“It’s a political hail Mary. It’s unclear why they want to throw a monkey wrench into a $5 trillion market,” said John Kerschner, head of securitized products at Janus Capital Group in Denver. He said the net benefits for the economy are negligible, perhaps adding $20 billion to $30 billion “at best” to the U.S. economy. Reuters News Service August 31, 2011
You remember a few years back when they reformed the bankruptcy laws. People were simply walking away from their unsecured debts through a bankruptcy filing. What did the banks do? They reformed the laws so that if you sought relief and protection from creditors through the courts that certain debts (those owned by the banks in particular) would follow you for life. The debts that couldn’t follow you (i.e. unsecured credit card debts) were allowed to charge exhorbitant amounts of interest to cover the high default rates.
That’s business, right?
Well, there’s a new plan coming down for those who want to refinance their mortgages. This plan will be designed to save Fannie, Freddie and the Dead Fed in one fell swoop all while sticking it to the Chinese. How is this going to work exactly? There are a lot of complicated details, but allow Dave to summarize.
You borrow the money in paper fiat dollars. You have a thirty year note and the expectation that your wages will rise (say 5% inflation) and that gradually the value of your income stream rises while the value of your debt diminshes and maybe you experience some price appreciation in the value of your property. Sounds like the American dream to Dave. Don’t fall for it.
The real plan, and Dave expects it to be buried in the fine print of these new refinance contracts in the form of some new synthetic vehicle which will allow the International Monetary Fund to leverage the value of Too Big To Fail bank bonds that it will acquire once the banks are “rolled up.” I digress…. let me get back to the point.
When you pay your debts off, you will be paying them off in a highly deflationary environment where the value of your wages is falling, your property value is falling and the future value of your debt is rising. It gets better. The dollars you will be paying back will be linked to the new divorced currency (see the new synthetic financial instrument that’s likely in the works) which will allow the banks to act as an extruder allowing the IMF to expand their drawing rights (balance sheet inflation offsetting your deflation) because you will be paying off your debts in gold. That’s right…. gold.
This won’t be gold you can get your hands on. It will be gold that is “synthesized” through the roll-up of the TBTF banks and the floating of a new occidental bond that combines U.S. Treasuries with the pan-Euro bond. You will be able to read about this more here at TradeWithDave, but I wanted to get this summary post up since the White House is preparing to make their release.
Someone needs to contact John Kerschner at Janus and tell him that it’s crystal clear. It’s a hail Mary alright… hail Mary full of gold.
Here’s a link to the entire Reuter’s release: http://www.reuters.com/article/2011/08/31/us-usa-obama-housing-idUSTRE77T6DV20110831?feedType=RSS&feedName=topNews&rpc=71