4 Comments, 4 Threads

1. 1. aaron

   Let’s just hope we don’t decide to catch a fever on thursday.

   Best, Worst, Good and Bad Case Scenarios

   September 30, 2008 - 2:24 pm   Link to this Comment | Reply

   

   
2. 2. varifrank

   So, what you are saying steve is the fundamentals of the US economy are strong?

   Im trying to think who it was that said that same thing recently. I cant remember his name. He ran for President once…

   September 30, 2008 - 4:02 pm   Link to this Comment | Reply

   

   
3. 3. Stephen Green

   Frank —

   Providing Congress doesn’t do something too terribly stupid.

   Sleep tight!

   September 30, 2008 - 4:06 pm   Link to this Comment | Reply

   

   
4. 4. aaron

   Here’s another one, Who Pays?

   The taxpayer pays. The taxpayer always pays. No. Matter. What.

   Everyone pays taxes and everyone is the taxpayer. When a blowup happens, it’s the taxpayer who will pay. When there is economic destruction, the taxpayer pays. (And, conversely, when we pay taxes there is economic destruction… generally.)

   Now that we’ve dealt that, who should they pay?

   Should they pay borrowers, who didn’t realize that living expenses might go up but their wages wouldn’t, so they might want to default?

   Or lenders who didn’t expect the borrowers’ wages to stay low and prices to go up, leaving them less to make payments with?

   Should we pay the flipper, who bought houses, hopefully with the intention of improving them and quickly selling? He didn’t know costs would go up and home values would go down, decreasing the return on his now costly improvements.

   Or should we pay the lenders, who loaned to flippers at low rates, but put a ballooning interest rate on the loan so that the flipper would sell to someone else if he didn’t improve the property fast enough? He didn’t know that improvement costs would go up and tightening budgets would cause home prices to go down.

   Or should we pay the banks, who bet that they would not see default risk go up, bet that they would receive sub-prime principal in lump sums, bet that they would not see sub-prime principal payments in installments after 2 years, bet that they would not see interest payments at ballooned rates, then borrowed on those bets and bet bigger?

   September 30, 2008 - 7:25 pm   Link to this Comment | Reply

   

   

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