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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (2678)	6/25/2003 10:39:57 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 4905

<<The big difference though, is in what happens after that money leaves them. For the most part mortgage lending is a deadend, its chained to the housing market, there's very little that gets multiplied in the economy except housing prices and a bunch of mortgage agents get fat.>> This is the essence of why the current emphasis (by the Fed) on channeling money creation into residential real estate is insane...it ensures that larger and larger flows are required just to maintain housing prices and valuations, even as the velocity of the newly created money diminishes. A monetary dead-end, as it were. It is not much different from other forms of consumption in that respect WITH the exception that it represents a long term commitment of capital flows by individuals for many, many years to come. That's why we won't see significant GDP growth for years to come (at least without humongous budget and trade deficits to "create" GDP). C&I lending remains the tell...it is the most potent indicator of deflation out there.

To: GraceZ who wrote (2678)	6/26/2003 1:24:42 AM
From: GraceZ	Respond to of 4905

I need to correct something in this post. I said the Fed writes a check on its Treasury account, this is incorrect. Its a book keeping entry and electronic transfer, no physical check and in the old days when it was a physical check it wasn't written on the Treasury, the check said the Federal Reserve Bank of NY.

To: GraceZ who wrote (2678)	6/26/2003 2:45:20 PM
From: maceng2	Read Replies (1) \| Respond to 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.