The New Economics: Animal House

“You f***** up, you trusted us.” — Otter advising Flounder, from the film Animal House You may read this: http://www.rgemonitor.com/us-monitor/254129/new_recommendations_to_solve_our_financial_crisis_and_i_admit_that_i_was_wrong New recommendations to solve our financial crisis (and I admit that I was wrong) Fabius Maximus Oct 23, 2008 Summary: Please vote, and do so carefully! This could be one of the most important elections in American history, as continued economic crisis might require a massive (and hopefully temporary) expansion of government power — unlike anything we have seen except during wars. ...Analysis from Pisquatwa Research shows that maintaining the US System's growth required either an annual 13% increase in household debt, or an annual 5% increase in household income. Given the Republoan phobia regarding increasing household incomes, debt was chosen, and debt reached the limit of sustainability, hence the current deflationary collapse. In my view, housing prices will revert to levels of previous bottoms ie: 3X household income. With household income plunging, to 40,000/ yr. we can expect mean housing prices to drop to ~ 120,000, or a further 40%. What this will do to the banking sector need only be imagined... I seem to remember talking about bulldozing excess houses... when FDR took over in 1932, they poured milk down the sewers to drive prices up... The fat lady has not yet sung.