US mortgage crisis goes into meltdown

RenewableCandy · Post by **RenewableCandy** » 06 Dec 2007, 11:41

Another piece of news in the Metro today: HMG lodge a bill to make it compulsory to pay into a pension scheme: your own workplace one in the absence of 'alternative arrangements'. It's not on their website and the beeb haven't mentioned it.

Would my paid-off zero-energy house inhabited by extended family and veggie-garden (dream on!) count, I wonder?? Or would I be made to give up my hard-earned to some scheme which is doomed never to pay out?

Post by **mikepepler** » 06 Dec 2007, 11:43

A neat explanation of CDOs here: http://www.portfolio.com/interactive-fe ... 007/12/cdo

Adam1 · Post by **Adam1** » 06 Dec 2007, 12:32

Blue Peter wrote:But what can the government/BoE do? Banks' balance sheets are full; the residential mortgage backed secruity (RMBS) market has closed down (and the commercial one too, I think); less sophisticated Asian investors have become sophisticated enough to know that Western housing is not a good place for investment at the moment.

There won't be the volume of money coming in at any rate to maintain the housing bubble, let alone inflate it any more.

(All IMHO, of course)

Well, they've just cut interest rates by .25% and I guess, theoretically, they can carry on cutting down to 0% if they wanted to. The only constraint would be the inflation figure. The inflation figure not necessarily being the same as real-world inflation. If you choose your basket of goods to exclude food and energy items, like they do in the US with the "core" inflation rate, you can probably keep the inflation figure nice and low.

clv101 wrote:As a saver and not a debtor high inflation paying people's mortgages off for them would not impress me.

Yes, it's going to make the government unpopular with the 'grey vote' too; and they tend to be the most enthusiastic voters. That may well be a political constraint.

SunnyJim · Post by **SunnyJim** » 06 Dec 2007, 12:52

RenewableCandy wrote:Another piece of news in the Metro today: HMG lodge a bill to make it compulsory to pay into a pension scheme: your own workplace one in the absence of 'alternative arrangements'. It's not on their website and the beeb haven't mentioned it.

Would my paid-off zero-energy house inhabited by extended family and veggie-garden (dream on!) count, I wonder?? Or would I be made to give up my hard-earned to some scheme which is doomed never to pay out?

What!!!! What happens if you don't earn any money? Can they take your house off you to pay into your pension? I mean they can take your house away to pay for an old folks home if you haven't got enough in your penion?

This will mean we are all totally tied to the state, never able to give up work, and never able to 'drop out' of they system.

It's a desparate effort to extract money from us and put it into the finacial system, helping to contribute towards continued financial growth, which as any fool can see is unsustainable and will end in tears with the collapse of banks and the loss of peoples pensions.

In the abscence of a company scheme where you have to pay a small amount in to get company payments nothing would make me give my money to a 3rd party to 'invest'. Not after the Northern Rock fiasco, and having read about the state of the financial system. I'd be a concientious non-payer. Or leave the country. Or live in a bus and grow dreadlocks.

Post by **mikepepler** » 06 Dec 2007, 13:25

Here's the Pensions Bill, I've not read it yet...
http://www.publications.parliament.uk/p ... 004057.htm

PS_RalphW · Post by **PS_RalphW** » 06 Dec 2007, 13:50

I have a company pension scheme which is generously funded by the company. And because I chose the 'ethical' managed fund over the standard one, it has performed reasonably well the last few years. However, the company is transferring us to an 'individually managed' scheme because they were getting flack from the low returns on their 'standard' managed fund.

This means I can now choose from nearly 300 different pension funds, all of them as different as ITV 17 is from Sky 32 or BBC 74. But with internet access and unlimited 'chop and change' options and an even more opaque charging schedule.

I am going to ask the advisers next week about SIPpS. I think they provide managed SIPPS pensions - but they look suspiciously like stocks and shares and commercial property companies and tracking funds, etc.

I will fight tooth and nail to get my money out and into something of material value. Not that I think it will help in the long run, because I will be forced to buy an annuity - which is funded by the stock market.

RenewableCandy · Post by **RenewableCandy** » 06 Dec 2007, 15:28

SunnyJim wrote:
RenewableCandy wrote:Another piece of news in the Metro today: HMG lodge a bill to make it compulsory to pay into a pension scheme: your own workplace one in the absence of 'alternative arrangements'. It's not on their website and the beeb haven't mentioned it.

Would my paid-off zero-energy house inhabited by extended family and veggie-garden (dream on!) count, I wonder?? Or would I be made to give up my hard-earned to some scheme which is doomed never to pay out?
...

It's a desparate effort to extract money from us and put it into the finacial system, helping to contribute towards continued financial growth, which as any fool can see is unsustainable and will end in tears with the collapse of banks and the loss of peoples pensions.

That's kind of what I thought.

But the article implied it only applied to people in work, so the only way you could get out of it would be by not working (formally).

I've just had a brief look at the bill and I can't find anything that says about compulsion, it must either be extremely well-hidden (wouldn't surprise me) or else Metro's somehow got it wrong (also wouldn't surprise me). Or perhaps HMG are thinking of adding it and so it's not there yet.

But just reading through that bill, when you think dozens if not hundreds of things like this are produced by HMG every year and they NEVER GO AWAY, makes you think about Complexity and how difficult our life is made: Complexity is like a tax on time.

Post by **kenneal - lagger** » 06 Dec 2007, 17:03

clv101 wrote:The really scary thing is that this afternoon Bush is set to announce a freeze on sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise. This sounds like economic madness, the state injecting crazy amounts of money into a fundamentally broken system.

Some income has got to be better than no income for the banks. If they repossess at the moment they are going to end up with loads of houses they can't sell. That is, if they can repossess. Deuche (excuse the spelling) Bank couldn't get possession because they didn't have the title deeds to prove possession.

Andy Hunt · Post by **Andy Hunt** » 06 Dec 2007, 17:06

clv101 wrote:The really scary thing is that this afternoon Bush is set to announce a freeze on sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise. This sounds like economic madness, the state injecting crazy amounts of money into a fundamentally broken system.

A knee-jerk reaction which speaks volumes that they don't have the situation under control.

Fire-fighting isn't the same as sound fiscal policy.

Post by **mikepepler** » 06 Dec 2007, 17:18

What I don't understand is what the US banks get from the government in return to agreeing to freeze the rates? Will they actually pay them to do it?

RevdTess · Post by **RevdTess** » 06 Dec 2007, 22:09

I found it rather disgusting listening to Bush on the telly going on about how 'the american homeowner deserves to be protected.'

What about those wise enough to be non-home-owners in anticipation of a price fall? What about those who could never afford homes in the first place? Effectively giving away free cash to homeowners is only going to fuel inflation and put off the problem until it comes back even bigger next time.

Unsurprisingly, the dollar weakened on the news and crude went from a very bearish market afraid of economic slowdown to a massively bullish market, gaining $3 to close over $90 - something which OPEC's refusal to add more supply and a weekly 8 million barrel reduction in US crude oil stocks singularly failed to achieve.

amazing.

Post by **clv101** » 06 Dec 2007, 22:11

Tess wrote:What about those wise enough to be non-home-owners in anticipation of a price fall?

Quite. I'm not happy. I should have been a sheep.

stumuz · Post by **stumuz** » 07 Dec 2007, 08:55

This interest rate cut is defiantly the first shot in the sheep V wise people conflict. By cutting interest rates with actual inflation rising quickly, it seems tptb do want to inflate their way out of the debt mountain.
This debt mountain would be very difficult to tackle using sound economic principals, far too much pain felt by people who have overdosed on cheap credit, who coincidentally are also the people who are doing the work in the GB economy.
The UK has 63million people of which approx 28 million are employed. If the tptb make a significant proportion of these people worse off by working, they will stop.

So the chances of the government making life a lot easier for the feckless?pretty good.

The people who will pay? Savers, those with no access to commodities and pension funds.

It could go the other way. The money supply could be curtailed and cash will be king, but the cutting of interest rates yesterday and the rumour of more to come suggests they are heading for the inflate your way out of trouble route.

The inflationary route has a long pedigree, the Romans started to add base metals to their coins when things started to get tight!

Post by **clv101** » 07 Dec 2007, 09:00

The media do seem to be turning fast on this whole economic mess. www.housepricecrash.co.uk are talking about the BBC breakfast news. Apparently:

"Some financial expert woman(missed her name) saying houses were currently overpriced by up to 50%"
"James Caan (not the actor from the Godfather, the one from the Dragon's Den) said that the IR cut is meaningless for any business other than big banks. All he cares about is the Libor, and he went on to say that currently the best rate a business would get is 7.50%."
"The icing on the cake was Declan. This guy keeps surprising me. He said AGAIN that due to incoming inflation rates should be raised."

Blue Peter · Post by **Blue Peter** » 07 Dec 2007, 09:04

mikepepler wrote:What I don't understand is what the US banks get from the government in return to agreeing to freeze the rates? Will they actually pay them to do it?

Or what about the bond holders who have bought these mortgage cash flows? Who takes the hit? the banks? or the bond holders?

Peter.