BOHICA - QE3 is on!

[sbouslog]

Gone

[xring]

Let look at what is in the MBS's. To obtain a new home loan you have to have some skin in the game these days. You also have to have 2 years of tax statements and all sorts of other documents. These are not the same shady lending practices that were going down 8 years ago.

Yes lets look at what is in MBS! How do you do that?Source? These are good MBS? So the junk MBS generated during the "housing scam" have all magically disapeared and the fed is only buying good MBS? I would guess more buying of junk by the Federal reserve to keep their crony banksand a pension fund or three afloat.

[Pancho Villa]

We do have a bit more added risk by doing this. I dont believe that we are using derivatives to back these MBS's though (which makes it different then pre 2008).

Let look at what is in the MBS's. To obtain a new home loan you have to have some skin in the game these days. You also have to have 2 years of tax statements and all sorts of other documents. These are not the same shady lending practices that were going down 8 years ago.

So the US is selling 30 year treasurys at 2.95% and buying these MBS's at 3.4% (give or take a little). Unless we have another huge drop in the housing market this plan should work pretty well and generate a profit. ((.45%/12) X 40 billion per month). You can do the math.

This should stabilize housing for the next 4 years or so. Now they just have to find a way to stabilize the job market. Keeping the interest rates low will stimulate some job growth in the construction, commodities, and finance sectors.

Stabilizing housing is the PROBLEM, though.

You can only defy gravity for so long. The housing bubble never deflated all the way; the govt has been busy (through putting pressure on the banks to start loaning again and various other laws) propping up housing prices.

This is a short-term play. It gets votes with home owners, but the bottom line is: lots of people have homes that have no business having them, and prices are still way higher than they will be when it all comes crashing down, either in absolute or relative terms (ie either the dollar value of your home will come way down or the value of the dollar will come down.)

The govt has no business propping up prices anywhere. It won't last, and it's long-term harmful. It'll end poorly.

[sbouslog]

Gone

[Rust_shackleford]

great buy more food

[xring]

We do have a bit more added risk by doing this. I dont believe that we are using derivatives to back these MBS's though (which makes it different then pre 2008).



So the US is selling 30 year treasurys at 2.95% and buying these MBS's at 3.4% (give or take a little). Unless we have another huge drop in the housing market this plan should work pretty well and generate a profit. ((.45%/12) X 40 billion per month). You can do the math.

Your statment implys you consider the US government and the federal reserve to be one enity? The US government creates debt (treasuries) most of it is bought by the federal reserve. The money created by the federal reserve to buy US treasuries is created out of thin air. The money created by the fed to buy these mbs and other purchases is created out of thin air. There is no wash. Currency destruction ala Zimbabwe pure and simple. If you consider the federal reserve and the US government to be one and the same, and im not saying your wrong if you do, the 16 trillon of US debt is on the feds books and this program will add 3/4 of a trillion to the debt a year on top of the four trillion of spending. The only wash is the two trillion of revenues (taxes). Or is your point that you feel that these MBS have more value than the Treasuries than the Federal reserve has bought with previous QE's? Please clarify.

[xring]

Dude, come on. Have you gotten a home loan/refi in the last 2 years? Its not the same process that it was 10 years ago. We have a few loan officers on the site that will back up what I am saying. All the junk loans generated from 2002-2007 have already defaulted.

You are saying that all ( or even half)of the loans that were generated during the housing bubble and their derivitives have defaulted and the real estate they represented has been absorbed by free markets?

[tmckay2]

And so many of you still call Ron Paul a nut job. Welcome to Rome 2.0

ron paul IS a nut job, im not sure what this has to do with ron paul. other people being evil doesn't make ron paul any less of a nut job.

[sbouslog]

Gonr

[xring]

All of the synthetic CDO's that are going to bust already have. The banks are still holding on to some properties but those are on existing CDO's.

I am under the assumption that the 40 billion of CDO's that we are purchasing are for new mortgages rather than existing. I could be wrong on this. If they are existing then the damage is done and they would/should be bought at a discount to represent the current value.

If you are correct it might indeed be helpful to stabalize the housing market. We will know if mark to market is ever unsuspended I guess.
Faber says buy real estate.
http://bloom.bg/PhXCyt