Monday, February 16, 2009

Boris Sobolev recommends Mortgage debt forgiveness

Another financial analysis pointing out the obvious necessity of debt write-downs:

http://seekingalpha.com/article/120770-gold-now-demonstrating-trust-in-obama


One of the main problems with this crisis is that the majority of the debt bubble is related to residential real estate, which does not produce cash flow, but only seems to eat it up. As home prices decline and unemployment rises, debt serviceability is worsening dramatically.

In order to avoid social unrest and to maintain popularity, the Democratic majority will face two realistic options which could begin to address the economic disaster:

Forgive portions of mortgage debt which cannot be serviced. But who will pay for the losses – clearly not the weak banks. Uncle Sam would pick up the tab by printing more currency.
Print new dollars to increase the nominal income of the indebted population through tax cuts, job creation, jobless benefits and various social spending.
There is no other politically possible way out of this mess other than to run the printing press. The way of the free market via bankruptcies is not popular so there is no sense to even discuss it.

2 comments:

debt negotiation said...

Foreclosure is the major cause of our economic crisis. Government should really prioritize this issue.We should really keep ourselves updated.

foreclosure relief said...

Foreclosure is the major cause of our economic crisis. Government should really prioritize this issue.We should really keep ourselves updated.