Martin Armstrong update: In the hole & Phase 2 Debt Crisis

[olliescigar]

Quote from DrPepper:

If interest rates remain so low, won't most of those mortgages reset at a lower interest rate, making the monthly payments even lower? If so, how will that lead to another financial crises?

no he mean reset of principal or a complete pay off of all subprime which will likely happen

 

[DrPepper]

Quote from olliescigar:

no he mean reset of principal or a complete pay off of all subprime which will likely happen

My limited understanding of mortgage resets is that the mortgage rate is typically adjusted rather than calling the loan due. In this economic environment, I find it hard to believe that banks will call a note due if the customer is making regular payments.

With mortage resets, I believe that banks can add on an additional 1-2% interest after the introductory 3-5 year term of the mortgage plus adjust the interest rate according to the current one year Treasury Bill (or other interest measures like COFI or LIBOR). Since interest rates are lower than they were a few years ago, it seems that the net mortgage rate should be about the same and not cause a worsening financial crisis.

 

[olliescigar]

Quote from DrPepper:

My limited understanding of mortgage resets is that the mortgage rate is typically adjusted rather than calling the loan due. In this economic environment, I find it hard to believe that banks will call a note due if the customer is making regular payments.

With mortage resets, I believe that banks can add on an additional 1-2% interest after the introductory 3-5 year term of the mortgage plus adjust the interest rate according to the current one year Treasury Bill (or other interest measures like COFI or LIBOR). Since interest rates are lower than they were a few years ago, it seems that the net mortgage rate should be about the same and not cause a worsening financial crisis.

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yes, that is the traditional defintion, but the new paradigm involves what Morganist and I mentioned earlier,

 

[peilthetraveler]

For number 3 that the US debt be switched to coupons that can be used domestically would seriously cause prices to go through the roof. He is basically talking about injecting trillions of dollars of coupons into the economy and you know what domestic items are going to be bought most? Gold...silver...platinum. It will go so high, that gold silver and platinum will be more expensive in the united states than other countries, which will then cause some people to smuggle gold from other countries into the united states which will then cause hoarding. Once that happens the world will be woke up to the fact that coupons and dollars and euros are just paper and the real money is the stuff that is being hoarded. First prices will quickly go through the roof, just like zimababwe, then trading will only be done in gold/silver.

But even if they are not buying gold/silver and they are buying stuff like clothes, houses, cars, or whatever...those prices will go through the roof also just because of demand. $14 trillion dollars is ALOT of demand. Basically what they are talking about doing would turn us into a 3rd world country as US citizens wouldnt have enough money to buy anything.

 

[morganist]

Quote from DrPepper:

If interest rates remain so low, won't most of those mortgages reset at a lower interest rate, making the monthly payments even lower? If so, how will that lead to another financial crises?

it is not necessarily the base rate interest. they have their own due to the credit market system.

 

[morganist]

Quote from DrPepper:

My limited understanding of mortgage resets is that the mortgage rate is typically adjusted rather than calling the loan due. In this economic environment, I find it hard to believe that banks will call a note due if the customer is making regular payments.

With mortage resets, I believe that banks can add on an additional 1-2% interest after the introductory 3-5 year term of the mortgage plus adjust the interest rate according to the current one year Treasury Bill (or other interest measures like COFI or LIBOR). Since interest rates are lower than they were a few years ago, it seems that the net mortgage rate should be about the same and not cause a worsening financial crisis.

it is the opt arm and alt a mortgages.

http://www.wisegeek.com/what-is-a-mortgage-reset.htm

 

[MohdSalleh]

Quote from DrPepper:

I realize that this letter is likely a hoax, but it was interesting. Like the author of the letter, I have been wondering how the US can possibly get out of the current financial predicament given the fact that our current national debt and unfunded future liabilities (social security, medicare, etc.) are literally unpayable.

I had not previously considered his conclusion that the only solution to the current financial crisis is a complete restructuring with a debt for equity swap. Short of default and war, I agree that his solution makes a lot of sense. I just wonder how a debt for equity swap would be structured? For example, what equity would we give to China in exchange for our financial debt to them? We do not own enough gold to pay off our debts. Would we give them millions of acres of national parks or government buildings? What assets does the US government own that could be swapped for our debt to foreign countries?

there wont be war if we default, just that no one will ever lend us money ever again