1. There are now a lot of people out there who have collected houses – I know at least 3 people who own at least 6 houses each – and I don’t move in affluent circles. In other words there are a significant number of people who own and rent at least one house – so a rate reduction will help them immensely, but not increase available money in the average budget.

2. A significant proportion of home loans are currently fixed. A year ago the trend was for an increasing rate, a lot of responsible people, fixed their home loan.

3. There is now in Australia, due to the aging population, a large number of people who own their own home already. Changing the official interest rate will have very little effect on them.

4. Credit cards – the personal debt level is the highest it’s ever been, until these rates come down there will be little extra spending money in the economy.

Thanks and Regards

Rick
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Over the last 6 years, FNM and FRE bought or insured 700 billion subprime and Alt A loans. The default rate on these is 30%. $210 billion.

FNM and FRE have a claimed $60 billion in equity. Ignoring that this is also a lie involving creative accounting, we’re down to $150 billion. $25 billion?! A flat out lie from politicians, with obvious intentions.

A closer look at the matter reveals much worse. Compared to historic values, the housing bubble (hmm what helped create this it…) has increased housing prices to an unprecedented 200% of their real, long run mean value.

FNM and FRE have claims officially on $5 trillion in mortgages. A small mean reversion to the historical house price is going to put losses greater than $1 trillion.

Putting your faith in numbers released by the Congressional Budge Office without examining their incentives or the validity of the numbers is folly.

The $25 billion number is fiction. Its a number designed to minimise the amplitude of the problem in order to dilute the problem over time.