We all had ourselves a really good time at this party. It started with a nice tasting punch of a stimulus package after 9/11 that got people easing into recovery after an excess of technology frosting and the shock of twin candles. But Greenspan, supported by the well meaning, brought in the white lightnin’ of low interest rates, disguised by the fruit punch of mortgage backed securities, and safe subprime tranches, and many of us got really sloshed and had much more punch than we could handle. Some of us were more susceptible to its charm.
Well, now the party is over and we need to cleanup. In general, after a real corker like this party, it usually best to take your medicine and clean up right after rather than waiting for the next morning when the stuff is all congealed and harder to deal with. If you go so far as put the leftovers in the refrigerator of a bailout, it will usually still needs to be thrown out and by that time it will really smell.
I am concerned that we are all very tired and hung over and that we will try to take the easy way out - going to sleep for while – thinking that with time and a couple of extra aspirins for the susceptible folks, the mess will get better by itself. Usually, it just delays the inevitable. In his book “Turbulence”, former Chairman Greenspan talked of the Japanese real estate and investment bubble, where the Japanese government, in order to prevent people from dealing with the humiliation of losing their homes (having people know you were partying a little too hard) protected the homebuyers and the investors, like our government is getting ready to do today, through a combination of mortgage renegotiation, low interest rates and a stimulus package that will represent a mere 1% of GNP. That action caused the recovery in Japan
While I understand that what we do impacts the world, and that the world is shuddering right now, there are already signs of life here in the US California
I vote for a clean sweep. Let’s take our medicine, clean up the mess and get ready to get on with our lives. The medicine is lower house prices if you are trying to sell your home and more realism in your offers if you are trying to buy (you don’t ‘want to be trying this low ball, hold off stuff when the next party starts because the demand will be strong and prices will rise quickly). Finally, if you don’t know the impact of the joy juice of homeownership, best not to drink until you have the food of down payments and a few months protection money to protect you when things get rocky.