xbox in the end it will all blow up. However this time around the blow up will be much more catastrophic because it will be the bond market that explodes. It will play out pretty much as you have outlined above. We cannot monetize our debt. Currently the fed has what, 16% of our bonds or something like that. It is, and we are nearing the end game. However, nearing the end game is relative isn’t it? Is the explosion going to happen in 1 year? 3 years? 15 years? That is really the only question in my mind. As you saw my caviot is and has always been rates. So yes yes yes the explosion will dwarf 06. Instead of taking our medicine then, we were told that the sky was falling so we implemented policies that in my humble opinion were much worse then dealing with the problem and letting the market crater. Now we are in a spiral that some like to think will be resolved by inflation and an increased GDP. Personally I don’t see that happening. Moreover I see what you implied, and the only question is, when.

So absent of that event or “until that event happens” the San Diego housing market will move forward, driven by an excessive demand that has far outstripped supply. Prices have chunked forward and an equilibrium will be reached as the buyers pool will simply be reduced by many being priced out. Then we will level out and the inventory will catch up. We may see a modest dip but that is just the settling to the new equilibium and then a more subdued appreciation.

Now when the explosion happens…. wowsers it will be ugly. Unless the govt pulls their heads out of their ass and figures out we need to reduce spending and increase taxes and stop monetizing our debt.