Debt structures backed by investors are in one risk category and debt structures ultimately secured by the govt (as is a bunch of mortgage debt) is in another

I will submit that some reasons for going into debt are better than others. My point was that printing money is bad for the currency, and it doesn’t matter why you do it.

Debt and counterfeiting are two different things.

If you wanted to argue the relative merits between:

-paying people to deal in drugs, stay unemployed, uneducated, incarcerated, and without any family or sense of self worth

or

-sending a message to 1 billion people…”Don’t every f-ing do that again.”

I’d choose the latter as being long-term more constructive for the collective well being of the US.

No one can accuse you of being a bleeding heart liberal! :)

All I am saying is that within the last century every major war brought about inflation to some degree. I’m old enough to remember gasoline going from 35 cents a gallon to 80 cents a gallon, and $25k houses inflating to $75k after the end of the Vietnam war. History supports the expectation of significant inflation in the near future because of the Iraq war. When discussing future economic conditions, this factor should not be ignored.

Some deflation in asset prices is needed to restore balance to the market and value to the dollar.

Their is danger if inflation or deflation becomes to great.

This morning on the PI – someone has been cheating…
http://seattlepi.nwsource.com/local/325743_appraiser31.html

I always wonder how it is people get concerned about “financing” the war and the negative effect it has on the US Peso, but somehow we never discuss the horribly corrosive effect the Welfare State has on US productivity and the US Peso.

Printing money is printing money. It does not matter if you are buying bombs and bullets or paying Urban America to deal drugs and avoid contributing to society.

At least one is constitutionally mandated.

I would emphasize over and over again (kind of like Dr. Roubini) that subprime [and even loans to low risk borrowers too] hybrid and adjustables are only good for a period of years; then the “fixed rate [and then some]” monster payments kick in….we’re not talking 10-20% jumps folks, how about 100% or more. I know they can refinance to 7% fixed, the problem in a nut shell, they can’t afford to when their home ain’t an ATM machine anymore [meaning the price went flat, down or up a measly % or two].

I suppose if they have parents that will lend them $30-50K or more to pay the back interest the last sveral years they owe to close out the previous low payment hybrid….read the fine print carefully on your hybrid or other ARM & LEG contract, its horrifing….they can get a fixed rate refinance. Problem is, dad and mom used their home for an ATM machine too…..they’re most likely broke too…

Chris, two parts. First, the Fed has their back against the wall, because cutting rates could further encourage China (& others) to move money out of dollars. China is already threatening this. We NEED that money to maintain our trade imbalance. Second, the Fed rate and mortgage rates don’t always move together, and they definitely don’t do so immediately. Mortgages were just under 5% when the Fed rate was 1%. If those moved together, we’d see 9% mortgage rates now.

The analogy for the negative equity guys to prisoner’s “dilemma”: if prisoner A confesses, he gets the gas chamber regardless. So there’s no incentive to confess. Not really a dilemma but still analogous.

What is even more disturbing is that inflating away debt gives every american a rational incentive to take on as much debt as possible and save nothing, since any savings will be decreased in value along with the debt.

Good plan.

Put simply, in the Prisoner’s Dilemma, two parties (Smith and Jones) are given a choice confess or deny the charges. If they both deny, nobody goes to prison. If Smith confesses (implicating Jones) and Jones denies, it’s a plea bargain and Smith gets a 6 month sentence while Jones gets a 10 year one. The opposite is true if Jones confesses and Smith denies. Finally, they can both confess and implicate the other, in which case they both get 2 year sentences.

The best they can do is deny, but the risk of denying is too great when you don’t know if your accomplice will confess or deny. This means the smart thing to do is always confess. Since both prisoners are logical (right?), they both confess and both do much worse than if they had both denied.

The housing situation could be analyzed by game theory, but I believe Prisoner’s Dilemma is the wrong game to compare against. Especially because holding has costs which may trump the costs of selling at a loss, and if people realized that holding would cost them, they would sell immediately regardless of the effect on others.

“No wonder Trahant is on the Editorial Board of Morons. Ask Jimmy Carter just how great inflation works out for an economy.”

“Lost Lake Dave doesn’t realize that inflation is coming no matter what, and for most people has already hit pretty hard.”

“Revenue to governments declining? Mr. Trahant, your utter failure to assimilate facts is astounding.”