of two minds blog: Housing Writedowns Resisted

The discussion concerns America but is not irrelevant to our plight either: "Today's "trend that will stick": writing down housing values and mortgages to reality will be resisted by lenders, homeowners and government every step of the way, lengthening the recession. Why will this resistance lengthen the recession/depression? For what happens when writing down bad debt (uncollectable debt, debt based on impaired assets, etc.) is resisted, we need only look at Japan 1989-2002 for an example: hiding bad debt and acting as if assets will rebound to bubble heights someday leads to decades of stagnation."