Interest Rates and the Economy
inlet13
Posts: 1,979
In my opinion, in the early 2000s the FED policy of keeping interest rates low for a sustained period of time was the major driver of the housing bubble. This fueled speculation and exotic mortgages. ARMS went from 10% of all mortgages in early 2000s to about 50% of all mortgage by the peak of the housing market. Once rates reset higher, well.... people couldn't afford their loans... and bang... horrible recession.
So, today the Fed came out and said they are going to keep interest rates low until mid-2013. This is unprecedented, and to me, symbolized that they have run out of policy bullets. That said, the market loved it. Regardless, what do you think will happen this time from a sustained period of artificially low interest rates?
Hmm...
F the FED!
So, today the Fed came out and said they are going to keep interest rates low until mid-2013. This is unprecedented, and to me, symbolized that they have run out of policy bullets. That said, the market loved it. Regardless, what do you think will happen this time from a sustained period of artificially low interest rates?
Hmm...
F the FED!
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imo, they share equal blame. people signed up for shit they new they couldn't handle and banks signed up people for loans they knew they couldn't handle.
why?
greed
you hit the nail on the head.
but qe3 would have been a worse decision unless you like japan's zombie economy...
i am interested to see if b of a gets right. that could get ugly right quick...
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Actually... wasn't it those mortgage brokers (i.e. Countrywide) that sold the loans? Those Countrywide people were telling people they COULD qualify for an adjustable loan, then re-finance into a lower fixed rate loan or sell the home for a profit and use that profit to leverage another loan. And remember, housing developers with letting people in with little or nothing down. The sales pitch was, "Why pay your rent to someone else, when you can move right in and use your current rent money to buy your own place?" That is how they were able to snag so many buyers into the housing market.... which, in turn, inflated the money markets.
Problem was, buyers were told what their monthly payments were going to be by these predatory lenders... which didn't even cover the interests... and ended up upside down. It is the same method used by Credit Card Companies that convince so many consumers to pay the minimum amount per month.
I think it is tough to place so much blame on the buyers. They took it in good faith that the people they were dealing with were being honest and telling them the WHOLE truth. Many of these people were first time buyers... you remember what it was like being a first time home buyer, right? You place so much trust in the people working with you, right?
Hail, Hail!!!
so you listen to the salesman everytime you buy some something?
it takes two tango. as a buyer you are responsible for knowing what you can afford and what the ramifications of the deal is.
i agree, people were dumb and thought the housing market would go up forever, or they could refi over and over, or they would get a better job and pay it down.
at the end of the day, they agreed to the deal.
plenty of blame for both sides...i blame the lenders/builders/agents/inspectors/appriaisers for the lies that did occur, but even in cases, if the house was truly sold at a fair value, i have to put a big chunk of the blame on the borrower.
too many people were trying to live ghetto fab, with their levered house, upside down leased car and credit cards out the whazoo to pay for thier 60in big screen.
Why are you trying to make this about me? What did I say that triggered this response, so I know not to trip that wire again?
And yes... buyer needs to beware... but there are a completely different set of rules that come into play when buying a house, that do not come into play when buying a used car. There are 'Truth in Lending' laws that people involved with the sale MUST follow. Full disclosure being one. I was explained the full story about my loan and differing payment scenarios when the sale went into escrow.
With a car, all you need to do is slap an 'AS IS' statement on it... tha't it. People typically don't buy as many homes as they do cars or televisions. The people involved with the sale of the home, including and specifically mentioned, the lender, must adhere to these strict guidelines. The SELLER(lender) is the knowledgeable one in this equation and is supposed to play fair... by the law.
Hail, Hail!!!
yes, the lender is suppose to play fair, but we both know in america, greed over rules fair play. too many people here care about making a buck vs doing what is best for both parites. greed is a huge problem in the states.
The originator of the problem was the FED. They were the one's who built the bubble. Everyone then tried to capitalize on the bubble (some were doing so unknowingly, this includes both banks and homeowners).
The cause... the cause... was the FED. Everything else... all of it, happened because the FED kept rates too low for too long.
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