That would be a ridiculously low rate that would make home ownership very difficult to come by. The sub 5% rate at present is around record lows, and the ~5.5% rates induced by the government in the early 2000s was largely responsible for the hyperleveraged economy that is now crumbling.

I think that's one way of doing it if it worked.

I think pulling the first column back up isnt going to undoo the domino effect, the damage caused by the crisis causes more damage of its own, being that why eventually the whole world and ever industry is affected.

MJA, your solution is an over-simplified way of addressing only the crashed housing market.

The effect of the housing crisis spilled over to other markets. How about the credit crisis (report has it that the situation is ameliorating), trade and industrial production which has dried up as global demand plunges, rising unemployment, etcetc.

All these have to be addressed in order for the economy to begin a proper recovery.

I was told today that my idea for a house loan bill was similar to one used by FDR during the Great Depression . If it worked once it can work again. Not only would such a simple cure turn around the root cause of the current economic trouble, it would re-regulate the banking industry that has gone so wrong. Those other problems you are concerned with Jose would also be positively affected by a positive solution to the housing issue. Fixing the economy is fare more simple than we think. I wonder why our government taking these simple steps to fix it.

Here is another simple solution from Ellen Brown,
http://www.yesmagazine.org/article.asp?ID=3394

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MJA

There weren't any sub-prime mortgages and credit default swaps back in the 1920s.

The conditions are different now. The cause (greed and overleverage) might have been the same but this crisis require much more than what FDR did during the Depression.

Don't you feel that if fixing the economy is so simple, it'd already have been fixed?

The rich are getting richer and that Jose is the fix were in!
Who's in charge?
The very very rich.

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MJA

Don't get what you mean.

im just gonna hop in with my 2 cents nonsense as an economics noob...

what IS interest? a scam? borrow money but give me more back! wheres all that "interest" going? to pay for the people who dont end up ever paying back? why even have this as an acceptable practice... when my mom loans me money i dont pay interest. cause why? cause my moms not a greedy con artist!

and insurance... that **** drives me crazy...

the whole systems gotta evolve... we gotta move past all this... just like not too long ago it was all trade... wool for grain or something know... even in the 80s wasnt it more common for the whole ... you fix my car ill fix you dinner... we come so far... theres gotta be something better to turn to...

something more fair... something that gives everyone opportunity and equality...
like credits for volunteer work... so habitat for humanity thrives, parks get restored, if... ah... my idea is far too complex to map out now... gotta get ready for my cpr renewal class

Interest isnt exploration, its a deal: I open hand off some of my resources to you, wich I will not be able to use for a X time, but, in exchange, you will pay me more than I gave you. The borrower also comes out winning because he has the money he needs the moment he needs, and quite a lot of time and facilities to pay it back.

Suming it up, I think that if both sides agreed and nobody cheated, its fair Off course, that concept doesnt fix what happens then the borrower fails on his part of the deal.

"when my mom loans me money i dont pay interest." - sarathustrah

People who charge you interest for borrowing are not "greedy con artists". Anyway your mum don't charge you interest is because you'll be broke if she does.

"you fix my car ill fix you dinner" - sarathustrah

Talking about your Dad here?

I've no idea what you're talking about sarat. Interest is the price of you pay for borrowing money. It's definitely not a scam. Since money is lent to the banks or AIG, they have to pay interest plus the principal sum they borrowed.

There are two reasons why paying interest is necessary when borrowing money. First, no one would loan money unless they received some gain for taking the risk that the borrower will make good on their promise to pay back. Second, due to inflation, money is always being devalued--except in times of deflation which are rather rare in fiat money systems, so the interest serves as a way to make sure that the loaners are being compensated for time's effect on the value of money.

In certain inflationary periods, real interest rate can be in the negative. In that case, the lender would be at the losing end because the value of the money has decreased and what he gets back is worth less than what he has lend out.

no no no no...

its absurd to think the interest taken is fair and makes up for... whatever... that fluctuation is hardly.... ok well here... the only experience i know is because of NO credit (not bad credit) when my husband matt was just 19 and not having any credit yet... couldnt get a car for a fair price... had NO choice but to go to fast finance... they hook us up with a car that we are forced to pay 3x the true value of the used vehicle and then matt lost the job (measuring houses for carpet)* and couldnt afford payments... got it reposessed... and now after having only owed roughly 4k... they took it and auctioned it and say he owes them (after 6 years) over 13k dollars.

*then the messed up thing about that carpet job was the guy who hired matt was contracting his work out to guys... he would get 22 dollars per house plus the gas mileage fee... but he got matt to do the work for 14 dollars a house and no gas money. matt lost the job because a client had instructed matt to measure certain rooms and then said they only wanted 2 rooms instead of like 6... and all that extra carpet matt had measured/ordered/delivered was charged to matt. not being able to pay it... his boss said he was just gonna start doin his work again.

this type of behavior is everywhere... these rip off systems...

car insurance too... getting plpd and paying for years... car gets totaled... only get 500 dollars back... but had to pay triple that in payments over just a few years. paying for the right not to get sued... WTF

and people sueing for crazy junk

parental behaviors so disgusting... oh wait im sposed to be talkin about finances here...

yeah anyways... its all sick... it all needs to shift to something entirely different.

oh and by the way i wasnt talkin about a dad... i just meant people seemed to be a little different... some people... i dunno

The situation you talked about regarding your husband is very convoluted. Maybe you got scammed not by the system of interest rates but by the car salesperson. After all, aren't car salespeople not to be trusted?

who can ya trust...

not the boss... not the mechanic... not the bank... not the insurance company...

yknow i cant find anywhere anymore that will cash a check without a 3 dollar fee...

interest... or interested in takin my money

I don't think that $3 fee is interest. It's a service charge.

You can always trust yourself if there's no one else to trust. Anyway I think we're digressing from the main topic.

Like I said, "If both sides agreed and nobody cheated, its fair". Read the contracts well and make sure to keep a copy of then, if you can, so you know if someone is cheating you or if you were just careless then you signed it. Its also wise to have a good knowledge of the laws regarding the matter, as oftenly there are "forgotten laws" that can aid you in cases like that.

For example, in Brazil some shops and places like that keep small parking lots for the clients, usually with signs stating: "We do not take responsability for any damage your car may incur in our parking lot". However according to the law if you offer a parking lot, even if a free parking lot, you must pay for whatever damage a car may take in there, even if you have warning signs stating otherwise because you are not allowed to offer parking spaces and not pay for damage in then.

And yeah, we are out of topic... since the thread starter was banned, anyone else has mirabulous solutions for the economic problems?

We would absolutely love that. In fact we might go out and buy a vacation home or two.

Of course, we don't need that.

And you're missing one key point, which is how banks actually afford to stay in business -- they loan money at a higher interest rate than the rate they pay on savings accounts.

If I invest $100 in a 3% savings account, and you borrow $100 from the bank in a 6% mortgage, then the bank nets a $3 profit.

If you fix loans at 3%, then savings account returns are going to drop -- which means that people are going to start investing in riskier things to try and get better returns. And that is EXACTLY what caused this whole problem -- the US Treasury bond rate dropped so low that people invested in high risk things like mortgage-backed securities and credit-default swaps instead (because the return was so much higher).