Mortgage Rates Skyrocket [unintended consquences of the bailout]

The economic crisis can’t end until houses stop falling in price, which can’t happen until inventories come back to earth. Higher interest rates and tighter credit mean it will take longer for housing to bottom and for this crisis to end.

I am not going to disagree with your analysis about supply and demand. I will comment however, that we tend to call this an economic crisis, when in fact it is not. It is merely a normal market correction. While we may be headed there, technically we are not in a recession yet. The MSM has been saying we are in a recession since Jan 2008. 10 months later, where is the recession?

This is NOT a normal market correction. lol!

Home prices off 20%. The two largest mortgage holders insolvent. All 5 major investment banks insolvent or converted to bank holding companies. The worlds largest insurer insolvent. Stock markets plunged 40%. A week ago Friday saw the fastest single week fall in the stock market INCLUDING the 1929 stock market crash. Stocks are deep in “crash” territory.

Merely a normal market correct. LOL.

Got anymore good ones like that? I really need the laughs.

Don’t bother studying this crisis. The fact that this is not a normal correction will be painfully obvious to you in time.

Don’t bother studying this crisis. The fact that this is not a normal correction will be painfully obvious to you in time.

Young man, you are proving your ignorance about economics. We are not even in a recession yet, although we may be there shortly. To call this a crisis is to fall prey to the MSM. They want America to think that the world is falling apart, that it is the fault of the Republicans and only Obama will save the world from disaster.

Young man, it is a total shame that you have fallen into the indoctrination trap of the MSM. It is even sadder because you visit this web site and should know how the MSM works by now.

I expect better of Freepers.

That’s a very big “IF” and most likely priced into the interest rate you pay on your mortgage.

It is, to some extent, priced into the mortgage interest rate. On the other hand, since mortgages aren't assumable and since most people sell their houses well before the 30 year term of the mortgage would be up, the market interest rate would generally not fully value the opportunity cost of 30 years worth of interest.

At 7% there is room for rates to go up or down. At 5%, there really wasn't much room for a downside.

To call this a crisis is to fall prey to the MSM.

It is a crisis, but only because the government is 99% guaranteed to fluff things up.

The proper reaction would be to acknowledge that because of various frauds of different degrees in all levels of the marketplace, a lot of companies have accepted money in exchange for promises that they are not going to be able to keep. Those who committed fraud need to be punished and made to pay back whatever can be recovered from them, but people need to recognize that a lot of wealth has been destroyed as a result of market inefficiencies resulting from the fraud, and thus people are going to have to settle for well under 100% recovery.

The government's involvement, unfortunately, will redistribute the losses in ways that will defy any sense of logic, reason, or fairness, and indeed will increase the losses far above what they would otherwise be. It is fundamentally impossible to 'bail out' a pyramid scheme; supporting a pyramid scheme to make it appear solvent will cause some investors to recover who otherwise would not, but only by causing more money to be lost by new investors. While the fraud in the marketplace is more complicated than Ponzi's original schemes, the principles remain the same.

If the government would simply state that those who lost money, lost money, then the market could recover. Unfortunately, the odds of that seem to be just about nil.

Addendum: One issue I haven’t seen mentioned is that the amount of money invested in mortgage-backed securities exceeded the total amount of housing people could afford to buy. Not only were housing prices a bubble, but so were MBS’s. If the amount of money people want to invest in a particular asset class exceeds the natural demand therefor, the market will take those people’s money, but it won’t ultimately pay back anything in excess of the natural demand.

I’m 49 years old and hardly a “young man”.

Indeed, the evil MSM have pulled out the stops to elect Obama and this includes talking down the economy. Unfortunately for us, talking down the economy takes no more than telling the truth about it.

You obviously don’t know the first thing about the structural deficiencies in the real economy. Freepers tend to be more enlightened, studious and aware than the general population, but Freepers suffer from tunnel vision. They often see what they desire to see, not reality.

The economic fundamentals are poor. Debt at every level is massive, and this includes personal debt, corportate debt, bank debt, municipal debt, local government debt, state government debt and federal government debt.

We are currently deleveraging that debt at a breakneck pace. Like I already wrote, we recently had the steepest one-week sell-off of stocks on record INCLUDING the Great Depression. Prices are falling across all asset classes. All of them.

We haven’t seen an “official” recession because the government not only cooks the books, but because the government gave us a $150 BILLION giveaway to mask the recession, and because we are in a war that is being paid for off the books — which is to say, not being paid for at all — to the portion of GDP going to the war effort is being counted while the COST of the war is NOT being counted.

We have been in a recession since last December but the cooked government numbers don’t admit to that fact. Unemployment is higher than 6.5% but the cooked government numbers don’t admit to that fact. Yes, I sound like a conspiracy nut, but the fact is I know the truth and the government doesn’t want you to know the truth.

The government wants you to keep up “consumer confidence” and therefore has been lying to you all along. How many lies have Bernanke and Paulson told in the last few months alone?

Paulson, “Subprime is contained”. He knew it wasn’t.

Paulson, “Housing won’t spread to the rest of the economy”. Yeah, right. Since then unemployment is up, GDP is down, many businesses have gone bankrupt and the stock market has crashed.

Paulson, “If you give me the bazooka, I won’t need to use it” referring to $300 Billion Congressional bailout authorization for Fannie and Freddie. A week later, Fannie and Freddie were Nationalized.

Paulson, “We have to let banks and businesses fail.” A week later AIG got an $85 BILLION bridge loan.

Trying to educate people like you raises my blood pressure through the roof because I assume you are good and I assume you are reasonably knowledgeable but I know you are in denial and you just don’t want to hear the truth about how bad the economy is. You won’t study and learn and read about the structural deficiencies about the economy. All you can do is intentionally stay in denial and then pounce on me when I tell you the truth.

This frustrates me to no end and my attempts to educate people like you are completely futile. So there is no point in my continuing. You are going to believe whatever you want to believe, facts in evidence be damned.

The fact is, you can’t handle the truth. You frustrate the living daylights out of me because you see only what you wish to see, not what truly is.

I’m 49 years old and hardly a “young man”.

You came across as a smart mouthed teen ager.

You obviously don’t know the first thing about the structural deficiencies in the real economy.

As a financial decision maker, I am well aware of the fundamental problems within the economy. I have had to make decisions through 2 tech bubbles, we have had the gas bubble, I am very familiar with the Carter years, have studied the Great Depression and several "panics" in the 1800s. Now we are in the midst of the deflation of the credit bubble and like you said, it is impacting prices across the board, more or less. I never said anything that suggested the basics of the economy are sound. I have said many times that the MSM has blown this way out of proportion, partly to sell a story and partly to help the dems.

We haven’t seen an “official” recession because the government not only cooks the books, but because the government gave us a $150 BILLION giveaway to mask the recession, and because we are in a war that is being paid for off the books — which is to say, not being paid for at all — to the portion of GDP going to the war effort is being counted while the COST of the war is NOT being counted.

We have been in a recession since last December but the cooked government numbers don’t admit to that fact. Unemployment is higher than 6.5% but the cooked government numbers don’t admit to that fact. Yes, I sound like a conspiracy nut, but the fact is I know the truth and the government doesn’t want you to know the truth.

I am not calling you a conspiracy nut, but I would like to see the data that is driving you to this conclusion. Can you provide that please?

Trying to educate people like you raises my blood pressure through the roof because I assume you are good and I assume you are reasonably knowledgeable but I know you are in denial and you just don’t want to hear the truth about how bad the economy is. You won’t study and learn and read about the structural deficiencies about the economy. All you can do is intentionally stay in denial and then pounce on me when I tell you the truth.

No, I pounced on you for laughing at my comment and taking on the talking points of the MSM. You hadn't a clue where I was coming from, and I suspect you still do not. If you want to tell me the truth, please provide the data that says we have been in a recession since December 2007. Also, I know several doctors who can help you with your blood pressure problem.

This frustrates me to no end and my attempts to educate people like you are completely futile. So there is no point in my continuing. You are going to believe whatever you want to believe, facts in evidence be damned.

You are frustrated because you do not know how to construct an argument to make your case. I have just told you how to convince me that things are much worse than I think they are.

The fact is, you can’t handle the truth. You frustrate the living daylights out of me because you see only what you wish to see, not what truly is.

I have taught myself to be driven by data and fact, not by what the MSM wants me to see. If you are frustrated, just think how the presidents of NBC, CBS, ABC, CNN and the NYT must feel about me.

The proper reaction would be to acknowledge that because of various frauds of different degrees in all levels of the marketplace, a lot of companies have accepted money in exchange for promises that they are not going to be able to keep. Those who committed fraud need to be punished and made to pay back whatever can be recovered from them, but people need to recognize that a lot of wealth has been destroyed as a result of market inefficiencies resulting from the fraud, and thus people are going to have to settle for well under 100% recovery.

I agree with virtually all of your post. Those in the gov't that enable this should be held accountable. Those who broke laws should be thrown in the slammer.

The crisis will come if the Fiscal policy of Obama and the dems comes to fruition. Our standard of living will take a huge hit.

Screw it. You and the rest of the conventional wisdom gang aren’t worth the novel I wrote and deleted. Just screw it.

Screw it. You and the rest of the conventional wisdom gang aren’t worth the novel I wrote and deleted. Just screw it.

You just proved my point.