RE:More on my FNM/GSO coming implossion.
The following is my Saturday morning opinion.
Sure the Fannie and Freddie situation looks gloomy. what were the alternatives? When Fannie was created in 1930, the middle class was much smaller as a % than it is today. The economy was also much smaller.
Since 1970 the % of homeowners has more than doubled.
What is the last debt to be defaulted on in Bankruptcy? Right, the house. People as a rule will lose everything else and even go hungry before they default on the house.
Where would the money be now if not sunk into Americans' most important asset? In the Stock market? How big would the bubble be today if that were so? When the bubble bursts in the stock market, money just disappears. In the housing market there will be trillions of dollars in long lived assets to weather the storm.
Lastly, what about the multiplier affect? Housing dollars create prosperity and jobs in many industries. Each dollar spent creates profits and taxes. Each dollar goes into a bank account somewhere and furthers the bank multiplier affect. Investment money is created to promote more economic growth.
Frankly as a point of generation of new dollars, I would rather base the economy more on housing than on automobiles. There are lots more hundred year old houses out there being remodeled than hundred year old cars.
There are many ways to honestly keep the housing sector strong. All America needs to do is open the immigration gates and instantly create a whole new upwardly mobile middle class.
Russia and Argentina can't do that.
BT
AI
