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#41
08-27-2007, 08:44 PM
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Re: How will the subprime crisis ultimately affect our country?
TSC, I don't really understand what you're getting at. World Factbook says US exports are mainly capital goods, cars, agricultural, and chemicals. But so what? People buy them, and they'll buy more of them if they're cheaper.
[ QUOTE ] Secondly, why should we have to make the decision between expensive imports and expensive domestic goods? Can't you see the problem there? [/ QUOTE ] could you expand on this a bit? I'm not following you. 
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#42
08-27-2007, 08:57 PM
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Re: How will the subprime crisis ultimately affect our country?
I am saying it is a problem if our only options are expensive import items or expensive domestic goods.
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#43
08-28-2007, 08:35 AM
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Re: How will the subprime crisis ultimately affect our country?
[ QUOTE ]
People say it makes our goods more attractive overseas, but what exactly are we exporting that can be so attractive to other countries. Certainly we have some raw materials and agricultural goods. But other than major capital goods, cars planes machinery, what else are we really exporting? Almost everything we buy in the US comes from outside this country. Thats the paradox that I am not understanding. [/ QUOTE ] services for one. some aggriculture, some cars, i dont' know if software falls under services or not but that too, education (top schools LDO). if i really cared to look up exactly our exports i would (IMF, world bank, current account is where i'd look) [ QUOTE ] BTW, I work for a manufacturing company and we do export our goods, however I think for our discussion at hand, this is irrelevant. As far as I can tell, many of the goods that are made here, by multinational manufactuing companies, can be moved to other countries, if the low dollar value affects their exports (IE semiconductor companies). [/ QUOTE ] the low dollar value makes it a) HARDER to move overseas since it is more expensive and thus savings would be less, and b) MORE attractive to purchase the goods made here if the USD falls relative to its trade weighted index Barron
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#44
08-29-2007, 07:32 PM
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Re: How will the subprime crisis ultimately affect our country?
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#47
09-03-2007, 08:02 PM
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Re: How will the subprime crisis ultimately affect our country?
[ QUOTE ]
If these ARM's are causing more and more people to default, and consequently have their houses foreclosed, I want to know who is going to buy all these houses. [/ QUOTE ] The banks would like to know also. [ QUOTE ] I mean, prices are falling, but that has more to do with the demand decreasing and the supply increasing. [/ QUOTE ] Er yeah, why do you think that is? [ QUOTE ] These lenders generally don't care if a house is foreclosed. They can turn around and sell it at auction to reclaim their money. [/ QUOTE ] Untrue. The last thing a bank wants is to own real estate. They've had a hard time selling what they have. Also, more and more of them are worth less than what was borrowed, so they take a loss.
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#48
09-05-2007, 08:23 AM
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Re: How will the subprime crisis ultimately affect our country?
[ QUOTE ]
[ QUOTE ] If these ARM's are causing more and more people to default, and consequently have their houses foreclosed, I want to know who is going to buy all these houses. [/ QUOTE ] The banks would like to know also. [ QUOTE ] I mean, prices are falling, but that has more to do with the demand decreasing and the supply increasing. [/ QUOTE ] Er yeah, why do you think that is? [ QUOTE ] These lenders generally don't care if a house is foreclosed. They can turn around and sell it at auction to reclaim their money. [/ QUOTE ] Untrue. The last thing a bank wants is to own real estate. They've had a hard time selling what they have. Also, more and more of them are worth less than what was borrowed, so they take a loss. [/ QUOTE ] I don't understand how this hurts the entire economy and not just the banking industry?
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#49
09-05-2007, 08:38 AM
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Re: How will the subprime crisis ultimately affect our country?
[ QUOTE ]
I don't understand how this hurts the entire economy and not just the banking industry? [/ QUOTE ] look what happened when argentina defaulted on it's debt.
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#50
09-05-2007, 08:57 AM
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Re: How will the subprime crisis ultimately affect our country?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] If these ARM's are causing more and more people to default, and consequently have their houses foreclosed, I want to know who is going to buy all these houses. [/ QUOTE ] The banks would like to know also. [ QUOTE ] I mean, prices are falling, but that has more to do with the demand decreasing and the supply increasing. [/ QUOTE ] Er yeah, why do you think that is? [ QUOTE ] These lenders generally don't care if a house is foreclosed. They can turn around and sell it at auction to reclaim their money. [/ QUOTE ] Untrue. The last thing a bank wants is to own real estate. They've had a hard time selling what they have. Also, more and more of them are worth less than what was borrowed, so they take a loss. [/ QUOTE ] I don't understand how this hurts the entire economy and not just the banking industry? [/ QUOTE ] two main reasons, one direct, one indirect: 1) directly, consumers account for about 60-70% of GDP. consumers, until Q2 2007 have supported growth (Q2 2007 we saw businesses stepping in to increase inventory & orders). if consumers choose to save rather than spend, growth will be directly hit. the issues here are to what extent are consumers spending habits going to be affected. while subprime borrowers are not a huge portion of the market, the knock on effects to other mortgage holders can be significant (higher rates due to less demand for mortgages from security issues who have gobbled up all types of mortgages to securitize & sellt hem). higher rates on adjustment of ARMs and lower housing prices both eat into consumer's sense of wealth and thus reduce expenditures. the degree to which this will happen is the current question. 2) indirectly, the climate of fear and a scramble for liquidity as a result of the mortgage meltdown can pose very serious problems for the entire economy. in a worst case scenario, all commercial paper (not just asset backed) rates could soar eating into company profitability (this depends on the overall use of commercial paper for S-T financing). in conjunction with #1 above, lower profits (and lower expected future sales) may cause layoffs and thus let some slack into the labor market. this slack would release wage pressures that have been building and again eat into consumers' wealth via their paychecks. this is nowhere near all encompassing btw since there is more going on. i have a question for the forum that maybe deserves its own post?? (ahnuld or evan, lemme know if i should decouple this) right now, there is a mad scramble for liquidity in the london interbank community. asset backed commercial paper markets have pretty well frozen up as some trades can't be executed. this has resulted in strange occurrances like the 6mo USD libor rate being lower than the 3mo USD libor rate (and you can't take advantage of it since trading is so slim...that's actually besides the point since if you wanted to take advantage of it, you'd have to be a bank with money to lend right now and no bank seems very willing to do that relatively speaking). banks are both trying to hoard cash themselves AND get as much of it as possible which leads to way higher libor rates. libor rates typically hover right around fed funds, ECB, & BOE rates. right now, they are about 5.75%, 5%, and 6.75% respectively (that is 50, 75, and 100bps above stated rates). my question is how do things priced off of libor respond to these anomolies. for instance, almost every swap transaction is based off of LIBOR + x for the floating rate part. similarly, many derivative transactions are also based off of LIBOR. what does this mean for these instruments. in terms of funding, it seems the fixed payer is making out like a bandit since nobody could have forseen libor rates spiking like they have. this would obviously be at the expense of the floating payer who now has obligations far beyond what may have been budgeted for. how could all that play out? thanks, Barron
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