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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (94162)	5/12/2008 6:54:58 PM
From: John Vosilla	Read Replies (2) \| Respond to of 110194

'If the house was sold for 200K more, somebody has run away with that 200K. The money is out there. It has not gone to heaven. And if the owner of the house held it all along as it went up 200K and then down 200K, he didn't benefit in any way from the price rise. Nor does he benefit from the price decline. All he sees is the price increases for the milk, vegetables, rice, wheat etc.' Exactly..Someone either got the cash on the sale at a high price or the owner cash out refied and probably spent the money which again went into circulation somewhere all with a multiplier effect. Then down the road the bank forecloses on the current upside down bagholder and takes the $200k hit which isn't really a hit cause the tax payers pay for it somehow someway.. This is all highly inflationary just like the misallocation of capital flowing into Iraq and the oil cartel.. I bet for perhaps 75%+ of the population the housing bubble and bust had a zero effect or consequence on their lifestyle or spending patterns.. Another huge consequence to the economy is all these folks in debt slavery attempting to service all this overleveraged property get out from underneath all this debt, start fresh with a much lower monthly household expenditure as a renter thus giving these people much more disposable income on the back side of all this.. Creative destruction of capital as long as the free market is allowed to operate is a good thing I've always been told and history bears it out.. Bottom line is the deflationists who think they are ahead of the curve are actually very myopic and so focused on certain specific issues totally missing the big picture or that the house of cards are stacked against that way of thinking..the game is rigged with fiscal and monetary irresponsiblity the end game.. Bush knows it as does Paulson and Bernanke..just go read Ravi Batra's 'Depression of 1990' for fun during a time when our government actually practiced some sound discipline and deflation was actually possible in a time when Greenspan was an inflation hawk keeping money way too tight and Bush Sr practiced attempts to actually balance the budget in the 1990-92 period. Mish appears to have borrowed many of Ravi's ideas<g>.