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The Housing Nightmare Hits Main Street - US News and World Report
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 2 years 12 days ago (usnews.com). Views: 59
Tags: housing bubble |
| Related Tags: credit crisis gold wall street peter schiff economics inflation banks |
One domino toppling the next. It's been a convenient metaphor for how troubles in the American subprime mortgage market have cascaded into a global financial mess. Rising interest rates collapsed the housing bubble, which caused a wave of subprime mortgage defaults and foreclosures. That, in turn, froze corporate credit markets as risk-averse investors stopped buying esoteric mortgage-backed securities and led to big losses at bond insurers. Auction-rate securities—an obscure corner of the credit market used by hospitals, museums, schools, and local governments—have been the most recent dominoes to tumble. "We've gotten to the point of almost paralysis in some segments of the market," says David Resler, chief economist at Nomura Securities.
A daisy chain of financial disaster, you might say. One crisis begetting another. Yet at least there's been a certain linear, if ruthless, logic to it all. But now there are signs that the housing recession is turning into a full-fledged economic meltdown in what the Federal Reserve recently called an "adverse feedback loop."
Put simply, this means a tightening of credit across the spectrum—from mortgages to credit cards to auto and student loans—that robs consumers of their confidence, further constricting credit and stopping the economy in its tracks. Result: a full-blown recession as nasty as Americans have seen in a generation.
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