Growing fears credit boom may implode

[hegemony]

http://news.ft.com/cms/s/5b00c6ae-93fc-11d...000e2511c8.html

[frenchlover]

how does that affect ME???

[hegemony]

how does that affect ME???

<{POST_SNAPBACK}>

WHY IS IT ALL ABOUT "ME???"

 

one word why it matters: contagion

Edited March 15, 2005 by hegemony

[Izmunuti]

Here's another depressing one:

 

http://money.cnn.com/2005/03/11/commentary...hbone/index.htm

 

 

It's looking like the late 2000's are shaping up to resemble the late 1970's. Woohoo! The upside is I'll be able to get 13% in my checking account again!

 

Iz

[maporsche]

The upside is I'll be able to get 13% in my checking account again!

 

Iz

<{POST_SNAPBACK}>

 

 

Hopefully we won't see the same tax brackets as we saw then (up to 70%).

[sc628]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas" Canada, Mexico, South America and America. Sort of like the Euro I think it is supposed to be called the Amero.

 

www.infowars.com

www.prisonplanet.com

sc

[hegemony]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.  Sort of like the Euro I think it is supposed to be called the Amero. 

 

 

sc

<{POST_SNAPBACK}>

where's the black helicopter????

[radi8]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.  Sort of like the Euro I think it is supposed to be called the Amero. 

 

 

sc

<{POST_SNAPBACK}>

where's the black helicopter????

<{POST_SNAPBACK}>

 

 

It's been whisked off to a secret military base.

[TxQuiltGirl]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.  Sort of like the Euro I think it is supposed to be called the Amero. 

 

 

sc

<{POST_SNAPBACK}>

where's the black helicopter????

<{POST_SNAPBACK}>

 

 

It's been whisked off to a secret military base.

<{POST_SNAPBACK}>

 

Shhhhhhhhhhh ... you're not supposed to TELL!!!!

[JerseyBaby]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.

<{POST_SNAPBACK}>

Dang! All this time I thought it was going to be the Aliens that brought about economic collapse. Now you're telling me it's illigal aliens?

 

I'm suddenly feeling that urge to start building a bunker in my backyard again. Anybody know where I can get a good deal on canned ham and Sterno?

 

[radi8]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.

<{POST_SNAPBACK}>

Dang! All this time I thought it was going to be the Aliens that brought about economic collapse. Now you're telling me it's illigal aliens?

 

I'm suddenly feeling that urge to start building a bunker in my backyard again. Anybody know where I can get a good deal on canned ham and Sterno?

 

<{POST_SNAPBACK}>

 

Jersey, I'm surprised at you.

Didn't you save your bunker from last time, back when the Germans were in cahoots with the Feds, setting up concentration er- reeducation camps for us to be ushered off to?

 

 

 

I'll loan you a couple boxes of 12G shells, if you need them.

The kind without RFID tags.

[JerseyBaby]

Jersey, I'm surprised at you.

Didn't you save your bunker from last time, back when the Germans were in cahoots with the Feds, setting up concentration  er- reeducation camps for us to be ushered off to?

<{POST_SNAPBACK}>

Yeah, Radi, that bunker's still there.

 

Unfortunately I filled it up with Barbie dolls and the mummified body of Jimmy Hoffa I bought on ebay last year.

 

Edited March 25, 2005 by JerseyBaby

[soldiergurl74]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.  Sort of like the Euro I think it is supposed to be called the Amero. 

 

 

sc

<{POST_SNAPBACK}>

where's the black helicopter????

<{POST_SNAPBACK}>

 

 

That's what I'm saying... where is the hilo?

[JerseyBaby]

where's the black helicopter????

<{POST_SNAPBACK}>

That's what I'm saying... where is the hilo?

<{POST_SNAPBACK}>

The UN has a little cash crunch.

 

They sold all the helicopters to Donald Trump to ferry gamblers up and down the east coast.

[Gingerly]

This article made me think of your topic title, Heg, so I figured I'd post it here...

 

Higher mortgage rates to bite

 

Impact of higher home loan rates could be felt far and wide across the United States -- soon.

April 7, 2005: 2:39 PM EDT

By Chris Isidore, CNN/Money senior writer

 

NEW YORK (CNN/Money) - Whether or not rising mortgage rates cool the housing market, they're going to put a multi-billion-dollar dent in consumer spending -- and soon.

 

That could have big implications not just for housing, but for U.S. economic growth, economists said.

 

Mortgage debt now stands at record levels, having risen $1 trillion last year alone, and dwarfing other types of consumer debt, like credit cards. Homeowners have turned the equity they have in their homes into a virtual ATM, supplementing their household income through additional mortgage borrowing.

 

Mortgage rates are still relatively low -- about 6 percent for a 30-year fixed loan, according to financing firm Freddie Mac. But that's up almost a half a percentage point from just two months ago, and further increases are expected throughout the year by most economists. Mortgage rates are generally pegged to bond yields, such as the benchmark 10-year Treasury.

 

Rising interest rates will not only raise monthly payments on millions of loans. It could close that ATM for many households unwilling to refinance again at higher rates. And without that ready source of cash, there will be less money to spend on everything from clothing to appliances.

 

Refinancing home loans has put an extra $300 billion a year in consumers' pockets in recent years, according to economists. Refinancing homeowners took the opportunity to borrow extra money to pay off credit-card debt, remodel or stock up on big screen TVs, dishwashers and other stuff.

 

That source of funds was crucial to supporting consumer spending, which stayed surprisingly strong despite a mostly weak job market the last four years, according to economists.

 

"It's a big number, it's about 4 percent of personal income," said Richard Brown, chief economist for the Federal Deposit Insurance Corp.

 

Such a large hit to income is almost certain to dent spending, which fuels more than two-thirds of the nation's economy.

 

Higher interest costs for many

Most home loan refis were at fixed rates, meaning homeowners don't have to worry about rising rates hitting their mortgage payments. But as rates started rising, refinancing dropped to less than half the levels seen at the peak in late 2002 and early 2003.

 

And with the refinancing "ATM" closing down, a record number of homeowners turned to home equity lines of credit to tap into the value of their homes. But unlike fixed-rate home loans, home equity lines have seen some of the steepest increases in rates since last June.

 

The amount Americans owe on home equity lines of credit jumped to about $491 billion at the end of 2004, up 42 percent from a year earlier, and more than triple the amount at the end of 2000.

 

Home equity lines are usually tied to the prime rate, which in turn moves in lock step with the federal funds rate, which the Federal Reserve has boosted seven times starting last June.

 

That means just the last two quarter-point hikes by the Fed will cost home equity borrowers about $2.5 billion more in interest this year. And most economists expect at least another full-point increase by the Fed this year, meaning another $5 billion in debt service for those consumers.

 

Growth of variable rate mortgages

While most home refis were at fixed rates, there are enough variable-rate mortgages out there -- just less than 20 percent of the $7.2 trillion in total mortgage loans outstanding -- for rising rates to be felt there as well.

 

Not all of the $1.4 trillion in variable-rate mortgages adjust every year. But a 1 percentage point rise in rates on only half of that loan portfolio would mean about $7 billion more in interest costs to those borrowers.

 

Many people with variable-rate loans used them because their income or credit ratings weren't strong enough to get a fixed-rate loan. While wealthier households might be able to absorb higher financing costs, people with variable-rate mortgages are probably on tighter budgets -- meaning they could be forced to cut back on their spending.

 

And with rising rates, the popularity of variable-rate mortgages are growing. Just above a third of the $2.6 trillion in mortgage loans written last year were at variable rates.

 

Slowdown soon?

Rising rates should start to hit consumer spending in a big way by this summer, according to economists.

 

"We definitely have to figure that once tax filing season is done and tax refunds are cashed, we do expect consumer spending will slow down in the second half of this year," said John Silvia, chief economist for Wachovia Securities. "I don't see any way to fudge that (higher financing costs). You're not getting the employment gains or wage and income gains to offset that."

 

Some economists said rising rates could force more belt-tightening for consumers than even record gasoline prices.

 

"People have gotten used to the fact that gas prices come and go," said Bob Brusca of FAO Economics. "If energy prices turn around, the impact will go the other way just as quickly. But the problem is the debt isn't going to go away."

 

To see how the real estate market affects you, click here.

 

For more on the Fed and rates, click here. 

 

 

 

 

 

Find this article at:

http://money.cnn.com/2005/04/07/news/econo...dex.htm?cnn=yes 

[Clarkfan2]

Just remember that in the 70's when people were getting 13%interest in checking,mma et all they were having 12% inflation rates. Consumer car loans of 15-18% were not uncommon at all. Nobody wins in a hyper inflationary economy except those who borrowed and locked in low interest rates. Now is the time to be locking rates if you haven't.

 

 

Clark

[tootie357]

i still dont understand it all. if no one is spending what happens to the economy? also, how long did this last in the 70s? when i bought my first house, i had an arm and my interest rate was 6.9 i guess that was a good thing.

[Izmunuti]

i still dont understand it all. if no one is spending what happens to the economy? also, how long did this last in the 70s? when i bought my first house, i had an arm and my interest rate was 6.9 i guess that was a good thing.

<{POST_SNAPBACK}>

 

It was the worst in 1979-1981 with double-digit inflation. People thought it was going to get even worse so prices for things like gold and silver went crazy. The price of gold almost reached $900/ounce in 1980. That's almost $2100/ounce in today's dollars!

 

Iz

[hegemony]

deinflation is also still possible

[flacorps]

Just a little blast from the past ... heg keeps us apprised of what's coming ... sometimes more than 3 years ahead of time.

[Kevin20]

Just a little blast from the past ... heg keeps us apprised of what's coming ... sometimes more than 3 years ahead of time.

 

 

I don't see that article as very relevant to what has actually happened, though they started to get close to the fringes when talking about pricing of risk. It's kind of funny looking at this stuff in hindsight. Lots of people were getting vaguely nervous because of this or that, but I don't recall anyone coming close to foretelling the systemic problem resulting from the linkage of housing prices, mortgage resets, mortgage-backed bonds, credit default swaps, investment banks and regular banks, oh my!

[radi8]

I don't recall anyone coming close to foretelling the systemic problem resulting from the linkage of housing prices, mortgage resets, mortgage-backed bonds, credit default swaps, investment banks and regular banks, oh my!

 

They got an involuntary ride on a black helicopter before they could open their mouth.

[nwbroke]

how does that affect ME???

<{POST_SNAPBACK}>

WHY IS IT ALL ABOUT "ME???"

 

one word why it matters: contagion

 

 

Sounds like cooties going around!

[nwbroke]

They want to see the dollar collapse, so that they can implement a new currency for the "new Americas"  Canada, Mexico, South America and America.  Sort of like the Euro I think it is supposed to be called the Amero. 

 

 

sc

<{POST_SNAPBACK}>

where's the black helicopter????

 

 

Haven't you seen the Scottrade commercials? The CEO flies a black helicopter.

[Jen23514]

Just a little blast from the past ... heg keeps us apprised of what's coming ... sometimes more than 3 years ahead of time.

 

 

I don't see that article as very relevant to what has actually happened, though they started to get close to the fringes when talking about pricing of risk. It's kind of funny looking at this stuff in hindsight. Lots of people were getting vaguely nervous because of this or that, but I don't recall anyone coming close to foretelling the systemic problem resulting from the linkage of housing prices, mortgage resets, mortgage-backed bonds, credit default swaps, investment banks and regular banks, oh my!

 

then you're not reading The Economist!