The government will level the playing field by allowing the individual consumers who bought into this craziness to sink like stones - and for the most part privately, in dire embarrassment at having been used so badly. (Well, the government will also tinker around with just how much inflation they can let bloom to create the 'soft landing' they promise. But that's another story ... )
Essentially, the government used consumer naivete - the real estate 'boom' and resulting equity-suck - to sponsor the recovery from the stock market bust, as Eric points out. Risk moved from your bank right into your bathroom. (Or your 4 1/2 bathrooms.) There's no real third act here to turn to (equity markets and homeowners having given their all for the first two acts), so the government's vested interest at this time is in managing perceptions even if it can't manage the economy.
I predict the government will try to manage a series of stepped 'hard landings' for the victims - spreading the pain and testing awareness as it goes, and adding liberal amounts of exciting distractions in the form of oil price blather and more 'must do' wars, and it will call that a soft landing. Consumers probably will abet this approach: They tend not to round themselves up in groups and issue forecasts about just how hysterical they are about their debt levels, and they don't spend as much time with PowerPoint as bankers and economists.
The damage to individual consumers also is very difficult to track through traditional metrics; it tends to emerge anecdotally and slowly through poorly reported mainstream media stories that are by and large as inaccurate as was the giddy and bleating reportage on real estate nirvana.
The jig will be up when the packaged securities from all these suicide mortgages start ripening, rotting, and falling off the investor tree.
Here in metropolitan Washington, D.C., the bumpy rump of King George's realm, we suddenly have tons of hugely expensive housing for sale ... for a very long time. Why does it not sell? Because owners won't lower their prices because they can't: They now owe well more to the banks than their houses are worth because they stripped the equity like peeling paint on a barn. But are they vocal about it? No. They'red darned red-faced. Some may rent to groups of 30 or so immigrants to try to make future payments. (That would be the new-new non-conforming neighborhood.)
I don't call them 'homeowners' or even 'bank-owers.' I refer to them as renting a house from the bank, and many of their leases are about to expire.
... it's going to get very ugly.
Essentially, the government used consumer naivete - the real estate 'boom' and resulting equity-suck - to sponsor the recovery from the stock market bust, as Eric points out. Risk moved from your bank right into your bathroom. (Or your 4 1/2 bathrooms.) There's no real third act here to turn to (equity markets and homeowners having given their all for the first two acts), so the government's vested interest at this time is in managing perceptions even if it can't manage the economy.
I predict the government will try to manage a series of stepped 'hard landings' for the victims - spreading the pain and testing awareness as it goes, and adding liberal amounts of exciting distractions in the form of oil price blather and more 'must do' wars, and it will call that a soft landing. Consumers probably will abet this approach: They tend not to round themselves up in groups and issue forecasts about just how hysterical they are about their debt levels, and they don't spend as much time with PowerPoint as bankers and economists.
The damage to individual consumers also is very difficult to track through traditional metrics; it tends to emerge anecdotally and slowly through poorly reported mainstream media stories that are by and large as inaccurate as was the giddy and bleating reportage on real estate nirvana.
The jig will be up when the packaged securities from all these suicide mortgages start ripening, rotting, and falling off the investor tree.
Here in metropolitan Washington, D.C., the bumpy rump of King George's realm, we suddenly have tons of hugely expensive housing for sale ... for a very long time. Why does it not sell? Because owners won't lower their prices because they can't: They now owe well more to the banks than their houses are worth because they stripped the equity like peeling paint on a barn. But are they vocal about it? No. They'red darned red-faced. Some may rent to groups of 30 or so immigrants to try to make future payments. (That would be the new-new non-conforming neighborhood.)
I don't call them 'homeowners' or even 'bank-owers.' I refer to them as renting a house from the bank, and many of their leases are about to expire.
... it's going to get very ugly.
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