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So I trust most of you have seen all the stuff unfolding on the markets driven by the mortgages...I'm starting to really think about the likelihood of a recession or some serious inflation in the near term, particularly after what happened to Freddie Mac and Fannie Mae yesterday. These guys are supposed to be the best evaluators of credit around; they're supposed to be the providers of stability, and now they're cast in the exact opposite role. What happens when these guys get taken our or seriously hamstrung with losses?
These guys are the ones who basically insure the loans so that banks out there can keep extending mortgages to new customers. To the extent that these guys get incapacitated, the whole mortgage system will grind to a halt - and you can imagine what that means for the economy. I don't think that is in any way likely, as the government would absolutely have to bail them out before things got too bad. But still, this is likely to prolongue the entire mess...and as things get really bad Ben will probably end up slashing rates some more and pumping out more dollar bills into the economy...really putting us right into the crosshairs of some serious inflation.
Thoughts? Which will it be: Prolongued recession, high inflation, or somehow we'll get through it in one piece?
My best guess is that we're indeed going to have a recession in the near term. Batten down the hatches cuz it's gonna get ugly...
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