Thank you to Justin who sent me this Cramer clip and asked the following question:
Cramer: "We need to make housing affordable…we have to keep people in the homes if we’re ever going to stop house price depreciation".
Justin: Uhh.. isn’t the best way to MAKE housing affordable is to let it depreciate?
Justin also asked me, "Cramer says even if you’re not in trouble, this bailout is good for you because it helps sustain your housing price… umm I don’t own a home… how is sustaining an inflated housing price bubble good for ME?"
Beats me Justin. The group of borrowers that will be helped will be too small, and the moral hazard too large for this program to sustain prices anyway. More people will be encouraged not to pay their mortgage, and this will create more problems than it solves. We know, though, that no matter how unproductive the program, taxpayers will get stuck with the bill.
Cramer is wrong. Again.
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Justin is right, Cramer is wrong.
The foreclosures have spurred buying a bit due to more affordable agreed to prices. It will continue and really should continue unencumbered.
I’d rather see a real bottom, not an artificially created one.
o.k……this is for the financial experts out there. i’m just curious (and by no means proposing this as a potential solution). what would the implications be if we just had an across the board 5% interest rate lock for everyone? if you are responsible and are paying more than that, you’d get a little break. if you had bad credit and are paying way more than that, you’d get a big break. and if you can’t afford 5% on what you owe…..then you should’ve never been able to buy it in the first place and those may still loose their homes. i just don’t quite get the whole home value thing? it seems like the monthly payment should be the issue unless the home is an investment. in that case, i don’t really care if you lost 35%. so has everyone that invested in stocks (as opposed to real estate). i own my home (or rather the bank i pay owns it) and really don’t care that it is down 25% (just like i didn’t care when it was up 50%). to me it is a home for my family…..and i see it as a monthly payment…..not an asset that i invested in to make money.
The following is hard to believe becoming reality, but I still think it is worth a read and thinking in a hypothetical sense:
(Long Post!)
“The G-20’s Secret Debt Solution”
…
“First, the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”
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The G-20 may propose devaluing all currencies, including the U.S. dollar and the euro.
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It would be a strategy designed to ease the burden of ALL debts — by simultaneously devaluing ALL currencies … and re-inflating ALL asset prices.[My, wouldn't that make the real estate gurus and flippers happy? -MikeC]
That’s what central banks and governments around the world are going to start talking about this weekend — a new financial order that includes new monetary units that helps to wipe clean the world’s debt ledgers.
It won’t be an easy deal to broker, since the U.S. is the world’s largest debtor. But remember: Debts are now going bad all over the world. So everyone would benefit.
Fed Chairman Ben Bernanke … Treasury Secretary Paulson … President Bush … President-elect Obama … former Fed Chairman Paul Volcker … Warren Buffett … and central bankers and politicians all over the world agree a new monetary system is needed.
So they’ll start hashing out the details to get the new financial architecture deployed as quickly as possible.
If you think I’m crazy or propagating some kind of conspiracy theory, then consider the historical precedent …
To end the Great Depression in 1933 Franklin Roosevelt devalued the dollar via Executive Order #6102, confiscating gold and raising its price 69.3%, effectively kick starting asset reflation.
Only this time, it won’t be just the U.S. that devalues its currency. The world is too interconnected. Instead, the world’s leading countries will propose a simultaneous and universal currency devaluation.
This time, they will NOT confiscate gold. There would be riots all over the globe if they even mentioned the “C” word.
But they don’t have to confiscate gold. Here’s one scenario …
They cease all gold sales and instead, raise the current official central bank price of gold from its booked value of $42.22 an ounce — to a price that monetizes a large enough portion of the world’s outstanding debts.”
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“That way, just like in 1933, the debts become a fraction of re-inflated asset prices (led higher by the gold price).
And this time, instead of staying with the dollar as a reserve currency, the G-20 issues three new monetary units of exchange, each with equal reserve status.
The three currencies will essentially be a new dollar, new euro, and a new pan-Asian currency. (The Chinese yuan may survive as a fourth currency, but it will be linked to a basket of the three new currencies.)
The new fiat monetary units would be worth less than the old ones. For instance, it could take 10 new units of money to buy 1 old dollar or euro.”
http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996
Crazy to consider, to be sure. But interesting to consider nonetheless.
mikec……the only problem with this guy’s idea is what gold would end up being worth. did you see those numbers? IF it happened AND you owned gold……lock your doors and hire security because there’d be an army of new millionaires…..and an even bigger army of those trying to rob the millionaires.
Azsaluki- I’m not defending the guys numbers by any means, and I agree they are way up there.
However, after giving the most outrageous pie-in-the-sky gold numbers, he settles down somewhat closer to Earth with this: “I would not be surprised to see the G-20 monetize at least 20% of the U.S. debt markets. THAT MEANS …Gold would be priced at over $10,000 an ounce.”
So, 15x current prices.
BTW I’ve read so many financial commentaries from the far end of just about every spectrum… I think there should be a law that any financial piece MUST end with that old line from Mr. Ripley himself… “Believe it…or NOT!”