more pain to come, page-31

According to Four Corners what we are seeing in reguard to this subprime business has just begun .... we've just seen the first quarter. There are three to go.
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PAUL BARRY: The figures suggest that the worst is still to come. This year and next $900 billion dollars of subprime loans are going to reset to higher interest rates. Taking time lags into account, we are essentially here on the graph (graph showing bar highlighted for Sept 07, last bar is July 08, highest bar is at March 08). In California as in Cleveland we’re nowhere near the end.

PAUL BARRY (to Jimmy Adams): Do you think we’ve seen the worst yet?

JIMMY ADAMS, REAL ESTATE AGENT, RIVERSIDE, CALIFORNIA: No I don’t. My projection and the way I look at this and have studied it is that we are in the end of the first quarter of a four quarter game.

PAUL BARRY: Last week’s US employment figures, showing a fall in job numbers, sent world stock markets spinning again. In the last 18 months, 150 US mortgage lenders, including several of the biggest, have gone bust or shut down. So far 60,000 jobs have been lost, with another 50,000 forecast to go. House builders are also in trouble with activity at a 10 year low and more homes than ever that can’t be sold.

Some economists like Professor Nouriel Roubini are now convinced that recession is inevitable.

PROFESSOR NOURIEL ROUBINI, STERN SCHOOL OF BUSINESS, NEW YORK: We had the real estate boom and bust in the late 80s that led to a recession in 1990, we thought we had learned those lessons and instead it has happened again. We had that bubble in tech stocks in the late 90s that led to a bust and the recession in 2001 so the last three US business cycle and recession have been driven by asset bubble getting out of hand and then having a crash that lead into a credit crunch and then a severe economic downturn, so they happen over and over again.

PNN: And you think this is the third? The next one?

PROFESSOR NOURIEL ROUBINI, STERN SCHOOL OF BUSINESS, NEW YORK: Yes.

PAUL BARRY: In the last few years the USA and Australia have seen a massive spending spree fuelled by credit. A large chunk of the $1.3 trillion lent in subprime loans got spent in the shopping malls and car yards of America. People were using their houses like automatic teller machines, taking cash out as prices went up.

Now that is all going to go painfully into reverse and the US economy will suffer. So the question is: will Australia also be affected?

PROFESSOR NOURIEL ROUBINI, STERN SCHOOL OF BUSINESS, NEW YORK: If the US has a hard landing meaning a recession or a near recession, I think that it’s still the case that when the US sneezes the rest of the world gets the cold because the US is still one quarter of the global economy.

http://www.abc.net.au/4corners/content/2007/s2035637.htm