Paying Attention?

[pemeliza]

“People are picking bottoms all the way down, and at some point, prices become so tempting, that a critical mass of people/investors (who no longer need to be “rich”) enter the market and support prices when they reach fundamental levels. ”

Prices have reached fundamental levels versus rent in most of the country but yet they continue to drop. You certainly don’t have to be “rich” to buy a house in Vegas, Phoenix, or for that matter much of San Diego county.

“Not only have they succeeded in dragging this recession/depression out for far more years than necessary,”

Your chief point seems to be that if we would have let the markets crater then we would be doing fine by now. The fact that foreclosures are still piling up and prices are still dropping in smoldering areas like Vegas and Phoenix seems to suggest that you are underestimating the consequences of a complete deflationary debt collapse.

BTW, I am not suggesting that artificially supporting the market was a good idea and I agree that it was largely done to transfer losses to the taxpayer.

Regardless of how the band-aid is taken off, we are going to be dealing with the aftermath of this binge for a long time to come.

[briansd1]

CA renter, a lot of what you write is wishful thinking. Do you want deflation? Or do you truly believe that deflation will be the economic outcome?

I think that all else being equal, inflation is the more likely outcome. We won’t have runaway inflation but we will have moderate targeted inflation of maybe 3% in a low-interest rate environment as long growth is slow.

CA renter, some of your writing is inconsistent. Sometimes you argue that you are predicting deflation. But when someone mentions higher interest rates, you say something like “finally I’ll get a higher return on my money.”

Think about it, if you have $1 million sitting the bank, what’s better for you? Low inflation like we have now, or deflation?

As I’ve said before, inflation spreads the pain more evenly because you have to keep on working and being productive, otherwise, your wealth gets inflated away.

The extra liquidity made available by the Fed goes to the top economic classes because they have better connections and they work the system better to access that money to earn more money.

With inflation, the rich cannot sit on their wealth and do nothing. They have to work to keep up with inflation. Deflation is perfect for old money.

That’s the way our system works.

I would rather have a fiscal stimulus and WPA program to put the unemployed back to work. And I would rather have tranfer payments to the poor so they can get out of debt and improve their lives. I would also want to restrict the fees that can be charged to borrowers with low credit scores. But is all that going to happen? I doubt it.

Will the government limit real estate purchases to US citizens as you wish? I don’t think so.

I believe that it’s important to separate wishful thinking from what is likely to happen.

[briansd1]

CA renter, a lot of what you write is wishful thinking. Do you want deflation? Or do you truly believe that deflation will be the economic outcome?

I think that all else being equal, inflation is the more likely outcome. We won’t have runaway inflation but we will have moderate targeted inflation of maybe 3% in a low-interest rate environment as long growth is slow.

CA renter, some of your writing is inconsistent. Sometimes you argue that you are predicting deflation. But when someone mentions higher interest rates, you say something like “finally I’ll get a higher return on my money.”

Think about it, if you have $1 million sitting the bank, what’s better for you? Low inflation like we have now, or deflation?

As I’ve said before, inflation spreads the pain more evenly because you have to keep on working and being productive, otherwise, your wealth gets inflated away.

The extra liquidity made available by the Fed goes to the top economic classes because they have better connections and they work the system better to access that money to earn more money.

With inflation, the rich cannot sit on their wealth and do nothing. They have to work to keep up with inflation. Deflation is perfect for old money.

That’s the way our system works.

I would rather have a fiscal stimulus and WPA program to put the unemployed back to work. And I would rather have tranfer payments to the poor so they can get out of debt and improve their lives. I would also want to restrict the fees that can be charged to borrowers with low credit scores. But is all that going to happen? I doubt it.

Will the government limit real estate purchases to US citizens as you wish? I don’t think so.

I believe that it’s important to separate wishful thinking from what is likely to happen.

[briansd1]

CA renter, a lot of what you write is wishful thinking. Do you want deflation? Or do you truly believe that deflation will be the economic outcome?

I think that all else being equal, inflation is the more likely outcome. We won’t have runaway inflation but we will have moderate targeted inflation of maybe 3% in a low-interest rate environment as long growth is slow.

CA renter, some of your writing is inconsistent. Sometimes you argue that you are predicting deflation. But when someone mentions higher interest rates, you say something like “finally I’ll get a higher return on my money.”

Think about it, if you have $1 million sitting the bank, what’s better for you? Low inflation like we have now, or deflation?

As I’ve said before, inflation spreads the pain more evenly because you have to keep on working and being productive, otherwise, your wealth gets inflated away.

The extra liquidity made available by the Fed goes to the top economic classes because they have better connections and they work the system better to access that money to earn more money.

With inflation, the rich cannot sit on their wealth and do nothing. They have to work to keep up with inflation. Deflation is perfect for old money.

That’s the way our system works.

I would rather have a fiscal stimulus and WPA program to put the unemployed back to work. And I would rather have tranfer payments to the poor so they can get out of debt and improve their lives. I would also want to restrict the fees that can be charged to borrowers with low credit scores. But is all that going to happen? I doubt it.

Will the government limit real estate purchases to US citizens as you wish? I don’t think so.

I believe that it’s important to separate wishful thinking from what is likely to happen.

[briansd1]

CA renter, a lot of what you write is wishful thinking. Do you want deflation? Or do you truly believe that deflation will be the economic outcome?

I think that all else being equal, inflation is the more likely outcome. We won’t have runaway inflation but we will have moderate targeted inflation of maybe 3% in a low-interest rate environment as long growth is slow.

CA renter, some of your writing is inconsistent. Sometimes you argue that you are predicting deflation. But when someone mentions higher interest rates, you say something like “finally I’ll get a higher return on my money.”

Think about it, if you have $1 million sitting the bank, what’s better for you? Low inflation like we have now, or deflation?

As I’ve said before, inflation spreads the pain more evenly because you have to keep on working and being productive, otherwise, your wealth gets inflated away.

The extra liquidity made available by the Fed goes to the top economic classes because they have better connections and they work the system better to access that money to earn more money.

With inflation, the rich cannot sit on their wealth and do nothing. They have to work to keep up with inflation. Deflation is perfect for old money.

That’s the way our system works.

I would rather have a fiscal stimulus and WPA program to put the unemployed back to work. And I would rather have tranfer payments to the poor so they can get out of debt and improve their lives. I would also want to restrict the fees that can be charged to borrowers with low credit scores. But is all that going to happen? I doubt it.

Will the government limit real estate purchases to US citizens as you wish? I don’t think so.

I believe that it’s important to separate wishful thinking from what is likely to happen.

[briansd1]

CA renter, a lot of what you write is wishful thinking. Do you want deflation? Or do you truly believe that deflation will be the economic outcome?

I think that all else being equal, inflation is the more likely outcome. We won’t have runaway inflation but we will have moderate targeted inflation of maybe 3% in a low-interest rate environment as long growth is slow.

CA renter, some of your writing is inconsistent. Sometimes you argue that you are predicting deflation. But when someone mentions higher interest rates, you say something like “finally I’ll get a higher return on my money.”

Think about it, if you have $1 million sitting the bank, what’s better for you? Low inflation like we have now, or deflation?

As I’ve said before, inflation spreads the pain more evenly because you have to keep on working and being productive, otherwise, your wealth gets inflated away.

The extra liquidity made available by the Fed goes to the top economic classes because they have better connections and they work the system better to access that money to earn more money.

With inflation, the rich cannot sit on their wealth and do nothing. They have to work to keep up with inflation. Deflation is perfect for old money.

That’s the way our system works.

I would rather have a fiscal stimulus and WPA program to put the unemployed back to work. And I would rather have tranfer payments to the poor so they can get out of debt and improve their lives. I would also want to restrict the fees that can be charged to borrowers with low credit scores. But is all that going to happen? I doubt it.

Will the government limit real estate purchases to US citizens as you wish? I don’t think so.

I believe that it’s important to separate wishful thinking from what is likely to happen.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[sdduuuude]

[quote=briansd1][quote=sdduuuude]
Not so sure it staves it off. Possible that QE1 staves it off, and maybe even QE2, but the more you go into debt, the higher your interest payments. Get the interest too high and the likelihood of the deflationary collapse increases.
[/quote]

I’m confused how more QE (money printing) would cause a deflationary collape.

Dispite QE1 and QE2, interest rates are now lower. Quantitive Easing actually avoided a deflationary spiral.

[quote=sdduuuude]
I’m not a fan of either the deflationary spiral or hyper-inflation theories but I do think deflation has a bit part to play yet and could come back more than once in the next few years.
[/quote]

If deflation “has a big part to play and could come back more than once in the next few years,” then more QE is the way to address that deflation.

[/quote]

BIT part, not BIG part.

[CA renter]

[quote=pemeliza]”People are picking bottoms all the way down, and at some point, prices become so tempting, that a critical mass of people/investors (who no longer need to be “rich”) enter the market and support prices when they reach fundamental levels. ”

Prices have reached fundamental levels versus rent in most of the country but yet they continue to drop. You certainly don’t have to be “rich” to buy a house in Vegas, Phoenix, or for that matter much of San Diego county.

“Not only have they succeeded in dragging this recession/depression out for far more years than necessary,”

Your chief point seems to be that if we would have let the markets crater then we would be doing fine by now. The fact that foreclosures are still piling up and prices are still dropping in smoldering areas like Vegas and Phoenix seems to suggest that you are underestimating the consequences of a complete deflationary debt collapse.

BTW, I am not suggesting that artificially supporting the market was a good idea and I agree that it was largely done to transfer losses to the taxpayer.

Regardless of how the band-aid is taken off, we are going to be dealing with the aftermath of this binge for a long time to come.[/quote]

You are right…in some areas, it is cheaper to buy than to rent, but it doesn’t necessarily mean that prices have reached fundamental levels. As you probably know, investors have been snatching up many of these properties in order to rent them out.

There are good reasons for these properties to be cheaper to buy than rent. Most of these houses are in locations that tend to have more a more transient population, and tend to have a less stable and lower-paying job base. For many people, it’s better to rent than to buy, so investors don’t have as much competition from owner-occupiers vs. the more desirable neighborhoods where rentals are few and far between, and prices are driven up by well-qualified owner-occupiers (like where we’re looking, unfortunately). Also, these “cheap” areas are more likely to have renters who don’t pay on time, if at all; are more likely to turn over more often; and are more likely to have tenants who cause greater damage to the house when they leave. Smart investors take all of this into account, and discount the price appropriately.

In “normal” real estate markets, there have always been areas that are cheaper to buy than rent. It’s not necessarily an indication that prices are “too low” because of some economic anomaly/deflation.

As for the point that we’d be fine now if everything had been allowed to “crater,” no, I’ve never suggested that we’d be sitting pretty now. What I do suggest is that we’d be far closer to a bottom than we are now. Let’s say we had to see 20 million foreclosures from 2005 levels in order to clear out all the bad debt, and the prices that were caused by all the bad debt. And let’s say prices of all assets needed to drop 40-60%, on average, in order to reach what I would consider to be a fundamental bottom. IMHO, we are still going to get there, but we had the choice of letting it happen quickly and confining the damage as much as possible to those who willingly took on too much risk and caused the run-up, OR we could let it happen slowly, over many, many years, by wasting trillions of dollars — which conveniently happened to shift the losses from those who should have borne them (and these people end up getting even RICHER as a result) to those who were relatively innocent. People can handle being out of a job for 6-24 months, but they cannot handle being out of a job for 6-24 years. FWIW, I’ve always supported a WPA-style program for infrastructure and other projects, in addition to investing in energy and healthcare R&D, along with backing the FDIC, SIPC, and NCUA, and thought we should simply nationalize any banks that failed. It’s not that I think we should have done **nothing,** but that we should have done it in a far more intelligent and ethical way.

All of these bailouts will not prevent credit defaults in the long run, IMHO, especially they way they are being targeted. Not only will they not prevent the defaults that were going to happen anyway, they will end up *increasing* the number of defaults because the time lag has drawn in many more buyers who were paying prices that are still too high, with debt that they will not likely be able to pay off. Remember, those FHA buyers, especially the ones who were able to use their “tax credit” as the 3.5% down payment, are underwater from the moment they close escrow — the selling costs would eat up that 3.5%.

[CA renter]

[quote=pemeliza]”People are picking bottoms all the way down, and at some point, prices become so tempting, that a critical mass of people/investors (who no longer need to be “rich”) enter the market and support prices when they reach fundamental levels. ”

Prices have reached fundamental levels versus rent in most of the country but yet they continue to drop. You certainly don’t have to be “rich” to buy a house in Vegas, Phoenix, or for that matter much of San Diego county.

“Not only have they succeeded in dragging this recession/depression out for far more years than necessary,”

Your chief point seems to be that if we would have let the markets crater then we would be doing fine by now. The fact that foreclosures are still piling up and prices are still dropping in smoldering areas like Vegas and Phoenix seems to suggest that you are underestimating the consequences of a complete deflationary debt collapse.

BTW, I am not suggesting that artificially supporting the market was a good idea and I agree that it was largely done to transfer losses to the taxpayer.

Regardless of how the band-aid is taken off, we are going to be dealing with the aftermath of this binge for a long time to come.[/quote]

You are right…in some areas, it is cheaper to buy than to rent, but it doesn’t necessarily mean that prices have reached fundamental levels. As you probably know, investors have been snatching up many of these properties in order to rent them out.

There are good reasons for these properties to be cheaper to buy than rent. Most of these houses are in locations that tend to have more a more transient population, and tend to have a less stable and lower-paying job base. For many people, it’s better to rent than to buy, so investors don’t have as much competition from owner-occupiers vs. the more desirable neighborhoods where rentals are few and far between, and prices are driven up by well-qualified owner-occupiers (like where we’re looking, unfortunately). Also, these “cheap” areas are more likely to have renters who don’t pay on time, if at all; are more likely to turn over more often; and are more likely to have tenants who cause greater damage to the house when they leave. Smart investors take all of this into account, and discount the price appropriately.

In “normal” real estate markets, there have always been areas that are cheaper to buy than rent. It’s not necessarily an indication that prices are “too low” because of some economic anomaly/deflation.

As for the point that we’d be fine now if everything had been allowed to “crater,” no, I’ve never suggested that we’d be sitting pretty now. What I do suggest is that we’d be far closer to a bottom than we are now. Let’s say we had to see 20 million foreclosures from 2005 levels in order to clear out all the bad debt, and the prices that were caused by all the bad debt. And let’s say prices of all assets needed to drop 40-60%, on average, in order to reach what I would consider to be a fundamental bottom. IMHO, we are still going to get there, but we had the choice of letting it happen quickly and confining the damage as much as possible to those who willingly took on too much risk and caused the run-up, OR we could let it happen slowly, over many, many years, by wasting trillions of dollars — which conveniently happened to shift the losses from those who should have borne them (and these people end up getting even RICHER as a result) to those who were relatively innocent. People can handle being out of a job for 6-24 months, but they cannot handle being out of a job for 6-24 years. FWIW, I’ve always supported a WPA-style program for infrastructure and other projects, in addition to investing in energy and healthcare R&D, along with backing the FDIC, SIPC, and NCUA, and thought we should simply nationalize any banks that failed. It’s not that I think we should have done **nothing,** but that we should have done it in a far more intelligent and ethical way.

All of these bailouts will not prevent credit defaults in the long run, IMHO, especially they way they are being targeted. Not only will they not prevent the defaults that were going to happen anyway, they will end up *increasing* the number of defaults because the time lag has drawn in many more buyers who were paying prices that are still too high, with debt that they will not likely be able to pay off. Remember, those FHA buyers, especially the ones who were able to use their “tax credit” as the 3.5% down payment, are underwater from the moment they close escrow — the selling costs would eat up that 3.5%.

[CA renter]

[quote=pemeliza]”People are picking bottoms all the way down, and at some point, prices become so tempting, that a critical mass of people/investors (who no longer need to be “rich”) enter the market and support prices when they reach fundamental levels. ”

Prices have reached fundamental levels versus rent in most of the country but yet they continue to drop. You certainly don’t have to be “rich” to buy a house in Vegas, Phoenix, or for that matter much of San Diego county.

“Not only have they succeeded in dragging this recession/depression out for far more years than necessary,”

Your chief point seems to be that if we would have let the markets crater then we would be doing fine by now. The fact that foreclosures are still piling up and prices are still dropping in smoldering areas like Vegas and Phoenix seems to suggest that you are underestimating the consequences of a complete deflationary debt collapse.

BTW, I am not suggesting that artificially supporting the market was a good idea and I agree that it was largely done to transfer losses to the taxpayer.

Regardless of how the band-aid is taken off, we are going to be dealing with the aftermath of this binge for a long time to come.[/quote]

You are right…in some areas, it is cheaper to buy than to rent, but it doesn’t necessarily mean that prices have reached fundamental levels. As you probably know, investors have been snatching up many of these properties in order to rent them out.

There are good reasons for these properties to be cheaper to buy than rent. Most of these houses are in locations that tend to have more a more transient population, and tend to have a less stable and lower-paying job base. For many people, it’s better to rent than to buy, so investors don’t have as much competition from owner-occupiers vs. the more desirable neighborhoods where rentals are few and far between, and prices are driven up by well-qualified owner-occupiers (like where we’re looking, unfortunately). Also, these “cheap” areas are more likely to have renters who don’t pay on time, if at all; are more likely to turn over more often; and are more likely to have tenants who cause greater damage to the house when they leave. Smart investors take all of this into account, and discount the price appropriately.

In “normal” real estate markets, there have always been areas that are cheaper to buy than rent. It’s not necessarily an indication that prices are “too low” because of some economic anomaly/deflation.

As for the point that we’d be fine now if everything had been allowed to “crater,” no, I’ve never suggested that we’d be sitting pretty now. What I do suggest is that we’d be far closer to a bottom than we are now. Let’s say we had to see 20 million foreclosures from 2005 levels in order to clear out all the bad debt, and the prices that were caused by all the bad debt. And let’s say prices of all assets needed to drop 40-60%, on average, in order to reach what I would consider to be a fundamental bottom. IMHO, we are still going to get there, but we had the choice of letting it happen quickly and confining the damage as much as possible to those who willingly took on too much risk and caused the run-up, OR we could let it happen slowly, over many, many years, by wasting trillions of dollars — which conveniently happened to shift the losses from those who should have borne them (and these people end up getting even RICHER as a result) to those who were relatively innocent. People can handle being out of a job for 6-24 months, but they cannot handle being out of a job for 6-24 years. FWIW, I’ve always supported a WPA-style program for infrastructure and other projects, in addition to investing in energy and healthcare R&D, along with backing the FDIC, SIPC, and NCUA, and thought we should simply nationalize any banks that failed. It’s not that I think we should have done **nothing,** but that we should have done it in a far more intelligent and ethical way.

All of these bailouts will not prevent credit defaults in the long run, IMHO, especially they way they are being targeted. Not only will they not prevent the defaults that were going to happen anyway, they will end up *increasing* the number of defaults because the time lag has drawn in many more buyers who were paying prices that are still too high, with debt that they will not likely be able to pay off. Remember, those FHA buyers, especially the ones who were able to use their “tax credit” as the 3.5% down payment, are underwater from the moment they close escrow — the selling costs would eat up that 3.5%.

[CA renter]

[quote=pemeliza]”People are picking bottoms all the way down, and at some point, prices become so tempting, that a critical mass of people/investors (who no longer need to be “rich”) enter the market and support prices when they reach fundamental levels. ”

Prices have reached fundamental levels versus rent in most of the country but yet they continue to drop. You certainly don’t have to be “rich” to buy a house in Vegas, Phoenix, or for that matter much of San Diego county.

“Not only have they succeeded in dragging this recession/depression out for far more years than necessary,”

Your chief point seems to be that if we would have let the markets crater then we would be doing fine by now. The fact that foreclosures are still piling up and prices are still dropping in smoldering areas like Vegas and Phoenix seems to suggest that you are underestimating the consequences of a complete deflationary debt collapse.

BTW, I am not suggesting that artificially supporting the market was a good idea and I agree that it was largely done to transfer losses to the taxpayer.

Regardless of how the band-aid is taken off, we are going to be dealing with the aftermath of this binge for a long time to come.[/quote]

You are right…in some areas, it is cheaper to buy than to rent, but it doesn’t necessarily mean that prices have reached fundamental levels. As you probably know, investors have been snatching up many of these properties in order to rent them out.

There are good reasons for these properties to be cheaper to buy than rent. Most of these houses are in locations that tend to have more a more transient population, and tend to have a less stable and lower-paying job base. For many people, it’s better to rent than to buy, so investors don’t have as much competition from owner-occupiers vs. the more desirable neighborhoods where rentals are few and far between, and prices are driven up by well-qualified owner-occupiers (like where we’re looking, unfortunately). Also, these “cheap” areas are more likely to have renters who don’t pay on time, if at all; are more likely to turn over more often; and are more likely to have tenants who cause greater damage to the house when they leave. Smart investors take all of this into account, and discount the price appropriately.

In “normal” real estate markets, there have always been areas that are cheaper to buy than rent. It’s not necessarily an indication that prices are “too low” because of some economic anomaly/deflation.

As for the point that we’d be fine now if everything had been allowed to “crater,” no, I’ve never suggested that we’d be sitting pretty now. What I do suggest is that we’d be far closer to a bottom than we are now. Let’s say we had to see 20 million foreclosures from 2005 levels in order to clear out all the bad debt, and the prices that were caused by all the bad debt. And let’s say prices of all assets needed to drop 40-60%, on average, in order to reach what I would consider to be a fundamental bottom. IMHO, we are still going to get there, but we had the choice of letting it happen quickly and confining the damage as much as possible to those who willingly took on too much risk and caused the run-up, OR we could let it happen slowly, over many, many years, by wasting trillions of dollars — which conveniently happened to shift the losses from those who should have borne them (and these people end up getting even RICHER as a result) to those who were relatively innocent. People can handle being out of a job for 6-24 months, but they cannot handle being out of a job for 6-24 years. FWIW, I’ve always supported a WPA-style program for infrastructure and other projects, in addition to investing in energy and healthcare R&D, along with backing the FDIC, SIPC, and NCUA, and thought we should simply nationalize any banks that failed. It’s not that I think we should have done **nothing,** but that we should have done it in a far more intelligent and ethical way.

All of these bailouts will not prevent credit defaults in the long run, IMHO, especially they way they are being targeted. Not only will they not prevent the defaults that were going to happen anyway, they will end up *increasing* the number of defaults because the time lag has drawn in many more buyers who were paying prices that are still too high, with debt that they will not likely be able to pay off. Remember, those FHA buyers, especially the ones who were able to use their “tax credit” as the 3.5% down payment, are underwater from the moment they close escrow — the selling costs would eat up that 3.5%.

[Author]

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