Tuesday, July 26, 2011

The Mortgage Professor is Worried

Jack Guttentag writes:


...“If a default had the horrendous consequences you describe, and these induce Congress and the Administration to agree finally on an increase in the debt ceiling, how long would it take financial markets to return to normal?”
 Markets would never return to a state where US Government obligations are viewed as riskless. We will pay for this loss of grace forever.
 Investors in fixed-income securities are worse-case oriented, and make a major distinction between the impossible and the unlikely. The current rates that the Treasury must pay investors are based on the assumption that default is impossible. Once a default occurs, it will NEVER again be viewed as impossible. The additional cost of carrying debt on which default is possible will be paid forever....
Read the whole post.

1 comment:

davelindahl said...

DAVID LINDAHL say that once you thing a real estate asset has a Encumbrance then browse the net and get a Realtor in that particular area and call and inquire what he or she may know about that real estate asset or location of the property, this will surely protect you from the future issues and head ache due to wrong move.