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US credit gone mad...


  1. From Financial Sense
    "God bless the American consumer. For without them, the U.S. economy and other economies around the world would be in deep trouble. The willingness of the American consumer to go deeper into debt to maintain personal consumption has surprised even the most optimistic economists on Wall Street. With mortgage rates at record lows, and the advent of no-points mortgages, the consumer has been able to tap a deep well of money made available by Greenspan’s latest bubble: the mortgage and housing market. With the banking system flooded with fresh money and GSE’s able to tap the securities markets as money roles into bond funds, the supply of new credit is becoming endless. With interest-only loans, second mortgages at 125% of the value of home, and adjustable-rate mortgages, the ability to extract equity out of a home has created a Fed-induced consumer money machine.

    The result is that the consumer goes deeper into debt and keeps his payments the same. It is the next best thing to printing money. Up until this time, printing money has been only a central banking and government privilege. However, with the Fed lowering interest rates and flooding the banking system with money, the common folk have been let in on what was once the providence of central bankers. That is the great thing about American credit -- it has now become freely available to all, regardless of one’s financial status. With the modernization of the credit application process, we now have “Don’t ask / Don’t tell” loans where income or assets don’t have to be disclosed. Having a job may not be necessary, or for that matter, having any assets at all. Is this a great country or what?


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