The Global Economy

Now more than ever before, the world's economies are linked together. Is this a good thing or a bad thing? Only time will tell. At this point it seems that greed and ignorance is driving much of what is behind foreign policy in the United States and across the globe. Ignorance in that most people don't even know what to pay attention to as the world integrates their economies...and the smart and cunning people are out there making lots of money where nobody can see. I guess this is to be expected and it will hopefully taper off in the near future. One of the most compelling case studies in this is the current "subprime meltdown" that people in the media and Congress like to talk about every day. The fact of the matter is, nobody really knows what the situation is as this time there are many people holding the bag...or at least parts of it and they may not even know. Hedge funds and quasi-hedge funds in the US, Europe and elsewhere have been leveraging their holdings to buy pools of mortgage backed securities for some time now. Many times, what they were sold or selling was not what they thought it was. It seems the only people that have been paying attention were the hard money lenders that have always used a a collater-centric approach to underwriting real estate loans. We may never know where all of the real estate that has been defaulted on is held. The paper that backs these collateralized loans is held in small part by many different people, groups, institutions domestic and foreign that it is nearly impossible to tell.

It seems that the public at large is not interested to know that the major economies in the United States and Europe have had to print billions of dollars and Euros (respectively) to make sure that their financial institutions did not collapse overnight. This, unfortunately, is not an over-dramatization of what took place a few weeks ago. If you are interested go back and read about the federal reserve bank overnight lending rates and discount window enhancements as well as the European Central Bank's actions in the days preceeding. Maybe it is better that people have no idea what is going on as it would only lead to more chaos in and out of the financial markets. For now, sites like OBares, which caters to For Sale by Owner types, will see a flood of new listings as people try to get out from under the mess they have put themselves in financially. Many people however, will not be able to sell their homes and will be kicked to the curb by the local Marshall because they have defaulted on their home loans. Is it the lender's fault? The unscrupulous mortgage broker or the property owners' themselves? I think we are walking a fine line if we do not hold the property owner(s) accountable first and foremost. Signing on the dotted line has to continue to mean something or chaos is likely to come like we have never seen before. If people lose confidence in the system, there will be no system. OF course, there are people out there who preyed on the ignorant and the stupid and they should be punished as well. I speak to many of these ding-dongs on a daily basis and many of them have hung up on me when I start to ask them questions about their "business practices."