From the Federal Reserve:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system.
http://www.federalreserve.gov/newsevents/press/monetary/20111130a.htm
So now it’s cheaper for foreign countries to borrow us dollars.
Let’s see…
– Foreign country owes 100 billion million dollars
– Fed reserve just allowed them to borrow 1.5 instead 1 dollar per unit on trade
– Foreign county is able to borrow at a lower cost which also lowers the amount of dollars they owe from 100 billion million to 75 billion million
Hmmm…
Sounds like a tricky way to pay off foreign debt and lower the value of the dollar by flooding the market with additional units.
The acts of desperation to prevent another Lehman type event are getting closer and closer together. That’s a function of tying to prevent an exponential problem from running you over. Debt that cannot be paid won’t be paid and wealth based on that debt will be lost. Central banks and government are trying to protect that wealth based on debt by shifting it from private entities to taxpayers but even that has limits.
It’s only a matter of time until things fail and we see what things are worth without massive amounts of leverage. It won’t be pretty for your 401K but the wealth gap will shrink massively and we’ll have a framework for a more prosperous future.
How much time though?
Homebuyers are tired of waiting.
If you could give me the exact date I’d really appreciate it.
Yeehaw!!! DOW +400
Jim,
Here is a good buy in my hood for someone cashing out some day trading market gains today for their down payment or all cash deal.
http://www.sdlookup.com/MLS-110058308-974_Merganser_Ln_Carlsbad_CA_92011
I don’t like the idea of the Bank of Canada getting involved with a bunch of deadbeat nations. It was our government regulations that prevented our banks from destroying our economy in the first place. Why would the government ever want to destroy it now? To catch up with the rest of the broken world?
livinincali,
I think things have to get much worse before we have a collapse like what you’re describing.
I think one of 2 scenarios happens.
1. We suffer for decades under decisions made by the boomer cohort in many nations to award themselves thick benefits of every stripe. Once they die in significant enough numbers, the world moves back to a sustainable pattern.
2. We suffer for decades under decisions made by the boomer cohort in many nations to award themselves thick benefits of every stripe. Once it gets bad enough, the young, more able plebes sieze control of the wealth through forceful measures, thinning the herd of the unproductive.
Personally, I’d place the likelihood of #1 to be 10:1 over #2.
In that case, whether you buy a house today or 30 years in the future, you’re probably not much worse off. The demographics of the US point more to a longer-term decline than resumption of growth ala the last 30 years.
Who knows, though?
Chuck
doughboy – Merganser is a beast!
@prohoff
with a name like “Merganser” would you expect anything less?
That sounds like the name to one of the many mutated monsters of Godzilla films….Attack of Merganser, the mutated Bird from Batiquitos lagoon!!!
I didn’t say it should influence your decision to buy a house. You do have to live somewhere and for a lot of people they like the freedom that owning brings. If you want to give you a date, I can’t, but I can tell you that it will likely be in the next generation. There’s certainly tons of assets being bought and gobbled up now with the intent that they’ll be sold to fuel consumption in the future.
I really don’t think there is a safe place to save your wealth. Everybody is going to lose it’s just how much on a relative basis. Everybody is looking to protect there wealth via some mechanism including homes, stocks, bonds, foreign assets, gold, etc. Best place for your money might be cash, that seems to be the only thing that nobody wants to hold.
I believe a number of large foreign banks and money funds were in danger of collapse due to the lack of any willing counterparties, and this action fixes/delays that problem and only that particular problem – for now. This does not expose the US to any credit, currency or collateral risk as these rest with various CB’s.
It’s 4:27 p.m. and I’m in need of liquidity support after work: A nice, cold martini to celebrate the oligarchy.
Cheers!
So banks can borrow money from the Fed at 1.0% and then buy Treasuries and get 3.5-4.0%? Is that correct?
Thaylor,
I think the equation is more like this:
1. Take deposits from retail banks at .1% (in savings accounts, pay more for CDs you can lever more)
2. Borrow from fed, levered 10:1 to 50:1 at 0%
3. Lend to USG at guaranteed 3.5% to 4%.
*sigh* I wish I had a Federal Bank Charter. I’d be one of the “wealthy” all of the 99%ers keep talking about.
Chuck