This week has been an extremely volatile one in the world of real estate and the economy. We’ve seen Gold at $1,000 an ounce, a collapsing dollar, oil skyrocketing, an much more. Of everything that has happened, probably the most shocking is what came out of the Fed this week . . .

According to the The Daily Telegraph, “The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.” Tim Bond, a strategist at Barclays Capital remarked, “The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody’s attention in Washington”

At Least President Bush is Confident in the Economy!

It seems like everybody but the President, who continued to dodge questions about the economy until a press conference today where he expressed his “confidence” in the US economy. I’m glad that he is confident, but he’s doing little to stem the collapse of the dollar and the looming current recession.

To make matters worse, suffering investment bank Bear Stearns today was given a bailout by J.P. Morgan Chase and the Federal Reserve Bank of New York. From the Wall Street Journal:

The intervention by J.P. Morgan and the New York Fed shows Bear “didn’t have enough money to turn the lights on this morning,” said Carl Lantz, strategist at Credit Suisse. “And in a big picture sense, this isn’t that comforting.”

This news turned a somewhat positive market (inflation report wasn’t as bad as expected) upside down once again, and at the time of publishing this post, the Dow is down 300 points and Bear Stearns is off 40%.

Talk about an economy we should be Confident in!

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Tags: bear stearns, dollar, Economy, Euro, fed, federal reserve, George Bush, monetary policy, president bush

If someone were to have said, say a year ago, that there would be a crisis in the subprime mortgage market that would lead to world-wide economic chaos, that person would no doubt have been laughed at.

Sadly, though, that is exactly what has happened and the evidence just this week is overwhelming.

But, before the depressing news, how about a little uplifting news? You know you want it!

The Fed To The Rescue: Too Little Too Late?

The Federal Reserve has come up with a “rescue” plan that, as the Associated Press put it, “would pour as much as $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.”

Why does this matter?

Because the mortgage crisis induced credit collapse has made banks and other lending institutions not want to lend money to one another. And, in the end, that means they don’t want to lend money to you.

Under this plan, financial institutions can borrow from the Fed, and, in effect, exchange their questionable mortgage-backed securities for a sure thing: U.S. Treasury securities.

In theory, this should trickle down and make banks and others more likely to extend credit to all of us…and that includes new mortgages, which could help take some of those now empty foreclosed houses off the market.

Is this enough?

Says Ian Shepherdson, chief economist at High Frequency Economics, “This will not turn the economy around or fix all the problems in the markets but it should reduce the liquidity issue, at least for now,” according to the A.P.

Hold On. Here Comes The Promised Depressing News

Told you we’d get to this. If you are the weak knee type, you may want to stop reading right here and make yourself a cup of coffee…even though world coffee prices have jumped more than 20 percent in the past year.

But, if you are strong, read on and keep a tissue nearby. Better yet, keep a box of tissues nearby . . . although paper prices, too, have risen.

$6.1 billion dollars is how much Fannie Mae and Freddie Mac lost in the fourth quarter and they think they will suffer billions of dollars more in loses as we crawl through 2008.

The price of gas has gone up as of this writing to a new national record–$3.2272 a gallon, on average. And, in places such as Southern California, it costs even more. We’ve already seen some service stations charging $4 a gallon for regular gasoline.

In large measure, gas prices are now rising–they did lag a bit–because the price of light sweet crude oil keeps setting new records just about every day. It was trading at $109.72 at one point today (Tuesday) in the New York Mercantile Exchange.

120? Did I Hear 120? 120, Going Once, Going Twice, Sold To The Suckers Around the world.

That’s right, there are now serious projections that oil could rise to $120 a barrel.
And, ready for this? Maybe even higher??

Because U.S. dollars are so much cheaper now against many currencies, partly because of what began as a subprime mortgage crisis, and partly because of the ever expanding economies of China and India, the U.S. trade deficit in January rocketed to $58.2 billion from $57.9 billion the month before–this according to a Commerce Department report issued today.

Talking about China, and I was, our trade deficit with that country also got a lot bigger and is now $20.3 billion as of January. It was $18.8 billion in December 2007.

Even Google?

Yes, even Google, which pretty much owns the entire planet by now, is talking about possible layoffs soon! I mean, Google? You’d think they’d be able to Google for a solution to their problem, right?

I know what you are thinking. You’re thinking, yeah, this is pretty depressing stuff, but, boy, what about that stock market Tuesday which had its biggest one day rally in some six years, the Dow Jones industrials up 416.66 points!

Come on. We’re all adults here, right? Nice that the market went up so much on one day, but does anyone really think this will start a trend, what with all the bad and uncertain economic news out there? Shame on you if your answer is yes. Hate to introduce some more doom and gloom to this otherwise upbeat last few paragraphs, but you know the market is going to plunge again and probably lose whatever it gained in trading today. Of course you know it!

Like I said, if someone would have said a year ago that a subprime mortgage crisis would ignite all of this—-well, come to think of it, if someone had, that someone should have been made Secretary of the Treasury or even President. But, that’s a whole other story.

Tags: bailout, banks, China, dollar, Economy, Euro, gas, gold, google, government, housing, Interest Rates, oil, real estate, subprime

On Friday, Gold hit a 27 year high as investors around the world ran to safety from the plummeting US dollar. Hitting $752.80 an ounce, Gold is at levels we haven’t seen since January of 1980.

Additionally, the dollar index, which measures the greenback against six major currencies, fell 0.8 per cent to a record low of 77.66 on Friday. The index has fallen 5 per cent since mid-August. (Source: FT.com). All you have to do is look at this index to see that we’re on a free-fall.

I’ve begun to hear people from around the country asking about putting their money in foreign currencies, something I’ve never personally experienced. It seems as though those people who are aware of what is happening to the Dollar are really getting quite nervous.

To make matters worse, The dollar fell to a record low against the euro for the seventh consecutive session while the Canadian dollar hit a 31-year high as inflation data raised expectations that the Federal Reserve Bank would again lower interest rates. Longer term, the U.S. has been running large trade and budget deficits for years — factors that tend to undermine a country’s currency in the long term, unless they are offset by foreigners willingness to invest their money in the United States. (Source: Yahoo Finance)

Unfortunately, it seems as though there is a new global unwillingness to invest in the US, thanks to the growing fear of recession, and countries pegged to the dollar are wondering how to stop the bleeding in their own countries.

As the Dollar falls, people globally are looking for an alternative, and I think the Euro will reap the benefits of renewed confidence. The Euro will only grow in strength and stature as the Dollar falls.

Tags: Canada, currencies, currency, dollar, Euro, gold, platinum