demand will be restrained.

My comment was this:

"Tougher to get new mortgages." The kind of thing we are hearing from the VIs here.

I quoted the fact that credit tightening was occurring in the US and that the same is occurring here. This has apparently triggered off a nervous "Neither" reaction from you in an apparent attempt to draw attention away from the thrust of the articles posted. As you are not a bear or a bull you have no credibility to lose but I would suggest that your comments on this thread are undermining even you fence sitting status.

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Guest wrongmove

I will ignore the first paragraph - I have spun nothing. I actually pasted the quote from Bernanke directly into my response. Any unbiased reader can see that.

I would agree with points 1-4 you make. They are an unemotional summary of what Bernanke said - pretty damn bearish :) - no need for the mega spin as applied in your thread title. This just detracts from the actual news IMHO. That is my point - you turn decent news into ridiculous exageration and provide the neutrals with an excuse to ignore it.

You are also correct in a way that I am a "nervous neither" - I am nervous that this HP madness will not stop. As I have repeated many, many times, my VI is very much in a crash. I have nothing to gain from rising prices as I rent a flat in the UK and have a daughter who is getting ever closer to home-buying age.

First you call me a troll, then spinning, then an attack of neitherism. These are classic signs of you giving up on the argument and resorting to insult. Not convincing.

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Guest wrongmove

For those who prefer it "straight from the horses mouth", here is Bernanke's speech in full:Remarks by Chairman Ben S. Bernanke

"The Housing Market and Subprime Lending

Over the past four quarters, the U.S. real gross domestic product (GDP) has increased at an average rate of about 2 percent. Growth during the first quarter of this year was held down by some factors--notably, significant declines in inventory accumulation, net exports, and federal defense spending--that seem likely to be at least partially reversed in the near term. Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected. Thus far, however, we have not seen major spillovers from housing onto other sectors of the economy. On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy’s trend rate of expansion.....

..... Developments in the Housing Market

As you know, the downturn in the housing market has been sharp. From their peaks in mid-2005, sales of existing homes have declined more than 10 percent, and sales of new homes have fallen by 30 percent. A leveling-off of sales late last year hinted at a possible stabilization of housing demand; however, once one smoothes through the monthly volatility of the data, more-recent readings indicate that demand weakened further, on net, over the first four months of this year. House prices decelerated sharply last year, following annual gains averaging 9 percent from 2000 to 2005. Prices have continued to be quite soft so far in 2007, although for the most part outright price declines have been concentrated in markets that showed especially large increases in earlier years........."

And some very skeptical comment (about Bernanke's "solutions") here:

Ben Bernanke's Post-Horse Barn Door-Locking Strategy for Real Estate

"Ben Bernanke's June 5, 2007 speech on the real estate market was an exercise in futility.

He did not refer to the obvious: his predecessor's monetary policy, which created a real estate bubble. Instead, he promised new regulatory measures, which are in fact the old measures, which failed to prevent the bubble.

He admitted that the present economic slowdown was heavily dependent on the fall in the real estate market: about one percentage point.

Of course, the adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected. Thus far, however, we have not seen major spillovers from housing onto other sectors of the economy. On average, over coming quarters, we expect the economy to advance at a moderate pace, close to or slightly below the economy's trend rate of expansion.

As expected, we have also seen a gradual ebbing of core inflation, although its level remains somewhat elevated. . . . However, although core inflation seems likely to moderate gradually over time, the risks to this forecast remain to the upside. In particular, the continuing high rate of resource utilization suggests that the level of final demand may still be high relative to the underlying productive capacity of the economy.

But what is causing this price inflation? He did not say. That's because price inflation is a monetary phenomenon, and the FED controls the monetary base. ........

......... There now. Don't you feel confident about the future? There will be lots more of the same. That will fix everything."

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Entirely agree with wrongmove. People are this forum are intelligent enough to draw their own conclusions, or not afraid to ask for help if struggling. If you want to effectively lobby for an end to the current madness, you need a couple of clear concise arguements, not sensationalism.

I've said it before (and posted it on the telegraph 'Brown challenges' blog) - I think point number 1 is to re-balance the tax benefits given to BTL's that are not given to FTB/OO. Secondly, I'd wack up stamp duty (15% above 500k) to put paid to bankers & oligarchs pulling up the whole market from the top.

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