[underdose]

“The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.

[underdose]

“The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.

[underdose]

“The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.

[underdose]

“The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.

[underdose]

“The first thing to realize is that the single biggest issue in the financial system is confidence in the system itself. I think we can all agree on that. ”

Actually, no, we can’t all agree on that.

I think one of the biggest issues is that for too long we’ve had too much confidence in confidence. People we’re confident as hell that housing prices would go up forever. When people are confident in a fallacy, they can push markets into an imbalance, but only for so long. Ultimately, regardless of people’s perceptions, fundamentals win.

Which leads to the bigger issue, that the fundamentals are terrible, and have been for years. Any bailout plan might bouy people’s confidence temporarily, but the horrid fundamentals will win. And since bailouts actually serve to worsen the fundamentals, IMO confidence and perceptions be damned.

[underdose]

Let’s make one clarification of the question. When you say “what will happen to prices”, do you mean in real terms or nominal terms? That’s a vital distinction.

In real terms, houses are still overvalued, no question. Prices must fall in real terms, that is, adjusted for inflation.

But nominal terms, that’s anyone’s guess. Paulson and Bernanke are causing so much monetary inflation through all this that across the board price inflation is not unlikely. So maybe home prices will recover in nominal terms. We may see a 5% increase in home prices nominally, and the govt. will declare victory. Of course, if this comes at the price of gas and milk both hitting $10 a gallon, that 5% nominal gain will still represent a significant decline in real terms.

Or, of course there is always the massive flight from dollar, hyper-inflation scenario, in which case homes skyrocket to trillions of dollars and milk and gas jump to hudreds of millions of dollars. That’s quite a gain in nominal terms, but still a devastating loss in real terms…

[underdose]

Let’s make one clarification of the question. When you say “what will happen to prices”, do you mean in real terms or nominal terms? That’s a vital distinction.

In real terms, houses are still overvalued, no question. Prices must fall in real terms, that is, adjusted for inflation.

But nominal terms, that’s anyone’s guess. Paulson and Bernanke are causing so much monetary inflation through all this that across the board price inflation is not unlikely. So maybe home prices will recover in nominal terms. We may see a 5% increase in home prices nominally, and the govt. will declare victory. Of course, if this comes at the price of gas and milk both hitting $10 a gallon, that 5% nominal gain will still represent a significant decline in real terms.

Or, of course there is always the massive flight from dollar, hyper-inflation scenario, in which case homes skyrocket to trillions of dollars and milk and gas jump to hudreds of millions of dollars. That’s quite a gain in nominal terms, but still a devastating loss in real terms…

[underdose]

Let’s make one clarification of the question. When you say “what will happen to prices”, do you mean in real terms or nominal terms? That’s a vital distinction.

In real terms, houses are still overvalued, no question. Prices must fall in real terms, that is, adjusted for inflation.

But nominal terms, that’s anyone’s guess. Paulson and Bernanke are causing so much monetary inflation through all this that across the board price inflation is not unlikely. So maybe home prices will recover in nominal terms. We may see a 5% increase in home prices nominally, and the govt. will declare victory. Of course, if this comes at the price of gas and milk both hitting $10 a gallon, that 5% nominal gain will still represent a significant decline in real terms.

Or, of course there is always the massive flight from dollar, hyper-inflation scenario, in which case homes skyrocket to trillions of dollars and milk and gas jump to hudreds of millions of dollars. That’s quite a gain in nominal terms, but still a devastating loss in real terms…

[underdose]

Let’s make one clarification of the question. When you say “what will happen to prices”, do you mean in real terms or nominal terms? That’s a vital distinction.

In real terms, houses are still overvalued, no question. Prices must fall in real terms, that is, adjusted for inflation.

But nominal terms, that’s anyone’s guess. Paulson and Bernanke are causing so much monetary inflation through all this that across the board price inflation is not unlikely. So maybe home prices will recover in nominal terms. We may see a 5% increase in home prices nominally, and the govt. will declare victory. Of course, if this comes at the price of gas and milk both hitting $10 a gallon, that 5% nominal gain will still represent a significant decline in real terms.

Or, of course there is always the massive flight from dollar, hyper-inflation scenario, in which case homes skyrocket to trillions of dollars and milk and gas jump to hudreds of millions of dollars. That’s quite a gain in nominal terms, but still a devastating loss in real terms…

[underdose]

Let’s make one clarification of the question. When you say “what will happen to prices”, do you mean in real terms or nominal terms? That’s a vital distinction.

In real terms, houses are still overvalued, no question. Prices must fall in real terms, that is, adjusted for inflation.

But nominal terms, that’s anyone’s guess. Paulson and Bernanke are causing so much monetary inflation through all this that across the board price inflation is not unlikely. So maybe home prices will recover in nominal terms. We may see a 5% increase in home prices nominally, and the govt. will declare victory. Of course, if this comes at the price of gas and milk both hitting $10 a gallon, that 5% nominal gain will still represent a significant decline in real terms.

Or, of course there is always the massive flight from dollar, hyper-inflation scenario, in which case homes skyrocket to trillions of dollars and milk and gas jump to hudreds of millions of dollars. That’s quite a gain in nominal terms, but still a devastating loss in real terms…

[underdose]

“I think Bush and most of the other high-level financial executives and policy makers knew what was going to happen…even to the extent that this was all by design.”

Very possible. It’s just too uncanny how everything has just kind of fallen into place. Many people have theorized that Bush’s inarticulate redneck bit is a well rehearsed act so that people will “misunderestimate” him. Maybe he really is an evil genious with a brilliant smoke screen, like Palpatine from Star Wars.

This still doesn’t address how absolutely nobody else was any the wiser. A small handful of us didn’t buy the tech stock bubble and housing bubble, but absolutely everyone in the mainstream news was on board. Are all the news agencies in collusion with the Bush administration? Controlled completely by the government? Fox news, sure. But CNN, CNBC, every local news paper, etc? Someone, somewhere, other than Rich Toscano and Peter Schiff must have figured this all out. Unless, of course, that high of a percentage of people really are that stupid. And if most people really are that stupid, what are the chances that every member of our government represents the handful of intellectual elite that understands things that absolutely nobody else does? That’s difficult for me to swallow. My guess is that some of them (like Greenspan) know darn well what’s happening, and others are bumbling incompetents that truly don’t grasp that all this turmoil was not a sudden accident caused by something unforeseen, like sunspot activity, but was glaringly obviously years in the making.

[underdose]

“I think Bush and most of the other high-level financial executives and policy makers knew what was going to happen…even to the extent that this was all by design.”

Very possible. It’s just too uncanny how everything has just kind of fallen into place. Many people have theorized that Bush’s inarticulate redneck bit is a well rehearsed act so that people will “misunderestimate” him. Maybe he really is an evil genious with a brilliant smoke screen, like Palpatine from Star Wars.

This still doesn’t address how absolutely nobody else was any the wiser. A small handful of us didn’t buy the tech stock bubble and housing bubble, but absolutely everyone in the mainstream news was on board. Are all the news agencies in collusion with the Bush administration? Controlled completely by the government? Fox news, sure. But CNN, CNBC, every local news paper, etc? Someone, somewhere, other than Rich Toscano and Peter Schiff must have figured this all out. Unless, of course, that high of a percentage of people really are that stupid. And if most people really are that stupid, what are the chances that every member of our government represents the handful of intellectual elite that understands things that absolutely nobody else does? That’s difficult for me to swallow. My guess is that some of them (like Greenspan) know darn well what’s happening, and others are bumbling incompetents that truly don’t grasp that all this turmoil was not a sudden accident caused by something unforeseen, like sunspot activity, but was glaringly obviously years in the making.

[underdose]

“I think Bush and most of the other high-level financial executives and policy makers knew what was going to happen…even to the extent that this was all by design.”

Very possible. It’s just too uncanny how everything has just kind of fallen into place. Many people have theorized that Bush’s inarticulate redneck bit is a well rehearsed act so that people will “misunderestimate” him. Maybe he really is an evil genious with a brilliant smoke screen, like Palpatine from Star Wars.

This still doesn’t address how absolutely nobody else was any the wiser. A small handful of us didn’t buy the tech stock bubble and housing bubble, but absolutely everyone in the mainstream news was on board. Are all the news agencies in collusion with the Bush administration? Controlled completely by the government? Fox news, sure. But CNN, CNBC, every local news paper, etc? Someone, somewhere, other than Rich Toscano and Peter Schiff must have figured this all out. Unless, of course, that high of a percentage of people really are that stupid. And if most people really are that stupid, what are the chances that every member of our government represents the handful of intellectual elite that understands things that absolutely nobody else does? That’s difficult for me to swallow. My guess is that some of them (like Greenspan) know darn well what’s happening, and others are bumbling incompetents that truly don’t grasp that all this turmoil was not a sudden accident caused by something unforeseen, like sunspot activity, but was glaringly obviously years in the making.

[underdose]

“I think Bush and most of the other high-level financial executives and policy makers knew what was going to happen…even to the extent that this was all by design.”

Very possible. It’s just too uncanny how everything has just kind of fallen into place. Many people have theorized that Bush’s inarticulate redneck bit is a well rehearsed act so that people will “misunderestimate” him. Maybe he really is an evil genious with a brilliant smoke screen, like Palpatine from Star Wars.

This still doesn’t address how absolutely nobody else was any the wiser. A small handful of us didn’t buy the tech stock bubble and housing bubble, but absolutely everyone in the mainstream news was on board. Are all the news agencies in collusion with the Bush administration? Controlled completely by the government? Fox news, sure. But CNN, CNBC, every local news paper, etc? Someone, somewhere, other than Rich Toscano and Peter Schiff must have figured this all out. Unless, of course, that high of a percentage of people really are that stupid. And if most people really are that stupid, what are the chances that every member of our government represents the handful of intellectual elite that understands things that absolutely nobody else does? That’s difficult for me to swallow. My guess is that some of them (like Greenspan) know darn well what’s happening, and others are bumbling incompetents that truly don’t grasp that all this turmoil was not a sudden accident caused by something unforeseen, like sunspot activity, but was glaringly obviously years in the making.

[underdose]

“I think Bush and most of the other high-level financial executives and policy makers knew what was going to happen…even to the extent that this was all by design.”

Very possible. It’s just too uncanny how everything has just kind of fallen into place. Many people have theorized that Bush’s inarticulate redneck bit is a well rehearsed act so that people will “misunderestimate” him. Maybe he really is an evil genious with a brilliant smoke screen, like Palpatine from Star Wars.

This still doesn’t address how absolutely nobody else was any the wiser. A small handful of us didn’t buy the tech stock bubble and housing bubble, but absolutely everyone in the mainstream news was on board. Are all the news agencies in collusion with the Bush administration? Controlled completely by the government? Fox news, sure. But CNN, CNBC, every local news paper, etc? Someone, somewhere, other than Rich Toscano and Peter Schiff must have figured this all out. Unless, of course, that high of a percentage of people really are that stupid. And if most people really are that stupid, what are the chances that every member of our government represents the handful of intellectual elite that understands things that absolutely nobody else does? That’s difficult for me to swallow. My guess is that some of them (like Greenspan) know darn well what’s happening, and others are bumbling incompetents that truly don’t grasp that all this turmoil was not a sudden accident caused by something unforeseen, like sunspot activity, but was glaringly obviously years in the making.

[Author]

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