On the positive side, it is hoped that such action will put the housing crisis aside or at least help to set it aside for a while. As Henry puts it: "Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing.''
On the negative side, we knew very well that such step meant another printing money exercise on the part of the US administration. The Fed's printing machine is going to run for a long long time. I don't want to repeat our concerns with devaluation of USD, interest rate fluctuations, hyperinflation and diminishing faith on the strength of the US dollar. Well, the US government is in effect taking over at least half of the US home-loan market and you know, this time is truly too big to fail. The size and magnitude of the problems behind Freddie & Fannie's conditions must be huge, so huge that only the US administration can have a clear or clearer picture.
On the brighter side, I would agree that the takeover may hopefully avoid a confidence crisis in the US financial strength. Well, this reminds me of one of the predictions in the Epilogue of Peter Schiff's Crash Proof (2007):
"Insolvency at Fannie Mae, Freddie Mac, ... could create an international crisis of confidence in the country's ability to make good on its financial promises."
I also hope that the takeover would further build up confidence in the US dollar and US equities.
But at this moment it is still too early to say what the likely effects will be. If the market can keep calm and look at all the facts and data that may be disclosed or released by the US administration, then maybe the takeover will be overwhelmingly welcomed by the international markets. But if the facts and data including how big the problems are behind Fannie & Freddie cannot be fully released to give sufficient clarity and transparency, then too bad to everyone. That means the crisis is far from over and no one knows how deep the abyss is.
What worries me most is the reactions of countries holding US bonds and investments like Japan, China, etc. If anyone of them decides to give up or reduce its US holdings, then ... I really don't know!
You see Hong Kong is already a poor victim of the sinking US dollar since HKD is pegged to USD. All of us in Hong Kong are paying the price to uphold the value of the sinking USD but the irony is that we are Chinese not Americans! See people in other places of the globe are paying for the losses caused by real estate speculations and credit crunch crisis originated from the US. How unfair this is! Hong Kong is a slave in chain tied forever to the sinking USD and this slave lacks the will power to rebel against such tyranny. Instead Hong Kong chooses to give its blood to sustain and uphold the value of a sinking foreign currency at the expenses of its Chinese people!
I may be naive and stupid but I am not really dumb! Why should I uphold a sinking USD in order to bail out the sinking US housing market? Why should I pay for the wrongs done by Wall Street? Did anyone help Hong Kong to bail out its collapsed property market in 97-98? No!
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