Obama recently said he wanted to hear the ideas "out there" for a better stimulus package. Paul Krugman, who recently won a Noble Prize for his Economic Genius, has some ideas... and he recently shared those with Rolling Stones!
In his post, Krugman notes... "One more thing: even with the Obama plan, the Romer-Bernstein report predicts an average unemployment rate of 7.3 percent over the next three years. That's a scary number, big enough to pose a real risk that the U.S. economy will get stuck in a Japan-type deflationary trap."
This doesn't sound good...
According to Krugman.. "There's nothing to suggest that the plunge in the job loss will end anytime soon." He specifically thinks that we need a program on the scale of the "New Deal." He suggests that cutting taxes will help... but with unemployment headed to a number above 8%,
we need J-O-B-S!
Bernanke also spoke today from London about what the Fed can do to further slow down the drop in property values and bolster the global economy... although Krugman notes that there's really not much more the Fed can do...
The Fed leaked in late November that they intended to push mortgage interest rates lower. IMHO... this is what is truly needed. Any program that will ACTUALLY get us below (or to) the publics' "magical" 4.5% - THAT'S what Obama needs to do, and do it QUICK! I say this BECAUSE I believe that there are people out there who can purchase, and they are waiting for the "bottom." The lowest mortgage rates since World War II would be a great sign!
-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-
On a separate note (in response to Lenn and Aaron) here are my opinions:
- Lenn has suggested on multiple occasions that a plan floated by my Congressman, Rep Miller, to allow Bankruptcy Judges change the Principal Balance on the mortgage loan is a good one. I disagree. One of the reasons Mortgage Interest Rates are NOT where they should be (in the low 4's) is because NO ONE is purchasing mortgages. IMHO, allowing a judge to set the "value" and forcing a cramdown is not the best alternative. Do I think Banks SHOULD accept Cramdowns, and re-negotiate Principal Balances, absolutely - but I think it's more fair, and would stabilize overall markets better if there was a MECHANISM (other than Bankruptcy) that would force Bank's to do what they are suppose to be doing. We FURTHER jeopardize the flow of Mortgage Backed Securites with Rep. Miller's plan.
- Aaron has a featured post about "Talkin' about Walkin'"... the comments follow along the theme that banks are going to let loose of the stringent foreclosure and bankruptcy guidelines in 2 to 3 years. Again, just my humble opinion, but I don't think there's any way on God's Green Earth that would happen! Subprime loans are not coming back, loans to people with no equity are not coming back, the market for Mortgage Backed Securities is RUINED. The NEXT foot to drop (IMHO it will be this year) is Pension Funds, which are quietly going broke. When the Commercial Paper hits, (later this year like Subprime) - we are going to finally find out how many State Pension Funds, how many Teacher Pension Funds are heavily invested in what has traditionally been considered a stable investment. Because these funds have (and will continue) to avoid mortgages (we're junk bonds at this point)... there's no way the guidelines are going to be loosened for those who file NOW. Banks are going to have an elephant's memory about this! 7 to 9 years would mean that the next "boom," by your definition, would be in 2015 through 2017!!
If you have questions about which way mortgage rates are headed, call us, we'll certainly share our opinion!
Comments (11)Subscribe to CommentsComment