Bailout Plan To Affect Calgary Housing
In Future? You can Count On It.
Priced For Perfection?
Graphs
his letter is going to be much longer than our usual effort
because of the large number of graphs but, before we get to
those, we’d like to dwell for awhile on the 700 Billion Dollar
U.S. Economic Rescue Package, a.k.a. Bank Bailout Plan
which was just enacted by the U.S. government. Then, we’d like to
ponder, just for a bit, on the future ramifications which these ac-
tions may have on the Calgary real estate market so strap in, it may
be a bumpy ride.
First of all, it is generally accepted that this initial plan will have to
be followed by yet another set, or even sets, of cash infusions be-
fore “The Mess” is cleaned up. As to how much, some say perhaps
another 1.3 trillion but, truth is, they are just guesses and the fact is
it could be somewhat less or a lot more. And that is just the U.S.
You can look for the same sort of actions by governments around
the globe, for as we all know, “Sub-Prime” and the derivatives
thereof have infected nearly every financial institution in the world.
Second, it should be understood that this problem, which took years
to unfold will take years to cure and finally, we should all believe
Ben Bernanke when he says The Fed will do “whatever it takes” to
solve the crisis. What does that mean? It seems clear to us: Huge
injections of cash into The System and yes, much lower short term
interest rates. How much lower? We hear 1 point lower by 2009
and our best guess after that is at least another half point lower by
year’s end, 2009. That would put short term U.S. rates (Fed Funds)
at 0.5 percent.
So much for the financial system and Wall Street. The U.S. real
estate market and Main Street is quite another matter though, and
nothing we see so far will stop the tidal wave of foreclosures from
continuing for at least another 12 – 18 months and nothing is going
to stop a good recession from invading the overall U.S. economy.
In short, U.S. unemploym