Economic and market consequences of FNM/FRE bailout

Quote from Cutten:

Meanwhile, the dollar and US treasuries both plummeted on Friday, handing a nice profit to anyone following the advice in my first post. So much for it being "not a big deal". I hope for your sake you didn't follow your opinion and go long the dollar & bonds.
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again what is the "big deal" or what is the actual news out this week on fnm and FRE? NOTHING< THERE WAS NO NEWS!!!!!

A Lehman note on Fasb 157? a joke article of the NY times? (same paper said buffet was going to buy BSC at $120) or the WSJ article on Thursday that said the Government had a plan just in case a big institution went down?

Are you surprised the market over reacted? FRE was below $4 yesterday and doubled its vaule from the lows and went POSITIVE on the day at one point (ON CRAMER and a joke of a fed rumor). The market does mind pain, it hates and cant price uncertainty
 
from Phil Davis:

According to the WSJ: "The government doesn’t expect the entities to fail and no rescue plan is imminent, these people said. Government officials and market analysts expect both companies will be able to raise large amounts of capital relatively easily. Treasury officials are nonetheless talking about what the government could — or should — do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating."

FNM and FRE hold $5Tn worth of debt, 50% of the US housing market’s total debt. The value destruction of these two agencies forces them to turn to private investors to raise capital, who will pick up the debt literally at 10 cents on the dollar. This is the end game of the land grab that has been executed by the top 1% that I have been warning you about for 3 years and that Thomas Jefferson warned us about 233 years ago when he said: "If the American people ever allow the banking system to control their money, first by inflation, then by deflation; their children will one day wake up homeless on the continent their fathers conquered."

You don’t own your home, you OWE a bank for your home and, for half the people in America, that Bank is ultimately FRE and FNM who were allowed to to grow their outstanding derivatives from $700Bn in 2000 to $5Tn today despite warnings from Greenspan that they were getting to big and an accounting scandal that caused FNM not to file an annual report from 2002 to 2006. As with our last Bush S&L scandal, these institutions were allowed to run wild, INFLATING housing prices with easy lending policies and sucking up the wealth of the nation, which transferred ownership (through lien) onto the books of these two institutions, whose values have now been DEFLATED allowing private wealth to swoop in and take possession of 1/2 of the property in our county, effectively becoming bigger landlords than the kings of foreign lands for 10 cents on the dollar.

http://www.philstockworld.com/2008/07/09/wednesdaywipeout-6/#more-2349
 
Quote from walter4:

from Phil Davis:

According to the WSJ: "The government doesn’t expect the entities to fail and no rescue plan is imminent, these people said. Government officials and market analysts expect both companies will be able to raise large amounts of capital relatively easily. Treasury officials are nonetheless talking about what the government could — or should — do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating."

FNM and FRE hold $5Tn worth of debt, 50% of the US housing market’s total debt. The value destruction of these two agencies forces them to turn to private investors to raise capital, who will pick up the debt literally at 10 cents on the dollar. This is the end game of the land grab that has been executed by the top 1% that I have been warning you about for 3 years and that Thomas Jefferson warned us about 233 years ago when he said: "If the American people ever allow the banking system to control their money, first by inflation, then by deflation; their children will one day wake up homeless on the continent their fathers conquered."

You don’t own your home, you OWE a bank for your home and, for half the people in America, that Bank is ultimately FRE and FNM who were allowed to to grow their outstanding derivatives from $700Bn in 2000 to $5Tn today despite warnings from Greenspan that they were getting to big and an accounting scandal that caused FNM not to file an annual report from 2002 to 2006. As with our last Bush S&L scandal, these institutions were allowed to run wild, INFLATING housing prices with easy lending policies and sucking up the wealth of the nation, which transferred ownership (through lien) onto the books of these two institutions, whose values have now been DEFLATED allowing private wealth to swoop in and take possession of 1/2 of the property in our county, effectively becoming bigger landlords than the kings of foreign lands for 10 cents on the dollar.

http://www.philstockworld.com/2008/07/09/wednesdaywipeout-6/#more-2349
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I'm not clear on how private wealth now owns 1/2 of America's land. The instruments they are buying aren't really mortgages, they're cdo's and siv's and bonds on that debt.
Basically, air.
Are they really buying mortgages outright????
 
Quote from achilles28:

Looks like you need some Remedial 101...

Budget deficits aren't the concern. Inflation is.

FED policy determines interest rates irregardless of deficit spending. The problem then, is money supply. Not deficits.

Even if it were a deficit issue (which its not), inflation is a double-edged sword.

This is the problem with arm-chair economists weighing in with a wikipedia understanding of Neoclassical Theory.

Who cares if Zimbabwae can inflate away their debt if private savings are destroyed in the process??

Why do you suppose oil, commodities and the greenback, are where they are?

What affect do you suppose this has on the aggregate economy; an economy whose GDP is 72% reliant on consumption???

Go ask your Prof and come back with the answers.
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hey if you want to change the question 1/2 way threw the argument be my guest. all your points are well taken. but i was responding to someone telling me i was on crack because the USA does not grow at 6+%. my argument was, who cares that we have a deficit of 3% of gdp, if we are growing at 6%. and while i wish wikipedia was around when i was in college, i did get a degree in economics and mba in taxation, (in all honestly from a real crap school, if my writing ability is any indication ).

and while i don't want to get into a debate about inflation i honestly think a bigger concern is a japan like deflation. housing and banking bubble comming back to bite us.

Yes energy and raw goods have been going up in price. but really what else? i do know that transporting goods around using energy and making chemicals/ plastics and many other things utilizes much raw energy, but salaries are not going up. i went to my accountant this year, and it cost the same as last year, my rent went down this year, my sister has not gotten a raise in 2 years and housing prices are dumping. IMnot saying this will happen, but what if oil is $70 in 2009 and $35 in 2010? will that mean we will have a deflation problem? we all mock CPI and how it takes out food an energy, but there is a good reason to look at the core numbers. yeah, just my thoughts, and really are against the grain of everyone else. but it is something to think about, but i do know people will think im crazy for my though
 
it was a late nite hijack of the thread

back on point..

the US has only a 12% export market and a 70-80% consumption market

since our savings rate is zero, the latest boom (if you want to call it) was completely financed with borrowed money.

since inflation numbers are understated by a factor of 3.. the GDP calculation will come out positive when in actuality, the street level GDP has been negative for years..

our current account (trade and budget) is approaching a trillion per year which is money that has to be printed.

to hide the printing press numbers, the Fed stopped reporting M3 aggregates but there are some sites that calculate it from member bank data..

you're being devalued out of your current and future savings by your government, since the gov. cant balance the books..

see how easy that was?
 

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there is asset deflation happening but the purchasing power of the dollar is dropping along with it.

to counter this, the Fed. is keeping rates well below the inflation rate which is why you're getting screwed out of any return on saved dollars

this isn't lost on the gold market since it is one of the few markets along with oil that is a semi pure hedge to the money press.

and the government is eyeing ways to kill investment in oil, so the places to hide are becoming fewer.

I think that the gov will ultimately impose currency controls to prevent a dollar collapse, but it will eventually collapse anyway..

after all, gold was confiscated in '33 by the Feds. and I have no reason to doubt it will happen again.
 
Quote from daddyeaux:


and the government is eyeing ways to kill investment in oil, so the places to hide are becoming fewer.

I think that the gov will ultimately impose currency controls to prevent a dollar collapse, but it will eventually collapse anyway..

after all, gold was confiscated in '33 by the Feds. and I have no reason to doubt it will happen again.
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it wont happen, but all paulson has t do is pick up the phone and every othr member of the 7 would do there part to push up the dollar as we did in 2000 with the euro.
Everyone saw what happened with Thailand last year, and the USA would be the last to impose currenct controls on the world currency.
 
Quote from daddyeaux:

it was a late nite hijack of the thread

back on point..

the US has only a 12% export market and a 70-80% consumption market

since our savings rate is zero, the latest boom (if you want to call it) was completely financed with borrowed money.

since inflation numbers are understated by a factor of 3.. the GDP calculation will come out positive when in actuality, the street level GDP has been negative for years..

our current account (trade and budget) is approaching a trillion per year which is money that has to be printed.

to hide the printing press numbers, the Fed stopped reporting M3 aggregates but there are some sites that calculate it from member bank data..

you're being devalued out of your current and future savings by your government, since the gov. cant balance the books..

see how easy that was?
More...

Well said. Summed it up pretty good.
 
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