From Felix Salmon :
"The government does need to get the housing market going, because the alternative is unthinkable: if the government just kicked away the housing market's multi-trillion-dollar scaffolding overnight, as Santelli suggests it should, then the entire banking system would become insolvent, and we'd soon be reminiscing wistfully about how painless and shallow the 2008 financial crisis was, compared to the one of 2011".
Bravo, the penny finally drops!! But it's the wrong penny. The point is that the banks ARE insolvent and unless American taxpayers collectively (i.e. via the government), take on a load more debt to pay them for their stupidity; at some point someone is going to find out. Outside of the government handing out $50,000 tax credits there is little anyone can do to reverse the relentless grind of reality.
This is the reality of a bubble:
When you are creating a bubble with tax-credits, and facilitating loans with a repayment that is half what the inflation in the "market" for the assets class the government is providing what Felix Salmon calls a "multi-trillion-dollar-scaffolding" for, the "bubble-masters" can do no wrong. But sorry guys – post pop, when the realization starts to sink in that all the bubble did was create one the largest transfers of wealth from the poor to the rich in the history of mankind, the "tools" that were so effective before (easy-cheap credit and government support of lunatic lenders), doesn't work anymore. In the game of the bubbles, like surfers catching waves, timing is everything. Catch it right and you have magic, miss the wave and you get gobbled and you end up in a wipe-out of foam bouncing along the reef trying to figure out which way is up, and wondering how long you can hold your breath. Like right now.
The reason that trying to turn the tide is a pointless at this point, like King Canute's Big Idea, is because just as ordinary folks were "pressured" to buy houses they could not afford in a rising market, because they felt they would never be able to own a house if prices kept on rising; ordinary folks are now pressurized by the reality of the market-place, to sell or to walk away. And the "qualified" buyers have the luxury of just sitting back, and watching them bleed.…
