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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (101099)	8/20/2009 8:37:28 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 116555

I disagree slightly. "What do you think will happen to most consumers if their debt had been eliminated a few years earlier?" According to local sources, 90% of short sales are no letting the owner walk scott free. They are instead slipping in a note for deficiency into the short sale agreement. That is turning the owner into a lifelong debt slave.

To: Elroy Jetson who wrote (101099)	8/20/2009 8:59:29 PM
From: Amark$p	Read Replies (1) \| Respond to of 116555

Thanks for your comments. Your position is not that difficult to understand, just a bit implausible: "Creditors of American consumers and businesses will not be repaid with cheaper Dollars. They will mostly not be repaid at all! Stop and think. U.S. banks are but a small part of this picture. Creditors around the world hold this debt. Debt which is being liquidated through foreclosure and bankruptcy. What part of this is difficult to understand?" ____ Are you stating that the US Govt will default 100% on its debt, or just the US consumer and business debt will be defaulted upon? The US Govt/Fed have been and are buying up this MBS debt and other near worthless assets. And what about the EU PIGS (Portugal, Italy, Greece, and Spain), not to mention Latvia and Eastern Europe, do all these business and consumer loans default as well...? I am sure you do not ignore other countries debt to GDP ratios that are similar or worse than US...? So is your position one of a worldwide repudiation of consumer and business debt? And of government sovereign debt as well? Maybe you could provide me with a few links of articles that discuss such a worldwide repudiation of debt. ____ Seems more plausible to me that the world economy goes through a series of rolling devaluations country by country, similar to the Great Depression. To wit: "History is testament currency devaluation proved effective in ending the Great Depression. In 1930, Australia was the first to leave the gold standard, immediately devaluing the Aussie by more than 40%, and the economy quickly recovered. New Zealand and Japan followed suit in 1931, each with the same result. By 1933, at least nine major economies had enacted a devaluation of their currency by removing it from the gold standard, all of whom emerged from depression. In 1934, America realized a dollar devaluation of 41% when the price of gold was adjusted... only the French and Italians continued to adhere to the gold standard, and their economies remained depressed until finally, in 1936, they allowed their currencies to devalue". Would appreciate your posting a few links to articles that discuss such a worldwide repudiation of debt. Thanks.

To: Elroy Jetson who wrote (101099)	8/21/2009 12:22:10 AM
From: arun gera	Read Replies (3) \| Respond to of 116555

>they will chastened, to be sure, but their income which previously went to pay for debt service is now available for consumption.> Will that be really turn out that nice? Let us say the average borrower has $200,000 in mortgage loan and $100,000 of investable assets (the borrower is also a lender). If the borrower walks away from his home, the lenders lose $100,000 or so, the borrower loses the $40000 equity he had put into the house. The banks will of course pass their losses to their depositors and other investors including the federal govt. The borrower's $100,000 of investable assets will lose their value by maybe $50,000 (there is less cash in the market to buy those assets, and the borrower is also a lender/investor). If the federal govt prints excess money to save banks, they devalue the borrower's remaining cash assets. The only consolation is housing becomes affordable, but there are fewer jobs around. If the borrower has a job, his income will have more buying power, but his asset account would have been downsized considerably. -Arun