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« Growing pains | Main | Cash cow »

Nov 23, 2009

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Jim Caserta

Mr Gross, “What a good country or a good squirrel should be doing is stashing away nuts for the winter. The United States is not only not saving nuts, it’s eating the ones left over from the last winter.”

What Mr. Gross fails to state is that it's now winter. A good squirrel does not on net stash nuts in winter, lest he starve. He eats the nuts he had been saving. We will eventually need to 'stash nuts', eat less nuts than we collect, but winter is not the time to try to collect more nuts. The better analogy is that we are eating next year's nuts today.

This statement should have been fleshed out:
"But that could seem like a relatively modest pinch. Alan Levenson, chief economist at T. Rowe Price, estimated that the Treasury’s tab for debt service this year would have been $221 billion higher if it had faced the same interest rates as it did last year."

The reason treasury interest rates were lower in 2009 than 2008 was because of the financial crisis. A large portion of the budget deficit is due to lower tax receipts, also due to the crisis. Magically take away the crisis, and you get higher interest rates...but also less deficit because of higher tax receipts.

Joe Wilson ( NC)

My friend, the other shoe is in the air and racing towards the floor. The IMF says around "half" of the losses from the housing bubble have been either swept under the rug or just plain ol' fashioned lied about and will be revealed soon.

Not too mention the Commercial real estate implosion that is being soft pedaled by the good ol' Gubberment. It's gonna get a little bumpy from here on down. Just hang on till you see the ground and then jump, I saw Bugs Bunny do it one time it worked like a charm.

"but is the United State really facing the default risk of an overextended home-buyer? I don't think so" Perhaps we the (United States Government) should just let them have our house back and pretend it never happened like so many home buyers did. That is the only way out of this one podner, without blood and the gnashing of teeth that is.

Kim

But Bugs had air brakes

Jim Caserta

JW - if you believe CRE will cause another 'crisis' like last summer than the whole premise of the article is flawed. If people fear private borrowers ability to repay, where do they park their money - with the govt. This increases interest rates for private borrowers, and decreases them for the govt. The whole point of the article was the impending budget disaster when interest rates on govt debt go up. I'm bearish on CRE - I can see the near-empty buildings with for lease signs - but that only points towards more temporary govt spending programs to cushion the dramatic drop. Don't fall into the
baselinescenario.com/2009/11/20/government-debt-hysteria
government debt hysteria trap.

Ed Cone

Got a link to that IMF statement on housing losses, Joe?

mick

I have heard rumblings of a coming wave of ARM resets which could well cause some issues yet again. Oddly enough, the program in question was begun in Cally. However, my "source" is unclear how widespread the particular program was on the east coast. Time will tell.

Ed Cone

You can see a reset wave coming on this ancient chart. Much of this stuff, including CRE, has been widely discussed, and (one hopes) priced into the market.

mick

Honestly, at least locally, I think we have seen the bottom. The real question in my mind is how long will we stay here. We really need to establish the "new normal" so we can all move on with our lives. There is much work and recovery to be done. As has been noted here many times.... JOB Creation is the missing link.

If you are able ... it is a great time to buy a house. Of course, there is some gamble there as well particularly at upper ranges. I hope the extension and expansion of the tax credits combined with still low interest rates will create some movement come late winter/spring. We shall see.

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I had three pairs of Air Jordan's in 1985 and the kids either thought I was way too cool or the biggest dork in school.

Air Jordan's weren't cheap them either, but I didn't need short-term borrowings for long-term bonds to finance the transactions.

I worked at the grocery store and saved my money.

Gucci Shoes

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