The economy

[galadhelsul]

The bailout bill passed the House today, after failing on Monday. Since it already passed the Senate, it will probably be signed into law this evening or weekend. All the idiots that thought this bill had to be passed because otherwise the stock market would keep falling until it destroyed everyone's 401(k) balance can now rest easily with the

Comments

[galadhelsul]

On housing, you have picked the Japanese 20+ year recession option. This recession will last until incomes are back in line with house prices. In most of the country (geographically anyway) house prices can be held level until incomes rise 10-20%. But in the densely populated areas where most people live, house prices have to fall by a fair bit because we can't raise incomes far enough. In the Boston area, houses are still overpriced by more than 50%. That represents about 10-15 years of income growth during normal economic times. We may never get there in a continual recession. And Boston's housing bubble is small compared to many other cities.

Mass foreclosures are the fastest way to lower house prices. But foreclosures don't have to kick people out of their houses. The government could encourage the creation of rental companies that buy houses out of foreclosure on the condition that they agree to lease it to the current occupants for at least 3-5 years. Alternatively, the government could take over the loans and offer repayment terms similar to what is available for student loans. People who can't afford payments that are somewhat above market rate rents should be forced to downsize or sell to someone who will rent their house back to them. And in no case should anyone be given a reduction in their mortgage balance that they get to keep if they sell the house for a higher price later.