Saturday, September 22, 2007

Bernanke's Bumbling

From Abelson, via The Big Picture:

"NO GOOD DEED, OF COURSE, goes unpunished. And wouldn't you know, Mr. Bernanke's muscular move that touched off a blistering rally in stocks also, it grieves us to report, had less salutary, if equally predictable, consequences in other trading arenas

...A euro fetched a record price in U.S. dollars and the Canadian dollar -- the loonie -- achieved parity with our battered buck for the first time in over three decades (who's crazy now?). Virtually every currency known to man appreciated against our beleaguered greenback...

The incidental devaluation of the U.S. dollar sent the price of crude, which is denominated in dollars, barreling to an all-time high above $84 a barrel ...a spurt in gold to nearly $745 an ounce, the highest price since January 1980...

...he managed to steepen the Treasury yield curve, which means that the longer-term obligations, which effectively determine the level of mortgage rates, went up. Not, we suspect, the ideal medicine for what ails homebuilding

In other news, (related--read between the lines--) the US taxpayer will relieve bond-holders such as Lehmann, BearStearns, and others of high-risk 'nuclear waste' mortgages through FHA and FreddieMae actions.

Not the first time that moneyed interests have purchased Government policy and actions.

1 comment:

Brother James said...

Bernanke and mortgage lenders had some assistance in this mess. American home buyers bought homes that they coudn't really afford, at terms they had no lucid notion of how to satisfy. We want what we want, economic reality be damned.

Really, who but the most ludicrously optimistic borrower takes out a mortgage with a balloon payment? Here's a clue, for those out there considering this: If you cannot make the balloon payment today, chances are slim that you'll be able to do it in 7 years.

Was financial ruin worth the extra bedroom and 1/2 bath?