1 So far,so bad. on Thu Feb 19, 2009 6:49 pm
My comments heree are not a criticism of any person,place or thing. Normally, I don't care what the DOW says. But in this enviorment,it matters. Investors don't invest based on their emotions, they vote (invest) in a way that will preserve/improve their holdings. The DOW isn't dropping because investors are "worried". The DOW is dropping because the investors know that in a short period of time, they will be able to buy treas. notes with guaranteed high APYs. So where will companies get money to maintain or expand their business? Good question. The banks will only lend them money at rates higher than the APYs so that the banks can make a profit in orfer to take that risk. The inflation cycle has already started. In a year or two,after the government has covered and funded all the "stimulus" plan demands, the pressure will be off the lending institutions and they will start lending again. At what rates? Banks count guaranteed notes as "cash assets" and all their money will be tied up in those. The banks can trade them, at a discount, and get cash. But will make back that discount and add a % increase to make the deal profitable for the bank. I was touring Nexico right after their oil boom collapsed. CDs were being advertised in the papers that paid an APY of 24%! Work had stopped for lack of funds and we saw huge office complexes abandoned and empty for lack of construction funds. Unfinished highways and roads leading to them and sometimes,nowhere (I have pics). The real estate value here lost $12 trillion. Most mortgage holders will see their property worth less but they will make their payments. What choice do they have? $4 trillion is in,or will soon be in,default. The value has simply disappeared and the owners can't refinance at the bank. The gov has borrowed all the money. We will hear the word "hyperinflation" used more and more. Most of the stimulus funds will go to hire people on a temporary, project by project basis, and it may be that the gov. will be the employer of first choice instead of the last. What will our system be then? I've rambled enough.
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