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The point is that the bank's capital is tied up in that house regardless of who sells it ultimately. If I give the bank the house and they can't sell it or find anyone to assume the loan they have a liquidity problem. If they have too many houses default all at once they have a BIG liquidity problem and go belly up. The bigger they are when they fall, the more people get smashed when they fall. Freddie Mac and Fannie Mac were very, very, big.

The only way to fix oversupply is to let prices fall until the market clears.

We are becoming goose-stepping fascists while spouting Marxist slogans. I can't wait to see what's next. That reminds me. I need to apologize to my kids.

I recall listening to a news story out of the US last year about credit card bills. Something about the industry got a law passed that forced people to pay outstanding credit card debt before mortgage payments, and some consumer advocate saying it would have profound impact on the housing sector/economy.

MSimon wrote:

JohnP wrote:If we can dispense with the cocky, shrill, right-wing infoporn and get down to some hard analysis, I would be more interested.

The short form: we are screwed.

The only way to pump money into an economy without increasing inflation is to see that the money goes to producers. The money (most of it) is going to consumers. Expect a large spike in inflation in 12 to 18 months. i.e. just in time for the 2010 election. We are so screwed.

ya tho on the plus side, buy gold, silver, and platinum, it will peak again by then. Oil's tanking hard, wait til it bottoms out then buy oil futures 6-12 months out. I think the bottom is going to be 20-25 a barrel, primarily because US gasoline production is contracted, oil is piling up in tankers and terminals, it will take a long while to work through the backlog without a complete shutdown in production.

MSimon wrote:

The point is that the bank's capital is tied up in that house regardless of who sells it ultimately. If I give the bank the house and they can't sell it or find anyone to assume the loan they have a liquidity problem. If they have too many houses default all at once they have a BIG liquidity problem and go belly up. The bigger they are when they fall, the more people get smashed when they fall. Freddie Mac and Fannie Mac were very, very, big.

The only way to fix oversupply is to let prices fall until the market clears.

Yes, and sales are picking up now that prices have dropped significantly. Amazing how the market works when you let it eh?

choff wrote:I recall listening to a news story out of the US last year about credit card bills. Something about the industry got a law passed that forced people to pay outstanding credit card debt before mortgage payments, and some consumer advocate saying it would have profound impact on the housing sector/economy.

Yes that and the changes in bankruptcy laws that made it harder to declare also is a contributor.

The states need to respond to this by passing homestead statutes like Florida has.

Billy Catringer wrote:We are becoming goose-stepping fascists while spouting Marxist slogans. I can't wait to see what's next. That reminds me. I need to apologize to my kids.

Look up some libertarian summer camps to send them to.

JohnP wrote:

I'll go out on a limb and say, oil consumers are saying 'hooray' and oil producers are feeling some heat. The other question, which few seem to be asking, is, why oil went so high and fell so low? Not on fundamentals. A few made big profits for a while at everyone else's expense, then, suprise! recession already underway is aggravated. Money that could've been spent on other things instead went to feed the oil gods.

Well at risk of being accused of being in the tinfoil hat club, theres evidence piling up that the sovereign wealth funds of a few oil-rich european and middle eastern countries used their wealth through strawman traders to manipulate the oil futures market to bid it insanely high simply to force a collapse of the US economy before the election in order to get Obama elected.

The FTC has been investigating four such funds engaged in these activities.