This post is by way of an introduction to themessthatgreenspanmade, a new blog roll entry. He's been warning about all this stuff for years now. Though to be fair, we statistically ALL wanted the money.
Free money. You get what you pay for.
Like anyone who understands that money's value is subject to supply and demand just like anything else (Thank you, Dr. Freidman!), I've seen the new inflation coming for years. The media have decided to call it a "housing" or "mortgage" bubble, but that's just merchandising.
As though mortgages were not just one of the conduits (like the war and the usual corporate, welfare, and medical subsidies/bribes) for pumping up the money supply.
Plus it will allow next year's class war candidates to talk about those "evil(R)bankers". You know, the ones who lent you "good (D) working people" money even though they knew you were deadbeats.
And of course it will create whole new swathes of dependents on government. Starting with the Chairman of the Deadbeat Bailout Administration.
But it's not a bubble, or connected directly to any commodity except fraud by our political servants. It's a plain vanilla money supply inflation- a general decline in the value of a particular currency.
Hold hard there, aren't house prices (the value of houses in relation to money)falling?
Yes, they are. At least the sales of houses are declining, I don't see them actually selling at a discount. But no other price is. U. S. dollars are sliding down the scale of value in relation to commodities and other non U. S. dollar controlled stuff like euros or gasoline.
Because the increase in the money supply drives down money's value, it took more and more to buy houses (and soldiers). While the newly created money was plowed into houses and blown up in humvees, its effects were less apparent. But gradually they have wormed their way into other parts of the economy, to the extent that people have stopped being the greater fool borrowing money, or have just decided to hold off spending it on non essentials.
The declining value money has stopped chasing houses, and started chasing dinner. At least that's my theory.
My projection? MORE inflation, when the bribe/bailout gives the deadbeats even freer money. And the war and subsidies are still driving merrily along.
Borrow to the limit now, buy solid assets, and pay back with less value cash. The same investment strategy that always seems to work in a fiat money economy.
Longer term, don't forget about the 401(k) Tax Forgiveness Act of 2012 (or 2016). The free money created to replace the deferred taxes the boomers won't want to pay will dwarf the mortgage write offs.
Anyway, welcome to the blog roll!