1. Wannabeemigre said...

I dont know about the damage that this hic-cup in the American housing market will cause but I am laughing at the solutions being touted-a federal bail-out of the sub-prime sector or a lowering of interest rates-either of which is doomed to failure. The USA is already running record fiscal deficits which they can ill afford, the only way of getting more money is the issue of bonds ( I seem to remember China wanting to get out of US treasury bonds,) The Japanese shall soon be raising their interest rates more-they may not mind property bubbles in other countries they certainly dont want one of their own, and anyway by raising rates they can only stand to gain, remain competitive (lower land prices therefore lower interest payment otbe and/or get repaid from previous loans with higher value yen:-) luverly jubbly!! Lowering interest rates would put the US in the situation where the housing market takes off again, ok so far, but then so would inflation-oops!! the net result would be even more defaults in the long term-as far as I can see the fat lady is clearing her throat