""Ideology and the dollar have to be sacrificed to avoid financial armaggedon"" We can only artificially prop up "the market" for so long, then the bills come due. It's ideology like the above quote that'l insure our financial armageddon is total, and final.
And apparently English grammar is no longer taught at the elementary school level these days, either. Talk about a post that carries a whole lot of IRONY to it . . .
I agree - the market is inflated and artificially propped up. I am disgusted with the current situation. I was annoyed at myself for writing that above quote - but as critical of the fed and the entire system as I am - I can't think of any other alternatives/solutions. What do you suggest? Let things shake out on their own? I believed in that until only recently... I have yet to see any other viable solution. I believe in long term structural changes - but there is a difference between how to build a better soundly engineered house and how to put a fire out that threatens to engulf a house. The house is on fire - it is not time to argue whether we should have used pine 2x4s or steel beams. That discussion occurs after the fire is out.
It seems like the ultimate fire line is property values. Congress will do absoluely anything to maintain property values, I think they fear decreases in property values more than fears of inflation. Young people who cannot afford a new home do not form any sort of constituency. Image a Congressman facing re-election against 100,000s of constituents with cancelled home equity lines (a popular means of financing the kiddies college). Hell hath no fury like suburbanites upside down on their mortgage.
I'll maintain the "fire" metaphor/analogy and ask a simple question: Who sold gasoline to people known for playing with matches? Those same institutions also reaped enormous commisssions from those sales. Many subprime buyers had trouble with paying their cell phones and other bills - yet were given mortgages. Wall Street thought nothing of it because their "formulas" anticipated ever increasing home values - does that make sense? There was an institution once, that had a faulty formula. When reality caught up, the fed feared a "financial armaggedon." That institution was LTCM. How many times larger is the current crisis than LTCM - a single player? As for the current stock market's condition - it makes sense. Since 1980, we have tweaked - several times - how we measure inflation, and also how we measure unemployment. Hence, our GDP and outlook is much rosier than the reality. As a result, the securities markets are also affected. See these charts: http://www.shadowstats.com/alternate_data I think we are experiencing, right now, a 1970s style recession - which is saying, a rather severe recession. Nonetheless, our government tells us otherwise. Maybe we'll come out of this mess by fooling most of the population by avoiding panic - maybe not. Maybe reality gets so brutal, and people notice the disconnect between their daily lives and the government's and Wall Street's outlook. - and they vote in a powerful demagogue. These are unusual times - it's anyones guess. I think all our trading strategies will be put to a severe test. We are in unchartered waters.
Jewing people out of their homes makes no sense. All these banks have to do is re-finance these owners with longer amortized mortgages and have them pay existing mortgage payments instead of re-adjusting higher. Backdoor govt. support giving the ability to re-fi current defaulters is probably why BofA went ahead with the countrywide purchase. Although given BofA's excessive fees and non-competitive retail banking features, I still wonder how they have so many customers.