Well Wall Street Carnage

[kandrathe]

No, your right. I just found it interesting, but you called me out. I knew I shouldn't have posted it when I hit the Add Reply button and got that sinking feeling in the bottom of my stomach. No apologies, I'll just delete my post.

It was one sided, but also interesting. The part that was poorly explained was the bit in the middle regarding the "wedge" between normal inflation rate and the inflation of prices in the housing market. That part is better understood in the context of the article I posted on China's affect on Western markets. One big factor in this mess is China's currency manipulation and its subsequent effect on US (World) Trade. After the tech stock bubble burst, the Fed lowered interest rates to historic lows, and kept them low for over a year. The US treasury trying to keep up with the deficit, also capped 30 year bonds, and started pressing people into 20 year and shorter Treasury bonds. Then China, in it's attempt to fix the yuan to the dollar, bought billions in US treasury bonds. These combined issues made many bond investments seem either too risky or too low yielding, so tons of money flowed into GSE's.

The source of all this mess is ultimately unwise investments, and bad government, but also the US's unwillingness to rock the boat and call China to task for it's unfair currency manipulation throughout the past two decades. Bad government in this case was forcing banks to make sub prime loans, and unwillingness to reform Fannie and Freddie when they (Congress) knew it was a problem for a decade.