Instead of providing help in slowing the foreclosure process or pressuring banks to renegotiate, Obama’s solution is for the Fed to flood the banking system with enough money at low enough interest rates to re-inflate housing prices. What Obama seems to mean by “recovery” is that consumers once again will be extended Bubble-era levels of debt to afford housing at prices that will rescue bank balance sheets.
It is an impossible dream. American workers now pay about 40 per cent of their take-home pay on housing, and another 15 per cent on debt service – even before buying goods and services. No wonder our economy has lost its export markets! Debts that can’t be paid, won’t be.