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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: GraceZ who wrote (5604)9/26/2002 12:39:46 PM
From: J. P.Read Replies (1) of 306849
 
You've improved the consumer cash flow, but at what expense? You've taken 30K in short term debt, and now the consumer is paying interest on 30K for 30 years instead of, say 5, albeit at a lower interest rate. Meanwhile, Fannie has created 30K in inflation by "printing" the money and issuing it as a mortgage backed security (arguably without adequate risk controls, since, as someone pointed out, they operate with privatized gains and socialized risk).

And lots of people refi, take a higher monthly payment, and take the money and spend it. Then you have 30K in "Fannie Mae wampum" issued and 30K in long term debt to boot, and a lower cash flow. Combine that with falling wages and rising unemployment.
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