I agree. Prices dropping 50% will bring them back to where they would be if this crazy appreciation had not happened.

Chris, I’m interested, which of Talbott’s ideas do you dispute? I dispute his assertion that inflation has been burned out of the economy.

As far as the fallout, what he says is entirely possible. The entire MBS market is at risk, because of stupidity of the managers at Fannie Mae. In my opinion, they should be in jail! The whole liquidity game was a dangerous experiment. It will end in a mess. A big global recession, unless they come up with another asset bubble to prolong having to balance the global economy.