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How has that worked out folks? Japan's Nikkei was over 35,000 back before this hit them. Now we are in a race with them on the DOW - a cut of some 75% in market value. Real estate not only collapsed but has failed to recover in price. Consumer deflation became the rule and consumers in Japan did their damnedest to pay down debt, further damaging consumption.
All of this is now translating here as our government is doing the very same things that Japan's government did.
Ben Bernanke's theories on how he can halt a deflation as well as how monetary policy influences credit have proved false. We now know this - it is not the conjecture of an intrepid Internet Blogger, it is now historical fact. The monetarists were wrong, the intrepid bloggers correct. We have both Japan's and now our own economies as examples, where the neoclassical folks both tried to run their BS and both failed.
We have a real problem in this nation with the truth. We believe that government can fix all that ails us, when in fact government has never done a decent job of fixing anything. All government has managed to do is make promises they cannot keep, while bloviating and interfering in the process of markets finding equilibrium and thus clearing.
There is a price for a given house, a given MBS, a CDO. It is the price negotiated between a willing buyer and a willing seller - nothing more or less. So long as the government continues to actively interfere in these markets and try to "prop up prices" (no matter where it is) you will see spreads widen and markets remain frozen.
The longer markets remain frozen due to government interference, the worse the damage to our economy, the more people will be laid off, the more businesses will fail and the lower the stock market will sink.
Its really that simple, and that the people in Washington DC, including both McCain and Obama, are too tone-deaf to understand the basics of how markets work, is outrageous.
That we as Americans allow this claptrap to continue instead of recognizing the fundamental truth of how markets work and why interfering with them in this fashion can never succeed is even more so.