"Quantitative Easing??" Try, "Printing More Idiots"

Is the Fed Repeating
Wall Street's Sins?

Joe Nocera: At a certain point, Wall Street ran out of clients to sell [securitized debt] to. So the only way it could keep the machine going was to buy it themselves.

Jon Stewart: So, they infected themselves. At the end, they themselves became vampires.

[Which suggests] a new theory on the financial crisis: it occurred because of an idiot shortage. If I'm the Fed, I just print more idiots.

--Bethany McLean and Joe Nocera Interview; The Daily Show (11/16/2010)

That's it!

Instead of calling the Fed's current monetary policy something arcane like "quantitative easing," how about calling it "printing more idiots?"

At least, that's how I understand it.

Just like Wall Street ran out of "idiots" to sell securitized debt to, the U.S. Treasury has started to run out of investors to buy (more) U.S. debt.

China already stuffed to the gills with U.S. bonds?

Ditto for Japan, Singapore, South Korea, Saudi Arabia and all our trading partners on the other side of our yawning trade deficit?

No problem -- we'll buy the bills and bonds ourselves!

Two years, five years, ten years . . . you name it.

In fact, we -- the Fed -- will buy so much, we'll actually drive interest rates down.

Which is quite an accomplishment, given that long term interest rates have already collapsed, and short term rates are effectively zero.

Nothing could possibly go wrong with such a scheme . . . . right??

Refinancing Motive #23: Making Your Home More Saleable

Is Your Mortgage Assumable?

The interest rate on your mortgage is already low (or, you don't have a mortgage).

You're allergic to paying bank fees.

And you're not contemplating moving any time soon.

Should you still refinance?

The surprising answer is, perhaps "yes" -- especially if your current mortgage is not assumable.

That latter feature could very possibly be the difference between having a sellable home in a few years and not -- particularly if the Federal Reserve's current machinations result in an inflationary spike (and dramatically higher mortgage rates).

Then, the couple grand in refinancing fees will have turned out to be very cheap insurance.

Your lender will let you know which mortgages are assignable, and which aren't.

Is 4.25% the Floor?

Cutting to the Bone

Can 30-year mortgage rates -- now quoted at a previously unheard of 4.25% -- go much lower?

Regardless of what the economy (or Fed) does from here, it may be hard for rates to decline much more, simply because banks' overhead to originate and service mortgages is about that much (or so I hear from one local lender).

What's that line about a particularly clueless merchant?

"They lose money on every deal, but make it up on volume."

ZIRP Winners and Losers

Boon For Wall Street,
Goose Egg for Savers

Want to place a bet on how long the Federal Reserve's current policy of zero percent interest rates ("ZIRP") continues?

Consider who it helps -- and hurts:

ZIRP Winners:

--U.S. Treasury (debt service kept artificially low)
-- Wall Street (free money -- how nice!)
--Mega-Corp Borrowers (ditto. IBM just borrowed more than $1 billion for . . . 1%!!)
--Home owners (*kind of)

ZIRP Losers:

--Retirees and other savers

My money's on zero percent interest rates . . .

*Historically, cheap mortgages stimulate housing demand. But cheap money can be trumped by other factors, like falling asset prices, high unemployment, etc.