Does fed print money?
#1
Posted 29 December 2006 - 03:46 PM
It's the illiquidity, stupid !
#2
Posted 29 December 2006 - 03:54 PM
#3
Posted 29 December 2006 - 04:10 PM
Reserve Requirements
http://www.federalre.../reservereq.htm
Unless you think that available cash won't get loaned by banks who want and need to make money, the severe deflation argument isn't a strong one, IMO.
Mark
Mark S Young
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#4
Posted 29 December 2006 - 04:29 PM
Unless you think that available cash won't get loaned by banks who want and need to make money, the severe deflation argument isn't a strong one, IMO.
Mark
Thanks Mark. Of course, banks will not be lending out money, because people will not be able to borrow them.
That is how deflation always happens.
Here is the mechanism of how that can happen. Let's say Fed tomorrow lowers interest rates to 0% potentially allowing homeowners to refinance. Because the house prices are falling, those who are maxed out on home loans (ARM borrowers) will need to bring cash to the bank to be able to refinance. Additionally, the subprime lenders are closing shops, implying that they will not be able to borrow with no down.
Where will a California dude maxed out on house loan bring $200,000 from (20% price or decline) to refinance his house?
It's the illiquidity, stupid !
#5
Posted 29 December 2006 - 04:35 PM
Mark S Young
Wall Street Sentiment
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#6
Posted 29 December 2006 - 04:51 PM
Unless you think that available cash won't get loaned by banks who want and need to make money, the severe deflation argument isn't a strong one, IMO.
Mark
Thanks Mark. Of course, banks will not be lending out money, because people will not be able to borrow them.
That is how deflation always happens.
Here is the mechanism of how that can happen. Let's say Fed tomorrow lowers interest rates to 0% potentially allowing homeowners to refinance. Because the house prices are falling, those who are maxed out on home loans (ARM borrowers) will need to bring cash to the bank to be able to refinance. Additionally, the subprime lenders are closing shops, implying that they will not be able to borrow with no down.
Where will a California dude maxed out on house loan bring $200,000 from (20% price or decline) to refinance his house?
Greed is more powerful than fear.
#7
Posted 29 December 2006 - 05:07 PM
Greed is more powerful than fear.
Lol, you haven't been adequately frightened yet!!
(I am thinking tiny marbles withdrawn into your body )
#8
Posted 29 December 2006 - 05:13 PM
Greed is more powerful than fear.
Lol, you haven't been <a href="http://www.google.co...uately&spell=1" target="_blank"></a>adequately frightened yet!!
(I am thinking tiny marbles withdrawn into your body )
If fear was more powerful than greed, we wouldn't have criminals, or those willing to speculate .
Hence greed is always more powerful than fear. There will always be someone willing to do sub prime mortgages as long as $ is available.