Mortgage meltdown

How would YOU cope if your mortgage payments went up by 20%? How about 80%?? Look at the yellow graph below

So if you put those two graphs together, you have: 100 BILLION dollars each year of loans that suddenly must be paid back at up to 80% higher rates. At a time when selling one's house is not really an option.

I can't see this ending well.

All these were taken from Credit Writedowns

Have a read of this. It looks like this thing is really picking up steam.

My money is on a Fed bail-out.

And now, some propaganda

"The Federal Reserve widened the collateral it accepts for loans to securities firms to include stocks"

In the case of (for example) Merril Lynch, if the stock is, say, $17, buy Merril Lynch for $29 a share.  Then you can take those 29 dollar shares to the Fed for collateral.

See?  It's awesome.

Hey Rimu,

Its not so obscure, I've been reading this! The problem is that the situation is complex, filled with a myriad of detail and really much of it incomprehensible (for me at least). And while ecological tipping points may be complex, trying to work out the tipping point of the global financial situation is infinitely more complex it seems to me, because so much has to do with perception. Now we are witnessing Asian market meltdowns, as institutions tighten lending (lack of trust) - the whole system, based on greed, becomes so incredibly unstable that 'normal' activity, i.e. stocks in companies that do real things (industrial capital, not speculative capital) will be touched, harmed too. I can't hope to read it, I just feel that its best to be connected to real things: land, place and people. But any commentary that makes it easier for non-economic types is going to get my attention!

 More like economic irrationalism ;o)

For a short time there the other day, you had to PAY interest on treasury bills (as opposed to the more usual case where they pay YOU).

i.e. if you want the safety of putting your money in the hands of the US government (as opposed to those dodgy banks!), you need to pay! That doesn't happen often, does it?? Last time it happened was during the great depression, if I am not mistaken.

So the banks need $700 billion from the government to buy up their stuff that's worth less than they bought it for. Take that to it's logical conclusion.

hahahaha

Here is why the proposed $1 trillion buy-out of bank debt in the US will fail

First, let's imagine for simplicity that there are only two banks in the US.

The media / political pundits would have you believe the likely outcome of the bailout is the top-left box in which both Bank A and B sell risk assets to the Treasury. In this case, the result is a more regulated banking industry, with imposed limits to salary, but importantly markets clear.

HOWEVER, it is in BOTH banks interest to deviate from that.

Why? Simple. If Bank A (or B) believe the other is selling their risk assets to the Treasury; they will each be better off holding on to theirs.

Why? If the other bank sells and they hold, markets will still clear (in theory) and the bank that holds onto their risk assets can sell at the new market prices. This results in increased market share as they:

• Can pay more for talent
• Are less regulated
• Don’t have the stigma of selling to the Treasury (think of what selling portrays to the market)

This is even worse in the "real world" (with more than two banks) as all banks have the incentive to wait for other banks to sell risk assets to the Treasury to clear markets.

The likely result? The bottom right box in which no bank sells voluntarily and markets remain frozen.

Just a thought.. but if the US Government does pump $1 Trillion of tax payers money in to bail out the market and it fails, then that may just be enough to burst the "consensus bubble" and wake "consumers" up to the fact they are being bled dry by the corporate elite.

There is even a strong core of Republican 'free marketeers" in congress opposed to this bail out and a reasonable amount of media scrutiny around the validity and usefulness of such an expensive bail out package.

So, if it does just get pissed away I would not be surprised if there are some very angry punters in the US who will want to reign in the market, regulate it and make it accountable.

If that happens it could well lance the festering boil that is  the global money market and consequently help to mangage that market for when the poo really does start to hit the fan when the inevitable  energy shocks associated with peak oil kick in.

Just a thought...

Richard

The humour will make most sense to those who have seen Dark Knight recently.

Well, the big bailout didn't get approved by congress. Dow Jones down 770 points (7%) so far. Nasdaq down 9%.  It's going to be an interesting week.

Hmmm time to plant more vegetables.

aaand back UP 500 points today. Wild.

The writing has been on the wall for a long, long time. (click for larger)

Click for larger view, then read the text at the bottom right. NB that it assumes a fairly immediate bottoming, once the trendline is hit. Based on the 80's and 90's booms, that may be too optimistic.

Another chart from the "I am not sure what this means but it doesn't look good" dept.