Like an ATM that’s out of money

no credit

That’s what financially strapped homeowners now realize about their homes. The party is over. There will be more borrowing on the line of credit, because home values are falling now, not rising.

The Fed has aroused from their slumber long enough to say, hmm, this housing thing might ‘weigh’ on the economy more than we initially thought. Inflation is rising. To combat it the Fed must raise interest rates. But that will kill any possible housing resuscitation before it happens as well as dooming even more people to losing their homes because the payments for their variable rate mortgage will then rise.

I’m guessing not one member of the Fed is in danger of losing a home or even knows anyone who is. So they will continue to issue soporific statements (don’t want to roil the markets, y’know) while housing collapses around them. Then they will raise interest rates. Well, one of their primary purposes is to protect the assets of the monied class, so they can’t be upsetting investment banks, bond traders and hedge funds, now can they?

National Association of Homebuilders now says the building slump could last until 2011. That means a whole lot of hurt for a whole lot of businesses; realtors, contractors, building supplies – and all the businesses those people shop at. New car sales are down with the housing slump being an obvious factor. Vacation trips, meals out at restaurants, etc. will also take a hit.

In Debt We Trust covers much of this, concluding with a comment about lawmakers trying to mandate a way out.

We have to drop our pink colored glasses: there is little or nothing we can do. A debt binge is either paid or defaulted. And no lawmaker has the ability to change the outcome. Two options… only.