1930s-style debt defaults
likely, says IMF research - (www.cnbc.com) Many
advanced economies are likely to require financial repression, outright debt
restructuring, higher inflation and a variety of capital controls, a new
research paper commissioned by the International
Monetary Fund (IMF) has
warned. The magnitude of today's debt in Western economies will mean fiscal
austerity will not be sufficient, Harvard economists Carmen Reinhart and
Kenneth Rogoff said in the report, as policymakers continue to underestimate
the depth and duration of the downturn. "It is clear that governments
should be careful in their assumption that growth alone will be able to end the
crisis. Instead, today's advanced country governments may have to look
increasingly to the approaches that have long been associated with emerging
markets, and that advanced countries themselves once practiced not so long
ago," they said.
IMF paper warns of 'savings tax' and mass
write-offs as West's debt hits 200-year high - (www.telegraph.co.uk) Debt
burdens in developed nations have become extreme by any historical measure and
will require a wave of haircuts, warns IMF paper. Much of the Western world
will require defaults, a savings tax and higher inflation to clear the way for
recovery as debt levels reach a 200-year high, according to a new report by the
International Monetary Fund. The IMF working paper said debt burdens in developed
nations have become extreme by any historical measure and will require a wave
of haircuts, either negotiated 1930s-style write-offs or the standard mix of
measures used by the IMF in its “toolkit” for emerging market blow-ups. “The
size of the problem suggests that restructurings will be needed, for example,
in the periphery of Europe, far beyond anything discussed in public to this
point,” said the paper, by Harvard professors Carmen Reinhart and Kenneth
Rogoff. The paper said policy elites in the West are still clinging to the
illusion that rich countries are different from poorer regions and can
therefore chip away at their debts with a blend of austerity cuts, growth, and
tinkering (“forbearance”). The presumption is that advanced economies “do not
resort to such gimmicks” such as debt restructuring and repression, which would
“give up hard-earned credibility” and throw the economy into a “vicious
circle”.
Housing recovery sparks
pickup in home seizures - (www.cnbc.com) This
may be the last New Year's that Courtney Scott, 65, a retired nurse, gets to
celebrate in her modest suburban Atlanta home. Two days before Christmas, as
her quest for an affordable mortgage entered its fifth year, Bank of America
sent her another foreclosure notice—her fourth. Though the housing market
continues its halting recovery, thousands of homeowners such as Scott are still
struggling in the aftermath of the worst financial collapse since the Great
Depression. Even as the overall foreclosure level has retreated to pre-2006 levels,
the average length of cases already in the pipeline has increased. But that may
be changing. As the recovery in housing prices has helped lenders whittle down
a glut of seized homes, they've begun moving more properties to auction and
selling them more quickly. In states with the biggest backlogs—those where
judges review all home seizures—the pace of new auctions has risen steadily
since last July, according to Daren Blomquist, who follows foreclosures at RealtyTrac.
3
Ways Dodd Frank Law Will Roil Real Estate in 2014 - (finance.yahoo.com) According
to real estate attorney Shari Olefson, who also wrote the book Financial Fresh Start, the changes took effect January 1st and few
people even know about them. “It’s not a bad idea to have less risky loans,”
she says in the attached video. “The problem is folks are just not really ready
for this. Banks have been preparing for this for a while, but folks on the
street are just not aware of it.” What she’s talking about is the coming dawn
of the qualified or ‘’safe harbor’’ mortgage era. “Here’s the problem. In order
for banks to benefit from a ‘safe harbor’ against lawsuits by borrowers, the
loans they issue now under Dodd Frank have to be considered qualified
mortgages,” Olefson says. Specifically, she says that means debt-to-income
ratio cannot exceed 43%, points and costs cannot exceed 3% and banks must
independently verify that a borrower “has the ability to repay” via eight
different criteria. While the all sounds logical and well intentioned, Olefson
foresees some problems. “Here’s the catch, about 20% of people who have
mortgages right now, will not be able to get qualified mortgages. So
what’s going to happen to those people is they’re going to have to go elsewhere
for the new mortgage loans, or banks will have to price them more expensively
because they don’t have these protections against lawsuits.”
Obamacare Drives Up ER Visits - (www.newsmax.com) The
number of costly emergency room visits is set to soar under Obamacare,
according to a "gold standard" Harvard study, which directly
contradicts claims by President Barack Obama that his healthcare law would cut
ER trips. The millions of people who have just been enrolled in Medicaid will
go to ERs on a regular basis instead of their local doctors, according to the
research. Obama had said that his signature healthcare reform law would help
cut back on government spending by reducing trips to the ER, the Daily Caller reports. The study, published in the journal
Science and
released on Thursday, shows that the nearly 4 million new patients subsidized
by government under the expansion of Medicaid are more likely to end up seeking
treatment in emergency rooms for non-emergency health problems than before they
entered the program. Harvard conducted the study in Oregon in 2008 after that
state expanded its Medicaid program. It found that newly-insured Medicaid
patients went to the ER 40 percent more than the uninsured.
Bank of Finland Warns Debt Level Poised to Double:
Nordic Credit - (www.bloomberg.com)
Reinhart-Rogoff Find Hangovers in Bank Crises: Cutting Research - (www.bloomberg.com)
Reinhart-Rogoff Find Hangovers in Bank Crises: Cutting Research - (www.bloomberg.com)
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