The banks are the government, the government are the banks. This is a truly scary, but a realistic possibility/probability. Suppose that the government adopts a long-term stategy of bank bailouts as policy. This is becoming more real/likely by the day. The banks LOVE high RE prices. They make TONS of money. They are used to it. The government is used to banks making obscene profits. Why change anything?
The government may continue to give bailouts for 5-7 years, or until the banks are happy with their situation. This may continue until 1) foreign creditors decide they have had enough and/or 2) inflation catches up with the bad bets the banks made. Either way we seem to be hosed.
