With U.S. mortgage defaults up 90+% from a year ago, collapse of U.S. mortgage market is being felt around the world. U.S. housing starts have fallen to a ten year low, and are headed lower. Financial infrastructure that fueled this speculative bubble is being dismantled. Rate is important, but so is means of funneling money to borrowers. Mortgage financing system begins with mortgage brokers at front end. Mortgages then travel through layers of investment bankers till ultimately residing in portfolios of gullible investors around the world.

That system is disintegrating through bankruptcies and layoffs. System that created the money flow from investors to housing is being dismembered. Less money will flow to housing market. Less money means lower prices. Given long-term nature of housing and collapse of financing mechanism, U.S. housing starts will fall 50% from current levels as sales stall.

Central banks around the world have been forced to provide emergency funding to financial institutions troubled by impaired holdings of U.S. mortgage debt. Germany, for example, seems to have a weekly problem. These central banks may look to their investment portfolios for funds to aid these institutions. For the past two weeks official institutions have been net sellers of U.S. government and agency debt. Should they be sellers this week, that would be three weeks in a row, which has not happened in two years. Collapse of U.S. mortgage market has burned many foreign investors They most likely will be forced to become net sellers of U.S. dollar debt. Dollar's structural bear market will continue as foreign investors shun and sell dollar debt. Gold is the only true refuge in such an environment.

By Ned W Schmidt CFA, CEBS

GOLD THOUGHTS are from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. For a trial subscription email nwschmidt@earthlink.net. Ned will be exploring the Gold Super Cycle at The Wealth Expo in NYC, 19-21 October. For information go to www.wealthexpo.net To receive copy of July issue of The Agri-Food Value View , an exploration of Agri-Food Super Cycle. write agrifoodvalueview@earthlink.net

Ned W Schmidt Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.