When the vast majority locks their capital in them
the private market is crowded out of borrowing, a
very distinct possibility and one I’m betting on.

This is already happening.

At some point, they crash.

Neo pushes the reset button…

…new game, new players.

Mortgage floors should not be available for investment property or homes that are not the primary residence.

It is too simplistic to state that ALL banks bear equal responsibility for this entire mess. While the banks and brokers that handed out Alt-A, interest only and other junk mortgages are to blame, many other banks did maintain proper standards and have not needed any TARP money.

The real estate floor is governed by 31% Debt-to-income ratios on FHA loans, average incomes & interest rates.

And so, what happens if jobs disappear (which tanks income)? Does that push housing prices further down? How far?

The world may shake apart by bits and pieces, but eventually we go too.

What do you mean “eventually”? We’re Leaders! We’ll go first and be proud of it. heh

It’s like Mick Jagger hiring Hells Angels for security at Altamont, only much much worse.

Heh. Comparing Gates to Hells Angels? Pretty good.
Hmmm, which is potentially the more dangerous? If
you can name a couple of Dems or Libs who would be
better for Defense then why haven’t I been hearing
their names the last week or two?

could the next bubble be the one we’re living in right now – a dollar bubble? the so-called flight to safety? and what’s happening with treasuries is just a symptom?

Is it past time to move from gold (or other commodities) to dollars?

I’ve been assuming that the day Obama takes over would be ideal, but maybe we’re getting close enough that people feel it’s safe enough to go $$$$ now.

The current administration is willy-nilly going the Japan route (supporting a bloated financial sector whether we need it so big or not), and have found creative ways to keep dong that as their intiial schemes have flamed out.

Japan settled for zombie banks, Paulson seems to be going for zombie financial firms of every imaginable kind. And they had a much better national finance situation that we do now. The cost of dithering over for the last six months of the Bush administration will be big.

Driving by it from the Central Valley side is funny: you see vast acreage with nothign but very regularly placed stop-signs and conduit coming out the chopped up ground.

I don’t want to think what the vacancy and foreclsure rate is in the finished sections. Can’t turn it back into farms and grazing right away, probably scarpped too much topsoil off, but maybe windmills would be good.

Problem is that even if you find a away to unbuild those, I think the majority of the problem surplus housing is potentially very useful, and inside, or right next door to viable communities, and transit corridors. At least, that is what I have seen in California. No reason people should not be living in them.

Economists can explain anything that has already happened. The theory is flexible enough to do that without breaking any of the usual economic assuptions about how things work. Economists of a certain kind see that as a feature. Economic statisticians (econometricians) and others see it as a bug.

But, this time is different. I do not see how Washington consensus economic theory can explain huge chunks of financial and credit markets just plan old freezing in their tracks and disappearing. Akerlof and Stiglitz sure can explain that (hence their Nobel prizes).

I also do not see how anyone but a crazy person can say that building too many houses to sell them at a breakeven price for the builders and financers, and then kicking people out ’cause they can’t pay and letting them stand empty and rot is not a huge misallocation of real capital on an epic scale. But that is the basis for this crisis.

And apparently potentially very useful houses are starting to rot. I heard a news report from someplace in PA that said a mortgage rescue plan someplace there was running into trouble because of decay of now long vacant houses. “they aren’t in good shape anymore” was the quoe I remember the local guy in charge using.