September 18, 2012

Bernanke Put = Regulated Greenspan Repeat!

What caused the Financial Crisis: a certain course of action or lack of regulation?
Was it mere lack of regulation, while the course was itself a great one? Or was the crash a hopeless, unavoidable part of the course itself?

Let's revisit.

There was easy money policy to get over the recession of 2001 caused by the and telecom busts. A lot of this money that the banking system could draw for a rather cheap price began to flow into property financing that sent property prices very high. For one could buy a house for a significantly bigger price tag yet pay the same in monthly mortgage payments. On top of it, ARM (teaser initial rate, interest only) financing, to take it higher. With 'valuation' of their property soaring, was reaped 'Wealth effect spending', not to speak of HELOC spend by quite a few. Great economy! Until some of the easy money began to flow into commodities speculation, driving their prices up as well; while it was time for some of the ARMs to reset. People that could no longer pay both their mortgage obligations and their living expenses had to foreclose on the house. The smallest of supply a house of cards.

Apparently the same story, and officially and consciously so this time, is intended to be repeated. Except that there is now some additional regulation around it. But the other side of the regulation is that this time more money, and sooner, will get into commodities. It could well lead to a fresh wave of foreclosures, and fresh crash, before even taking home prices significantly up first.

Talk about "going back..." This sh!t happened before. If anything, last time was probably better than this time could possibly hope to be.

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