Housing Bubble, The Sequel — Seeking Alpha

July 15, 2009 by Chris.

See the link below for an interesting (and long) article regarding how banks could essentially control the real estate market and manufacture a quicker, albeit fake, real estate recovery.

The author discusses a program that is being currently considered by the government that keeps jobless homeowners in their house. They would do this by allowing homeowners not capable of paying their mortgage on a house that is underwater, to give up control of their house to the bank, but be able to remain in the house afterward. The old homeowner would now be a renter, paying a rent to the bank much lower than what the old mortgage payments were.

Of course this causes all sorts of problems, which the author highlights (read article Housing Bubble, The Sequel — Seeking Alpha)

I am especially impressed with the author’s comment regarding the deflationary effect on CPI. He says that the CPI would be artificially low as it would be affected by these below market rents being charged to the new renters. The government would continue to provide easy money to counter-act this “deflation” that appears from the reduced CPI number.

Of course, the government loves to report that inflation is much lower than actual so that they can keep interest rates on Treasuries low.  This way they can pay back everyone’s debts later on using dollars that are worth less (because inflation really is present) and still keep borrowing costs low because of the artificially low CPI!

Housing Bubble, The Sequel — Seeking Alpha

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