Economics

There is a problem in the "Comercial Paper" market......

WTF is the Commercial paper market?????

Well Money people trade these things around, specifcly banks. they also take out loans based on them. Commercal paper, are things like "Loans, and mortgages" that people have taken out and are paying back. Trillions of dollars of these things move about the markets.

The problem happend over a week ago, when Europe realized that they had tons of this crap, and that it was lableled incorrectly. They have ratings on them, and somehow you could roll together 20 B+ papers into a "AAA" paper. Well in truth these things are only worth about 80% of their earlier value. So, Europe locked up the comercial paper market. Refusing to take this "Crap" paper. So the federal reserve had to step in, and apply some cash to help get that market moving again.

The extended problem is that More and more people are waking up to the value of their home being 80% of the ammount they payed for it. This becomes a problem for people who were speculating in the real estate market. Also there are Millions of people who have variable rate loans, and have to renegociate that loan this Fall. There will be a wake up when they realize that they owe 500,000 on a 400,000 house, and the payment is about to go up.

Here is another funny one: The Weakenss in the housing market showed that the "High End" market was still OK. Housing builders then put all their efforts into building 500,000-1million dollar homes....... Well, now there is a Glut of them, so they are worth even less, But no one can afford them.