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Treasury scales back PPIP startup to $20B, from planned $100B - for now. “It...

Jul. 02, 2009 6:02 PM ETBy: Eli Hoffmann, SA News Editor1 Comment
Treasury scales back PPIP startup to $20B, from planned $100B - for now. “It wouldn’t shock me if the program never gets any bigger than this,” one investment banker says. Noam Scheiber revisits whether the goal was achieved without PPIP. At the core of the program's difficulties: how to get banks to sell distressed assets at a big loss.

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hedonist profile picture
The recession started with the housing bubble....
And it will begin to end with an improvement in that sector.

At the current sales pace, there are 9.6 months of supply of existing homes on the market.
Compounding this problem, are high mortgage rates, as the Fed keeps pumping money into the system.

The volume of mortgage applications filed last week dropped a seasonally adjusted 18.9% from the week before, as refinancing activity plunged, putting the MBA survey's refinance index at its lowest level since November.

With housing in dire straits, there is a negative wealth effect; in this environment, with incomes much lower, the problem is accentuated by the savings rate flying to 6.9%; this further dampens spending power.

When the consumer is not spending, goods will not be in demand;

When goods are not in demand, manufacturing activity slackens.

Capacity utilization drops and it has dropped to 65%, instead of 70%.

This leads to job layoffs.

In the meantime, we have the time bomb of inflation being carefully nurtured by the Fed, by the indiscriminate printing of money... this at a time when banks are not lending liberally;

When they do, this supply, plus the trillions printed by the Fed will hit the system, resulting in inflation which Mark faber thinks, could touch 20%.

This thesis will enlighten you as to why the Indices at their current level are a con and a danger for the innocent investor.

To invest in bonds is dangerous, because the US$ is expected to lose about 50% of its value over a protracted period of time, due to the huge monetization of debt.

Investing in gold could be one of the best bets but it would only pay dividends over a protracted period.
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