how does that affect ME???

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

Iz

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

where's the black helicopter????

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

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.

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?

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?

where's the black helicopter????

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

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 

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.

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 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!

WHY IS IT ALL ABOUT "ME???"

one word why it matters: contagion

where's the black helicopter????

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!

Well I read the latest issue telling what already went wrong, does that count?!

Paul Krugman for the New York Times wrote about it and warned about it for the last several YEARS.

and the big 3 automakers.

They are already failing.

They just got money from Congress. The question is whether it will be enough to sustain them through this rough patch, or will they go Ch 11 or sell out first.

Next up to fail: Insurers (MetLife) and the big 3 automakers.

I'm waiting for the 10B dollar hairdresser and day spa bailout legislation.

They're sure to fail.

In thinking through the thought process though, I wonder why banks would be constricting credit lines of A rated customers, especially those that carry balances and strong payment history.

they have been having problems for years competing in a Global Economy. I don't see that changing. So unless some big changes happen within the Big 3, I just don't see them as viable competitors.

They have problems competing domestically, but overseas they do pretty well (except for Chrysler). Worldwide, only BMW is consistently profitable, the rest weathervane a bit (except for Honda, which comes close to BMW's enviable record). I see Tata coming on strong. It looks like we're going to lock the Chinese out of our market and perhaps they wouldn't want to come here anyway. Chery was going to show up with a strong line, but GM hates them with a white-hot passion and I think they have the pull in congress to stop 'em from coming in under their own label, but Chrysler has just inked a deal with them so I imagine they will have a situation where they create a brand for them like Chrysler did for Mitsubishi (Colt) or with Hillman (the Plymouth Cricket).

I've wondered if when all is said and done, the offshore Ford and GM operations may be spun off and freed from the U.S. operations, which then implode.

More likely GM and Ford will pare production here while maintaining the dealer networks through importation of models standardized globally and assembled in say Mexico and Canada if not in a distant country.

Bring on the Opels.

I still say that in 5 years we will see the BK of the Detroit Big 3 - and someone like Wilbur Ross will come in and clean house. It's time to buy TM - it's a bargain at $63.

Paul Krugman for the New York Times wrote about it and warned about it for the last several YEARS.

The bottom line reason is that banks just are not lending money to each other right now. They are hoarding what cash reserves that they have. This is why it is difficult for many people to even get a loan. and why people and businesses with good credit are getting much worse interest rates than in the past.

During World War II, food hoarders were scorned and ridiculed. Why aren't we doing the same today with cash hoarders?

Looks like he did ok.

Pretty sure the Nobel Prize was for work he did 20 years ago when he was still actually a working Economist, not for his recent gig as a political hack.

LOL, ideology makes people so blind that they now ridicule a Nobel laureate. I am pretty sure you are smarter than that, Kevin.

But his slumming and political ranting for the new york times in recent years, so much of it leaving the poor NY Times ombudsmen hemming and hawing about his flagrant lying -- no doubt makes him popular among his elite social circles, but is hardly befitting the dignity of a Nobel winner. I don't get wound up about it, I just think it's unfortunate.