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economic question

Discussion in 'Money Talk$' started by Ps104_33, Mar 1, 2009.

  1. Ps104_33

    Ps104_33 New Member

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    [FONT=times new roman,times]How did a drop of a percent or two in US home prices cause whole countries in Europe to go bankrupt?[/FONT]
     
  2. canadyjd

    canadyjd Active Member

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    I don't think it was a percent or 2, but I'll offer a guess.

    The U.S. is a major consumer of goods from around the world (notice that trade deficeit lately?) and many countries have invested in our treasury bonds.

    So....as the U.S. goes (especially if it's bad economic news) so goes the world.

    peace to you:praying:
     
  3. Ps104_33

    Ps104_33 New Member

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    Actually, according to Enterprise Oversight's quarterly index. Housing prices peaked in the 3rd quarter of 2007. When IndyMac went bust in March 2008, OFHEO's housing index was down just 0.35% from that peak. When Lehman Brothers went bust in September 2008, the index was down 1.94%. Just how fragile are these mortgage-backed derivatives? Housing prices edge down 2%, and your whole institution goes broke? I dont get it.
     
  4. canadyjd

    canadyjd Active Member

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    Well then, you have to wonder if this was a manufactured crisis...now why would anyone manufactor a "crisis" in 2008? hummmm What could be the motivation? hummmmmm

    peace to you:praying:
     
  5. Ps104_33

    Ps104_33 New Member

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    To grab power in 2009?
     
  6. JustChristian

    JustChristian New Member

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    In the last year home prices in many places like California, Florida and Nevada went down by 50%. I wouldn't call that a drop by "a % or 2."
     
  7. Ps104_33

    Ps104_33 New Member

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    But thats just three states out of 50. Hardly a national crisis.
     
  8. KenH

    KenH Active Member

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  9. billwald

    billwald New Member

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    Or the same (sort of) crooks were stealing stuff in Europe as the US.
     
  10. TomVols

    TomVols New Member

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    Bill..ugh.

    Ken's chart is somewhat informative. What is missing is the historical timeline of the Fed interest rates, and it appears that the chart would have you believe that CMO/MBS are relatively new. They aren't really. Also, fear has played a huge role in this. A relatively small number of foreclosures and bank failures have occured. However, fears for the CMO/MBS owners have forced them to bail, sight unseen. That's critical. We still don't know what we don't know. It could be that the situation is not as bad and that there are not as many toxic assets as we think. Or it could be worse. No one will know until these MBO/CMOs are exposed for what they are.

    It's like the grab bag at the county fair. You may have gotten one with an IPOD. Your friend may have gotten one with a Blackberry Curve. But what about the guy who opens his up and finds a busted egg? The next guy isn't so eager to buy, let alone open, his grab bag. It's just not worth the risk. So the money stops flowing into investment markets, and thus the trickle down effect is that the money stops flowing into credit applicants.

    Remember the banks got burned too, thanks to Big Brother's invtervention and the stupidity of the banks themselves.
     
  11. Martin Luther

    Martin Luther New Member

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    MAJOR investments were fixed on growth and only growth. The entire monetary system is doomed to fail. Growth is derived from debt, without debt there would be no money. If that was not bad enough, the federal government is printing money and spending it. This is called borrowing but is in fact a hidden tax called inflation; it steals directly from the value of the money in circulation.
     
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