Ah, recognition! The problem isn't just mortgages. It's all debt, and unfortunately, the merchants didn't confine their infestation to homes. In point of fact this is the key item in the analysis - debt service requirements are simply too high, and debt has not been written off or defaulted to any material degree.
Until it is, we cannot recover. This has been my thesis since the outset of this mess and slowly, recognition is showing up at The Fed.
With nearly half of total bank assets backed by residential real estate, both homeowners on the cusp of negative equity and the banking system as a whole remain concerned amid the resumption of home price declines. This unease highlights the housing market’s fragility and suggests there may be no pain-free path to the eventual righting of the market. No perfect solution to the housing crisis exists. The latest price declines will undoubtedly cause more economic dislocation. As the crisis enters its fifth year, uncertainty is as prevalent as ever and continues to hinder a more robust economic recovery. Given that time has not proven beneficial in rendering pricing clarity, allowing the market to clear may be the path of least distress.
I'll be damned.
I actually read something intelligent from a regional Fed publication.
Ps: The entirety of the stock market's bubble behavior over the last 18 months, particularly that in the financials, depends on this not happening. Ever. Consider yourself warned that The Fed is waking up to the inevitability of their chosen path's failure, and that eventually we have to "eat" these embedded - and hidden - losses.
Join us on our
Share this page with your friends
on your favorite social network: