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

To: skinowski who wrote (109178)	3/1/2010 1:38:22 PM
From: Broken_Clock	Respond to of 116555

Interesting story heard from a neighbor this weekend: He sold 2 dozers to an Egyptian buyer last month. The buyer has it sold to a Viet Namese buyer who will use local labor in VN to disassemble and rebuild and sell in Asia.

To: skinowski who wrote (109178)	3/1/2010 1:55:44 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 116555

"Insurance" against lending risk in a bad economy are higher rates - but rates are kept low. They are not determined by the markets. I've heard that argument before, but it seems that the Fed normally acts on Fed Funds/Discount rate moves AFTER they market has essentially forced their hand. Thus, I believe rates would have been even lower without that stimulus. I just bemoan the manner in which it was spent as I believe it did nothing to stimulate job creation in the private sector. And yes.. the Fed is a big buyer, but also a big seller. They use T-bills as the means to add and withdraw liquidity (cash).. When they buy, they inject liquidity. When they sell, they take cash out of the system. federalreserve.gov If I'm reading the above correctly, the Fed holds about 1.5 Trillion of Gov't T-bills, bonds, and notes. But the following says the Fed has really been most active in the mortgage backed securities arena: reuters.com And before someone tears me up about the Fed, I'm just explaining it, as I understand it, not justifying, or condemning, the practice. "Insurance" against lending risk in a bad economy are higher rates - but rates are kept low Only in the sense that the borrower firmly believes that the profits to be gained exceed the costs of the interest on the loan. But that leads to something I've been trying to get my arms around. If interest rates increase, that increases the mortgage burden on those people looking to buy a new home. So wouldn't it stand to reason that as rates climb, people can afford less home, and thus home prices should decline. Opinions on that scenario anyone?? Hawk