Latest from Peter Schiff

By on August 11, 2007

Latest from Peter Schiff, http://www.europac.net/newspop.asp?id=9538&from=home Amid all the recent hoopla about defective Chinese exports, America has proved that when it comes to flooding the world with shoddy merchandise, nobody beats the good old USA. Sporting higher yields than Treasury bonds, investment grade ratings from reputable agencies, and juicy commissions for the investment banks that packaged them, these structured mortgage bonds have quickly become America’s greatest export. This week, several of Wall Street’s best foreign customers announced staggering losses on the American mortgaged backed securities they had been sold. The fundamental issue underlying these losses is that Americans borrowed more money than they can afford to repay. As initially low teaser rates expire and mortgage defaults increase, foreign lenders are discovering that the residential properties that collateralize the mortgage bonds are not worth anywhere near the loan amounts. As more of our nation’s creditors finally realize that they have been duped, the credit well fueling American consumption will run dry. Foreign lenders will simply refuse to accept our IOU’s as payment for their merchandise. Lacking in savings and productive capacity, we will be forced to accept dramatic reductions in our standard of living as a result.

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