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  • Is U.S. Debt Losing Creditworthiness?
    Investing in the US is very risky indeed because by all of Undecided's criteria the US is not panning very well... Our government might be stable, but our the decisions our government have been totally unpredictable and reckless. So yes, Treasuries might sell for a long while as the dollar is still the world's currency --this is what allows the US to print all that money... Yet if this empire ends, all of this might mark the year when the latest of many long-gone empires entered a systematic cycle of printing money and of devaluing its own currency...
    Sep 17 01:24 am |Rating: 0 0 |Link to Comment |View article
  • Rescuing Frannie
    Well, if you think about it nothing has changed... except that the window dressing has all collapsed. Of course we always knew that the debt of Fannie and Freddie were guaranteed by the US Treasury. Did anybody ever thought that should a rescue be needed it wouldn't happen??

    So even though we might think that the problem is in Fannie and Freddie themselves, of course it isn't even after discounting for their poor management decisions. The problem is that after a period of easy credit, we are now going into a period of tight credit. This because risk was low previously and now risk is by all accounts higher...

    Freddie and Fanny have suffered because markets have assessed that the American consumer will not be able to repay all the money it has borrowed. Of course this has been known for a time... But it was not a problem till the world could no longer continue to inflate the US debt bubble.

    Yet for the very same reasons (a weak consumer) and for other perhaps deeper reasons (a government with absolutely no fiscal discipline, a trade and capital defict) markets will assess as well that lending to the US in general, government included, is riskier... Fannie or no Fannie...

    Certainly, the cost hundreds of billions if not a trillion or so of past, current, and future bailouts (Bear, Federal Reserve Window, 1st Stimulus Package, Housing Bill, Fannie & Freddie Rescue, Big 3 bailout disguised as loan guarantees, 2nd future Stimulus Package, and so forth) will indicate to markets that the US both as a country and as a government can only meet its obligations by printing dollars and by borrowing some more!

    This will certainly meet higher inflation, sky-high Treasuries, and quite a painful period for all of us but the very wealthy. Of course, the alternative would perhaps be worse... that is, a collapsed financial market a-la 1929...

    Sep 07 01:42 am |Rating: 0 0 |Link to Comment |View article

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