The proposed stimulus bill and the financial industry interventions are remarkable commitments toward recovery, but the feeling out here remains that there is still more new pain to be felt.
At the heart of that uneasy feeling* is the continuing uncertainty about the devaluations of mortgage- and mortgage-related assets--there has been a substantial writedown, but is it enough? We still hear people saying, "no one has any idea how big this may be".
We also hear people saying, "the problem of transparency is that it would reveal just how large the hole is, and we can't fill it". This statement is almost certainly wrong, though knowing the exact location of all the skeletons would modify the cemetery's size for many a deserving institution. The fact that "no one knows", though, means that people can say that sort of thing without being contradicted, which prolongs the lives of such Unconventional Unwisdom.
It's time to plumb that hole and find out how deep is the bottomless pit, and I'm considering offering to do so for the U.S. Treasury. Time to put myself back in the cave, to see if I can find the light so I can show it to them all.
The Learning Process Has Begun, Though
I explain the bad feeling to the simple requirement of time to adjust to a new reality in America. If anyone were ever asked, we would say that the natural trend of property values, virtually anywhere in this country where there's a market to speak of, is upward. And it would've been true. You didn't even have to think about it.
I think the possibility has dawned that this may not be true anymore. At least, somewhere between many and most people would say that they have their doubts. Not that real estate prices should be descending on an ongoing basis, either; more like, it's possible that the total value of real estate is about what it should be. Some places will go up, some down.
Recall the real estate meltdown in Japan, probably the closest model to what is happening in the USA (and spreading outward). The steady increase on to infinity doesn't really seem like a sustainable model.
*Credits to Matt Johnson and The The for use of that song title.