Tuesday, August 24, 2010
And now it's over. Housing as an investment has been dealt a death blow, probably for a generation. This fall has put the taxpayer on the hook for over $5 trillion in obligations related to Fannie and Freddy, a bizarre hybrid of the worst features of crony capitalism and bungling government bureaucrats who now along with the FHA own over 90% of a mortgage market riding down the backside of Schiller's graph. As prices drop, losses mount at Fred's Fannie and it aint over till it's over. And it ain't over. Over 40% of homeowners are bereft of equity or underwater on their mortgages.One in 7 is facing foreclosure. Supply of existing houses is at 12 months. Nothing that our bungling politicians are doing has had any effect except propping up the unpropable, the unsustainable and the unworkable with a dreary succession of failed and foolish schemes purportedly to help the home buyer but secretly propping up the failed insolvent banks with money while spouting platitudes,
lies, and promises. Larry Summers a few months back said the economy was reaching "escape velocity." Barak a week or so said "The economy is on track." Are these guys delusional , incompetent or just pathological liars? What seems to be self evident is that this deflationary depression is deepening as the malignant web of leverage continues to unwind as debts vaporize , jobs disappear and moronic politicians posture and finger point.