Maybe because Mish thinks the one-trillion-dollars-and more ARMS holders are going to file bankruptcy. Poof – there goes that huge wealth destruction and evaporation of delusional “equity” contained in those so-called “investments” by FB’s. Soon after, banks won’t lend anymore. Credit contraction equals liquidity trapped. That equivalent dollar amount destroyed is bigger than FCB holdings that would be liquidated. Result, deflation. Great Depression, part 2.
Even if Fed Funds Rate equals zero (ZIRP like in Japan), banks won’t borrow money from the Fed because banks won’t turn around and lend the money to multitudes of Americans foreclosed with destroyed FICO scores. Catch-22 like.
Maybe Bernanke and his tag-team Treasury partner (Mr. Paulson?) are going to China to convince the Chinese to start buying “houses” instead of “treasuries”. Remember the Japanese buying Pebble Beach and other over-inflated real estate during the heyday of Japan bubble? We will have Chinese landlords if they listen to them. All the available vacant houses unloaded by flippers will be one-by-one bought out by Chinese citizens as new investment fad so that house prices will be propped up and retain their inflated values forever. Proceeds from house sales to the Chinese would in turn be used by Americans to go to Walmart again to buy Chinese-made whitie-tighties. Problems solved. No bubble crashing. Now, that’s a crazy idea.
Sorry, I’m just rambling here. Ignore if you must.
