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Five necessary steps for a real housing recovery
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Monday, October 31, 2011
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From Of Two Minds:
If there is one goal that the financial cartels, their politico apparatchiks and the public might actually agree upon, it would be restoring the housing market to health. This is because the financial cartel, their politico lackeys, and homeowners would all benefit from the stabilization of housing values at current levels:
1. SDI (systemically dangerous institutions) a.k.a. too big to fail banks, would avoid insolvency by keeping all their mortgage assets marked to unicorns-and-pixies, i.e. artificial valuations.
2. The political class of toadies, lackeys and grifters would finally free itself of an unsolvable problem that keeps highlighting its incompetence and irrelevancy.
3. Homeowners' most treasured fantasy -- that valuations will rebound and thus restore their dreams of "free" home equity -- will be reanimated.
In other words, everyone exposed to losses in the corrupt, speculative apex of malinvestment known as the U.S. housing market doesn't want a truly healthy housing market, they just want a return to the bubble era.
Sorry, folks, ain't gonna happen. (And yes, I own property, too, but it is what it is.) Bubbles do not reinflate, even with the Fed chanting its Keynesian Cargo Cult mantras ("zero interest rates forever!") and waving dead chickens over the embers.
The conditions which inflated the bubble cannot be called up by incantations; faith in the system has been destroyed, and only the complete socialization of the mortgage market by the forces of Central Planning -- the Fed and the Federal government's Socialized Mortgage Makers, Fannie and Freddie -- have staved off the complete collapse of prices which would have wiped out the banks and cleared the market via actual capitalism in practice, i.e. a transparent marketplace which is allowed to discover price.
Despite the fact that a truly healthy housing market is anathema to the status quo and current property owners sitting on huge mortgages, let's lay out the necessary characteristics of such a housing market...
Read full article...
More on housing:
Ten U.S. housing markets that could collapse this year
How you could safely make 54% on your money in one year
Doc Eifrig: There may be no better time to buy a house than now
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