Quote Originally Posted by Tulpen View Post
However I could not disagree more with you about what the problem is.
Nothing in the article says anything about what I think the >cause< of the problem is.

Quote Originally Posted by Tulpen View Post
And you want to bail them out?
The 4 ideas at the end seem to have really fired people up. I fully realized they would seem shocking, in fact I said so. My point was that it would take pretty extreme measures to stop this thing from snowballing. Whether it should be stopped, and what I think should be done are entirely separate issues.

I understand your, and others, desire to stick it to the bastards that "caused" this. Problem is that the folks that truly profited from this boom are already out - so while your desire to stick it to them is noble, all the real risk has already been transferred to pension funds, taxpayers, and perhaps even your money market account.

I also understand many think we should just let Adam Smith's invisible hand sort it out. Perhaps. But I'd personally like to see a lot more discussion about what role government and the fed should play now, and should have played in the past. Especially given their role in the creation of this bubble with the effective elimination or reserve requirements, the 1997 taxpayer relief act, and the 2001 rate cuts.

Ultimately I believe, that regardless of what "fixes" might be put in place we'll see a return to reasonable cap rates. In the areas that appreciated the most this will either require a doubling of rents, or a halving of prices - either of which also happen to be pretty close to a reversion to the mean in inflation adjusted home prices. I expect we will see a portion of this correction in continued price declines, followed by a portion due to rent increases (which is well aligned with Eric's KaPoom theory). I also believe it will be worse in outlying areas than metros (Eric's geographic cascade theory).

Sean