GG Posted September 29, 2008 Author Posted September 29, 2008 Did you get your foresight from Revelations or common sense? I heard Ron Paul talking about the bailout and making some sense. Oddly, the show discussing his commentary was the Bubba the Love Sponge show. Anyway, Paul is furious over the bailout and thinks it's stupid to do it (I disagree). But then he went on to say what I've seen Forbes and other WSJ commentators saying: the next administration needs to strengthen the dollar. That will be a challenge after we print 700 billion new dollars. It'll be a far bigger challenge if it isn't done. If the traders feared the collapse of the dollar due to the bail out, it would have been reflected in the price already. So far, the Treasuries & US$ have held up and are tracking favorably with the bailout news. The biggest challenge to the long standing health of the $ is Medicare and SS payments in the future.
bills_fan Posted September 29, 2008 Posted September 29, 2008 It'll be a far bigger challenge if it isn't done. If the traders feared the collapse of the dollar due to the bail out, it would have been reflected in the price already. So far, the Treasuries & US$ have held up and are tracking favorably with the bailout news. The biggest challenge to the long standing health of the $ is Medicare and SS payments in the future. True, but the plan really addresses the symptoms, not necessarily the root cause of the problem. The root cause, from a financial perspective only, is falling home values and negative home equity. I, unfortunately, don't see this plan fixing that problem. Time for helicopter drops? We could, of course, inflate our way out of this, but that would cause even more problems. Time may be our only answer, but will it ever be painful.
GG Posted September 29, 2008 Author Posted September 29, 2008 True, but the plan really addresses the symptoms, not necessarily the root cause of the problem. The root cause, from a financial perspective only, is falling home values and negative home equity. I, unfortunately, don't see this plan fixing that problem. Time for helicopter drops? We could, of course, inflate our way out of this, but that would cause even more problems. Time may be our only answer, but will it ever be painful. Agreed. But this is the least painful alternative. Frankly, better use of money and less expensive would be to give home builders cash to stop building for 1 year and demolish half built homes (kind of like paying farmers not to farm)
bills_fan Posted September 29, 2008 Posted September 29, 2008 Agreed. But this is the least painful alternative. Frankly, better use of money and less expensive would be to give home builders cash to stop building for 1 year and demolish half built homes (kind of like paying farmers not to farm) I had not thought of that, not a bad idea!! Home values really need to stabilize and rebound or else this is going to get far worse.
GG Posted September 29, 2008 Author Posted September 29, 2008 I had not thought of that, not a bad idea!! Home values really need to stabilize and rebound or else this is going to get far worse. This would address the root of the problem, but I think it's messier and will lead to more unintended consequences.
TPS Posted September 29, 2008 Posted September 29, 2008 Agreed. But this is the least painful alternative. Frankly, better use of money and less expensive would be to give home builders cash to stop building for 1 year and demolish half built homes (kind of like paying farmers not to farm) That doesn't resolve the problems that current homeowners face, which is the root cause. Read about a program in Philadelphia that requires lenders and borrowers to meet in courts and try to resolve delinquencies and bankruptcies. Something like half to 2/3s get resolved: borrowers get terms they can live with, and it's cheaper than going to bankruptcy court for the banks.
Gavin in Va Beach Posted September 29, 2008 Posted September 29, 2008 I had not thought of that, not a bad idea!! Home values really need to stabilize and rebound fall back and synch back up with wages, rather than stay artifically inflated which forces people to commit too high a % of their income for housing, or else this is going to get far worse. fixed
GG Posted September 29, 2008 Author Posted September 29, 2008 That doesn't resolve the problems that current homeowners face, which is the root cause. Root cause is not having a floor on the home prices, as that's what's causing a free fall in the markets. Limit the new supply of homes and you will get to the supply demand balance much quicker.
TPS Posted September 29, 2008 Posted September 29, 2008 Root cause is not having a floor on the home prices, as that's what's causing a free fall in the markets. Limit the new supply of homes and you will get to the supply demand balance much quicker. you're assuming people are building in those markets now--I don't think that's the case. Haven't new builds been shrinking? Prices are falling because people are being forced to sell unable to make payments or banks have taken the assets and trying to sell.
GG Posted September 29, 2008 Author Posted September 29, 2008 you're assuming people are building in those markets now--I don't think that's the case. Haven't new builds been shrinking? Prices are falling because people are being forced to sell unable to make payments or banks have taken the assets and trying to sell. Most of the affected markets have seen a slowdown in new contruction, yet there are still 500K new homes coming to the market. About 15% of the population moves each year, creating natural demand. Right now, we're still at an oversupply.
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