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Silver Wheaton Corp. Message Board

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  • bogfit bogfit Aug 7, 2007 4:14 PM Flag

    THE FEDERAL RESERVE

    "I was looking for FED easing ...". I am probably very similar to the average amercian, not knowing really how serious the housing problem and sub prime mortage is."

    Exactly! You not only don't seem to appreciate the enormity of the housing debacle that is unfolding, but also seem to not understand the actual character of the problem. I've tried several times to explain that 20%-30% of the dollar amount of the mortgages taken out in 2005-2006 represented nothing more than speculative pressure. Back in 2004 I was reading that over 20% of ALL homes sold in Sacramento County that year were sold to speculators. This empty value cannot be recovered by lower Irates, unless you start offering mortgages at 2% or less! And that just ain't going to happen.

    Add to the evaporated market speculation the fact that all previous bubbles over-shoot on the way down and you could easily be looking at declines of 40%-50% in some homes prices from the peak in the most heated of markets. Add in fewer lenders still in business, higher credit requirements, higher mortgage rates, deteriorating comps, resetting ARM's, higher unemployment (housing sector employees), and this is a story that we will be talking about for years.

    You may be right that the Fed will try to soften the blow, but looking at all the negatives a percent or two lower Fed rate won't save our homes, but it will sink the dollar.

    Got gold?
    b.

    .

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    • bogfit... the key as I see it, will be the large number of ARM's that come due around the first quarter of 2008. There's a huge amount of debt out there, and until it gets paid off, an easing of rates would only show weakness in our economy, not a shot in the arm that many think would be just what the doctor ordered. Encouraging more easy credit that's been so abused and the very cause of the problem is no way to make it go away. The bills need to be paid, one way or another, and people who have been lead to believe that the government can give them a free lunch will eventually find there's no more money left. The only reason we live in a free country, is because their freedom has been paid for by the soldiers that gave their lives defending their country from tyranny many years ago. They don't teach that in school anymore. The test always comes first, the lesson always comes later. History always reapeats, but nobody ever learns anything from it. Read Kondratieff and you'll learn the reason why we don't understand what's happening.

    • your preaching to the choir...I know only too well the ramifications of economic disaster which awaits us all.
      I think the links I have posted correctly reflect my view. You took my statement a little too literally, such that most americans are not fully aware of what catastrophic events are already set in motion.

      The markets will shrug off this bad news, it chooses what to ignore and to take into account. Going into a blow-off is like stretching the proverbial rubber band to its limits and then when it snaps, the other extreme will occur. We are seeing this now with housing values in certain areas. We'll experience this with stocks as well.
      Some who are predicting this 2nd depression are advocating staying in cash (some pm's) but mostly cash, (t-bills). Cash would be ok if you bought Swiss francs (which is backed by Gold), but money fleeing into treasuries will be a lost cause, as you stated, when the dollar plunges, what is the point of having U.S. dollar denominated investments if dollar is near worthless paper.

 
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