Heinz Blasnik- Views You Can Use Message Board

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Strategies & Market Trends : Heinz Blasnik- Views You Can Use

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To: GraceZ who wrote (2678)	6/26/2003 2:45:20 PM
From: maceng2	Read Replies (1) of 4905

Hi Grace, Interested if I have the wrong end of the stick on this one, I don't think so though I think the short answer to Elizabeth Andrews question is no, the debt taken on by Fannie Mae is not just simply "recycled" money. Message 19059120 Message 19060336 Money and debt are simultaneously created by the fractional banking reserve system, investorwords.com and there are risks involved.. Raines may be in a dream business, but the net result of Fannie Mae’s actions in the credit markets is a nightmare of resource misallocation and massive systemic risk. mises.org As I see it (as an amateur observer of the economy), if there is a large relatively uncontrolled reserve of money available for mortgages, the price of housing will escalate, causing a number of other reactions. Housing start increases for example. Now there are potential good effects, like yes, everyone does like to see the worth of their property improve, and we would all like a house. The formation of a bubble in a market means that prices eventually become prohibative though, and a contraction can ensue. This is where risk in the system (people not being able to afford repayments) can make a problem worse. The wages in the UK (for example, I believe this to be true in the USA too) can no longer sustain the huge recent increases in property prices. Average wages are not going up. Plain and simple.

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