No amount of stimulus

I realized last night after a discussion I had with Robbie that it's very likely that we're all going to be stuck in this morass for quite some time. The two of us are pretty much in the same boat: he bought his home 3 yrs ago and I bought mine 2 yrs ago. Both of us are confident that are homes are worth less now than they were when we bought them. We both put 5% down which is the most any first time home borrower could realistically do in the real estate market of the past 10 yrs. To achieve the goal of avoiding costly, unnecessary, and non-tax exempt mortgage insurance we took the 15% second mortgages pushed by our respective lenders at higher interest rates. We will be unable to take advantage of any reduction in interest rates to refinance and lower our monthly payments on our loans for at least several years. That will be when either we pay off enough equity or the housing market finishes it's correction.

Unfortunately, paying off the equity isn't in our best interest although we'd like it to be. Purchasing our homes was all done with what I call "fake money". Instruments that appeared to lower the effective value of the home by reducing payments, but in actuality raised the value. This was a natural response to the basic supply and demand principal. What I mean in this sense is that given the average home buyer can afford $X per month, if the interest rate is high they are willing to pay the $X which means the average price of a home is driven to be less than it would if the interest rate was lower. What was the cause of the lower interest rates? Of course it was the Fed manipulating the rates to prop the market up on a house of cards with short term goals in mind. This tradition was started under the Clinton administration, but was really the responsibility of Greenspan. Administrations prior to Bush contributed to the problem, but the Bush administration exacerbated it by such strong encouragement of the housing industry to compensate for the weakening economy everywhere else. Eventually this had to end. Unfortunately this is the key reason why we're in a global meltdown and is the highest form of irony I can think of. I wonder when the world will wake up.

This was known and is spilled milk that we're going to have to accept...can't rely on bailout...time will tell it's a incredible waste of money...market will have to correct itself...bailout could likely cause harmonic oscillation worsening the recovery... (more later)

With the uncertainties of today's market we're not going to pay down these 2nd mortgages any faster. Every dollar we put into them is real money thrown away, which we can't get back for several years, and every dollar of real money is what will last us a moment longer when we lose our jobs.

The only solution will be to encourage a short-term boost in inflation to readjust the market, and increase interest rates... (more later)