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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: bentway who wrote (447596)	1/14/2009 5:21:02 PM
From: Road Walker	Read Replies (2) \| Respond to of 1575980

The government seem incapable of loosening credit so borrowing can happen, or getting money into the hands of consumers who would spend it. Banks are not stupid. They are struggling for their lives and they are not going to lend money against declining assets used as collateral. Would you? The entire economy runs on credit. Companies use lines of credit and buy stuff on terms (extended by supplier companies) and sell stuff on terms (themselves extending credit). NOBODY works on their own cash. Are banks going to extend lines of credit when companies are struggling to stay alive with huge accounts receivables? Consumers are not stupid (well not always). Many have money to spend but they are hording it against hard times or paying down debt. A rational response to the threat of job or income loss and a huge 12 month decline in their net worth. The natural process is that at some point all this frugal activity leads to really cheap asset prices, and lots of cash with a lot less debt. And then the cycle reverses. But in the meantime.... I'm not sure we can influence this cycle. I think I'm all for trying, because I do think this looks really dismal... the worst I've seen including the 70's stuff with double digit inflation. I think a depression with 1000's of BKs and huge unemployment is possible. I just don't know. I don't want to spend most of the rest of my life in a depression.

To: bentway who wrote (447596)	1/14/2009 5:31:40 PM
From: tejek	1 Recommendation Read Replies (2) \| Respond to of 1575980

It's looking more and more like we're toast. No matter what we do." The government seem incapable of loosening credit so borrowing can happen, or getting money into the hands of consumers who would spend it. By the time they figure it out, it looks like we'll have spiraled down too far for it to make any difference. The problem isn't the government nor the credit nor even the spreads. They have pretty much returned to normal. Its the banks.....the ones that have a lot of bad loans on their books. They can't lend because they don't know if they currently have enough assets/cash to act as an offset to their bad stuff that's losing value. And even with the infusion of TARP money, they are not sure how far down the bad loans will go and whether they have enough cash. That's the whole deflationary spiral RW and CJ have discussed. That's why stabilizing the housing market is very critical. Secondly, the solvent banks are cautious about lending because they don't want to make loans that end up a year down the road larger than the value of the property they've just provided a loan......again that deflationary issue. Consequently, they have tightened up their lending practices......looking for reasons not to lend. They turned you down because you don't have a job....even though you might have sufficient cash. They may turn me down for the same reason although I have considerable equity in my place so that may calm them down. Again, the housing market has to get stabilized for the credit markets to calm down. From what I understand, the Obama people are starting to get it......that's why they are talking about helping the homeowners who are in default. You reduce the flow of defaults, and in turn, the foreclosures, you will stop the drop in the housing median. We are very close now....housing inventory/supply is down to 6.9 months. At six months, supply and demand are in equilibrium.