Shhhhhh - dont tell anyone!
 

I know, just more complaints. Data sucks when it comes to hope and change. I hate this reality crap.

Stimulus program results in high repo rate
Fri, 01/22/2010 - 17:50 — Consumers Law According to a recent research study, the Cash-for-Clunkers program resulted in high rates of repossessions for new car buyers. From USA Today: "Higher credit risk buyers who used the government's cash-for-clunkers program last year to buy a new car had higher repossession and late payment rates than those who didn't use the program.."

Of course, sub-prime borrowers are visited most by the repo man. According to the article:

Among subprime credit borrowers, those who used the clunkers program had a 4.8% repo rate, more than double the 2.2% who bought similar vehicles but didn't use the government incentives.

the phony govt. subsidies allowed them to claim little successes but in the long run they are all huge failures...:uhuh:



RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve

As recovery starts to stall in the US and Europe with echoes of mid-1931, bond experts are once again dusting off a speech by Ben Bernanke given eight years ago as a freshman governor at the Federal Reserve.

By Ambrose Evans-Pritchard, International Business Editor
Published: 5:11PM BST 27 Jun 2010


Entitled "Deflation: Making Sure It Doesn’t Happen Here", it is a warfare manual for defeating economic slumps by use of extreme monetary stimulus once interest rates have dropped to zero, and implicitly once governments have spent themselves to near bankruptcy.

The speech is best known for its irreverent one-liner: "The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost."


Recession almost at an end Bereanke began putting the script into action after the credit system seized up in 2008, purchasing $1.75 trillion of Treasuries, mortgage securities, and agency bonds to shore up the US credit system. He stopped far short of the $5 trillion balance sheet quietly pencilled in by the Fed Board as the upper limit for quantitative easing (QE).

Investors basking in Wall Street's V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.

The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month. This is a volatile index that can be distorted by the supply of new ships, but those who watch it as an early warning signal for China and commodities are nervous.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on "monster" quantitative easing (QE)".

"We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable," he said in a note to investors.

Roberts said the Fed will shift tack, resorting to the 1940s strategy of capping bond yields around 2pc by force majeure said this is the option "which I personally prefer".

A recent paper by the San Francisco Fed argues that interest rates should now be minus 5pc under the bank's "rule of thumb" measure of capacity use and unemployment. The rate is currently minus 2pc when QE is factored in. You could conclude, very crudely, that the Fed must therefore buy another $2 trillion of bonds, and even more if Europe's EMU debacle goes from bad to worse. I suspect that this hints at the Bernanke view, but it is anathema to hardliners at the Kansas, Richmond, Philadephia, and Dallas Feds.

Societe Generale's uber-bear Albert Edwards said the Fed and other central banks will be forced to print more money whatever they now say, given the "stinking fiscal mess" across the developed world. "The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant," he said.

Despite the apparent rift with Europe, the US is arguably tightening fiscal policy just as hard. Congress has cut off benefits for those unemployed beyond six months, leaving 1.3m without support. California has to slash $19bn in spending this year, as much as Greece, Portugal, Ireland, Hungary, and Romania combined. The states together must cut $112bn to comply with state laws.

The Congressional Budget Office said federal stimulus from the Obama package peaked in the first quarter. The effect will turn sharply negative by next year as tax rises automatically kick in, a net swing of 4pc of GDP. This is happening as the US housing market tips into a double-dip. New homes sales crashed 33pc to a record low of 300,000 in May after subsidies expired.

Wait, there are incentives to help people buy cars (i.e. more new cars sold) and the rate of repossession goes up?

This is Earth shattering analysis.

So what you're really saying is that the cash for clunkers program benefited not only the consumer and auto dealer...but the repo industry as well!

Sounds like a hat trick.

-spence

the only Stimulus i want from my government
comes in a baggie.

Why would the amount of cars sold affect the "rate"???
The rate should remain flat regardless of the volume of cars sold. What this tells us is that more cars were sold to people that cant afford them. Which, if you remember, buying what you cannot afford is what caused the credit crisis.
so once again, help the failures, punish the successful

You're injecting the market with a flood of new loans during a recession.

But the purpose of the plan was to create cashflow and demand for manufacturing as well as get older less efficient cars off of the road. Cars that have been repossessed will be sold off and continue to benefit the system.

It would be very difficult to measure the NPV of such an action, but it doesn't seem like a terrible waste of money and probably did some good.

-spence

Go Punch A Car Salesman....they sold them the car

Oh I get it. I think its called voodoo economics.

No, it's just get your criticism in place. I can see some saying the Feds shouldn't be meddling in this, although there's plenty of precedent.

Ultimately it's about the benefit to taxpayers. The repo rate increasing doesn't mean it wasn't a positive action.

-spence

So it's positive when a person has a car reposessed or defaults on a mortgage? This helps the economy in what way? I'm not in finance, so could someone please explain how having your credit rating go in the toilet and losing your house and or car can be good?

Spince, the more you try to spin things, the more people realize you're just a windbag with a better than average vocabulary.:grins:

That is correct sir! So why help people remortgage when they are over their head. Repo is a good thing:rotf2::biglaugh::rotf2::biglaugh::rotf2::rot f2::rotf2: