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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ggersh who wrote (104799)	9/3/2009 3:16:29 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 110194

Best explanation I've heard! Thanks! Thanks!! Bernanke highlighted this issue about excess Chinese savings fueling a speculative bubble here. usnews.com But that doesn't excuse US banks and Rating Agencies for issuing out crap as AAA. The RA's are likely going to find themselves liable for the fraudulent ratings they gave since they were paid by the IBs to rate their crap. Another under-reported issue is the amount of sub-prime debt that was extended to illegal aliens. Many of the regions most heavily hit by sub-prime were also areas where illegals were allowed to buy homes: nypost.com This is kind of why I'm more inclined to accept an amnesty program for illegals and registering them as temporary workers. And I'm more inclined to extend green cards for those temporary workers and H-1B folks who have demonstrated competence in the English language and a desire to become US citizens. They represent increased demand that, if they can find gainful and legitimate employment, could support home prices. Btw, there's also the question as to whether the US taxpayers should be on the hook for that securitized debt, or the Chinese investors who speculated in purchasing it. What China has essentially down is engage in surreptitious mercantilism, or more appropriate, Manufacturer Financing. They financed our consumption in order to finance their economic development. Not a bad thing for either side so long as it doesn't get too far out of hand. It has serious political ramifications vis a vis the US and Bejing. But on another angle, one has to ask why China had to invest all that money in the US financial system? I would suggest that the Chinese were very conservative and the rest of the world lacks sufficient transparency and integrity to attract those dollars. There's certainly no lack of demand for economic development in the non-developed world. There's just far too much corruption (even by the standards we saw in sub-prime). So our IBs and RA's played a pretty good game by turning crap into gold with regard to sub-prime. And even that's not bad because it would be considered junk debt. The problem TRULY arose, IMO, when they mixed toxic junk mortgage debt into AAA assets. It's like finding a rat hair in your burger.. You are hesitant to consume any more food at that establishment until you're sure they pass a health inspection. But suffice it to say, despite our problems in the US, they pale in comparison to what Europe and China are facing. Our bubble just popped first. Their's is on the way. Hawk