Housing Doom

Yes, I think I will have one. Thank you.

People forget that recessions are a natural part of the business cycle. When they are delayed, put off, stuffed under the couch… that’s when they become depressions. A recession purges the excesses of the system.

Rogers is a luddite goon.
The Fed’s purpose is to continually inflate the currency. Higher money inflation is the unspoken half of the Paulson plan. Freeze all the paper for 3 years and stoke 3 years of healthy inflation and healthy income growth (in non-real terms of course, but average guy feels good under the illusion of getting a raise) This reverses the housing slide and recoups 10% across the board from the lossy assets. More importantly, regains the confidence in US assets to repair the structured finance debt machine that the banks so desperately need. (Where did all those levered CDO buyers go?) With inflation, everybody pays except the debtors who get to make their existing debts cheaper in real terms. It’s a stealth bailout with only indirect domestic fallout. Smart Americans with saving might be upset about it, but those smart people are also free to buy gold or Euros or whatever, in addition to US stocks that will do well also. So nobody domestically has reason to be upset about it except when buying gas and such. The consumer’s cost for China goods don’t rise because they are subsized by the China currency peg. The point that Rogers slammed Ben about, Ben was essentially correct. With China being stuck with so many dollars, they pay yet this is desired. The greater the US inflation, the greater the pain for China to maintain the peg. The US wants to bust China’s peg and needs it to happen before the US can ever get a healthy balanced current account. So Rogers, now deeply invested in China, is simply griping and advocating China’s position which allows the insidious peg to continue indefinitely.
Paulson tried to negotiate with China but they ignored him. The US is going to bust the peg the hard way now or never. Wait 5 more years, and it might not even be an option for the US.