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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (106017)	1/2/2010 6:33:45 PM
From: Elroy Jetson	1 Recommendation Respond to of 116555

Whether the Fed is buying new Treasury bonds or domestic or foreign buyers do doesn't really matter for the time being. A rising Dollar suggests, but doesn't prove, the buying is being done with other currencies. This could still be done by the Fed with the proceeds of previous credit swaps with other central banks. The central problem remains reducing debt levels to the amount which can be serviced through the income Americans continue to earn. Income will not magically rise, and we're zero-bound on interest rates so they don't go lower. The solution remains debt liquidation, which usually takes the form of foreclosures and bankruptcies. Plans are being floated to keep all types of foreclosed properties off the market "for an extended period". On the surface this might seem to be the solution to prop-up property prices at an artificially high level. But how interested would you be in buying property at the artificial price, knowing that a huge supply of foreclosed properties just like it will eventually be released onto the market? This procedure would merely prolong the decline in property prices over a long period of time. Japan followed the same path and real estate prices declined each year for 16 years. Is that better? Not in my estimation. .