Wednesday, May 19, 2010

Mortgage situation getting worse

States can hide their debts for a while by selling bonds, and the Federal government can delay the inevitable for even longer by printing money, but private homeowners and small businesses don't have those options. So it should come as no surprise that another wave of mortgage foreclosures will lead the next economic downturn ... or the next round of nationalizations.
And these are the conditions with TARP, bailouts and buyouts.

The Federal government could simply decide to spend trillions each year from here to eternity to keep the economy propped up, but that would be mathematically unsustainable without printing money and hyperinflation. On the other hand, fiscal responsibility and balanced budgets would finally allow inflated prices to fall and insolvent banks to go bankrupt - but few politicians want to be held responsible for purposefully allowing that kind of pain to happen. Most prefer to give the impression of trying to help now, so that they can shrug their shoulders later when the whole system collapses more violently.

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