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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: UncleBigs who wrote (48933)1/7/2006 5:37:08 AM
From: Mike Johnston  Read Replies (3) of 110194
 
I think it might be the beginning of a massive rescue operation for the housing market.
M3 increased a massive $56 billion in the last week of december. The tsunami of new money hit the markets on Jan 3.

The fact is that house prices on the coasts are 100% overvalued in respect to fundamentals.
A 50% decline back to fair value would wipe out millions of "homeowners" and sink a big chunk of financial industry.

IMO, by the end of 2008 the Fed will have doubled the money supply by continuing to monetize government spending.

This in effect will double the price of everything, while nominal house prices are flat, "saving" many homeowners from default but still wiping out speculators with negative cash flow or those that will not be able to handle rising expenses.

Of course there is no "free lunch". The housing market will be saved but the standard of living will collapse for many in the middle class.
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