In a nutshell, large numbers of people are having to choose what bills to pay off, and for now they are paying off the high interest rate credit cards, rather than paying their mortgages. The old trick of borrowing against equity to pay bills is no longer an option. One excellent quote?
"The appraised value (of the house) didn't come high enough to consolidate our bills..."
Ouch.
The credit related problems are not just in the mortgage backed securities any more. The riskier class of "asset backed commercial paper" often consists of securitized credit card debt, and any defaults could cause yet another wave of restricted credit.
And while I'm posting today let me offers kudos to Pythagoruz for his August 30 call and chart on the US Dollar. We're not quite in free fall, but it won't be long, in my opinion.
3 comments:
In one sense the weakening US dollar makes investing in the US more attractive since foreigners can get more for their money, so to speak. But on the other hand there is a pretty nasty downtrend in place and any investments in the US will have to outperform that rate of decline to make a profit. The disturbing thing is, I don't see any catalyst on the horizon to support a stronger dollar. What do you think Indi?
Nice post.
I don't see a single thing to support the dollar,at this time. Trade deficits and government deficit spending can only go on for so long.
Combine that with the wholesale printing of dollars that has been going on to pay for the "war on terror", and well, I don't see things getting better any time soon.
And finally, if the Fed reduces rates to save the mortgage issuing banks? That'll be the last straw, in my opinion.
Europe is going through its own round of inflation at the moment and ECB rates will have to rise soon, in order to head off that inflation.
LMAO!
http://finance.yahoo.com/q/bc?s=EURUSD=X&t=1d
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