Ok I agree with some of what you say, but there's still half empty apartment buildings as a result. The temporarily high bubble prices encouraged excess production beyond the long-run sustainable demand for properties of that kind. That excess production/building has essentially been wasted - the cost could have been spent on something that people would actually want now and in the near future.
The truth is too radical for people to believe or even acknowledge. Fractional reserve banking is the achilles heal and fundamental "flawed premise" of the entire capitalist system. All the Federal reserve did was cartelize these inherently fraudulent institutions. The waves of bogus credit expansion then deflationary collapse is an inherent feature of our credit based economy. The entire system ONLY succeeds in shifting wealth from productive industries and workers to the financial sector, which so long as it is based on artificial or bogus credit is a fraud. Nothing any politician can do will solve this problem. At this point the only thing the establishment can really do to save itself is try to INFLATE and DEVALUE the dollar like hell. That will bail out our fraudulent system and allow John Q. Sheeple public to keep his subsidized, non productive, paper shuffling socialist job. Our mixed economy system is inherently unstable and always will be.
You hit the nail right on the head. Obama has put this country on the pain payment plan, X amount of pain over a decade or so, versus 1929 with no intervention. In total, however, there very likely will be more economic pain doing it Obama's way than just letting the system fully correct itself by allowing excess capacity and inefficient companies to be eliminated. There is no free lunch. We might not get great depression II, but we might get lost decade x2.
i'm no econ genious so flail away on this proposal. Instead of handing trillions to the banks at 0% and not having it relent out to the taxpayers who lent the money in the 1st place, lend the money at 0% for a limited time to small businesses and homeowners, to reduce their mounting credit debts,get people back to work and spending, let the banks eat their own losses and the strongest of banks survive. People still need roofs over their heads, food on the table,transportation... They are willing to work to pay for it,the idea of being 5 or 6 times your yearly salary in debt to do these things is not entirely the fault of the borrowers, they would have gladly borrowed less and payed more reasonable sums for housing. up until the 80's, a family was able to afford a home and family on 1 salary, now we have both parents working and still going under, There is an old saying ... a house is only worth what the banks will loan you
We can imagine a world where for some strange reason people decide sewage is the wave of the future. Some guy with a PhD writes a paper saying based on simple projections of the number of times we need to go to the loo and the average waste matter each time we go, the country is going to face a serious problem with sewage capacity. It get plenty of airplay and fear mongers in the media beat the drums of a national sewage problem. CNBC reveals Wilbur Ross has an early investment in a sewage pipe laying company and exits with 5X his money. Wall St starts pouring money into the sector and Cramer starts pitching sewage stocks on Mad Money. The nation's savings, in the form of IRAs, insurance assets, endowments, pensions assets will start to flow like a giant river towards pitchmen for the sewage industry. It seems we are directing savings towards a huge investment push. Meanwhile, early holders of sewage stocks see huge paper gains and start upgrading their homes to celebrate. Pitchmen go mad spending money on limos, airtime, champagne to win some of that investment flow. The trickle down effect stimulates the consumption economy. Society's marginal propensity to consume ticks up. The media fans the excitement and everyone starts to lionize the sewage industry. Let's say the sewage industry gets heady, they take their newly accessed capital from the national savings pile, through bonds or new equity offerings or venture, and start spending it on brand new HQ buildings, superbowl ads, champagne parties etc. If we assume that there is really limited benefit to building out our sewage system, then this too is converting funds previously allocated for savings towards consumption. There is no real investment benefit at the end of it all - no GDP frontier pushing activity. So the net result is this - we have quite a bit of wastage, as we build out sewage pipes no one is going to use. And we have a giant uptick in consumption. No surprise that when the bubble bursts and we realize it was all a pile of shit to begin with, we cut back on consumption to rebuild our depleted savings.
Good analysis, you just forgot to mention how banks magically creating credit (and Wall Street firms buying the magic loans from banks) worked to fuel the consumption/investment binge and exacerbated the whole situation.