Interest rates went down during the last crash and it did no good, yet people keep trotting this out as the magic elixir. Japan lowered rates to nearly zero and it did very little to revive their sick housing market.
It has been obvious for many years that we were about to enter a down cycle. I have been surprised however, by a couple of events that will make it even worse, IMO. First, there is the massive amount mortgage fraud taking place like the Murrietta scam. It has happened all over.
The second is the craziness we are seeing with the hedge funds, etc. It is clear that the appetite for investments in mortgages created a frenzy of bad loans, the likes of which we have never seen before. http://www.startribune.com/462/story/1236301.html
Although many things are the same, this bust will be different than the last one. Like last time, affordability is too high and must revert to closer to the mean. But many things are different. This bust is happening in a bottom up fashion. Instead of water pouring in from the top, it is seeping up from the bottom. The market will drown regardless of which direction the water comes from.
