logical

Inflationists vs. Deflationists: Who's Right?

From the comments here, I'd say you're still in a very small group -- but I believe you're also still correctly anticipating what will come of our past excesses.
Every consumer loan that defaults destroys a family's wealth as well as capital on the books of a bank somewhere. It then reduces the investment of whoever bought that loan bundled into an asset-baked security. Digits on a computer get erased and the bottom line is lower. Money that was created gets destroyed. Defaults are deflationary, especially if they are on depreciated assets or are unsecured, such as credit cards.
Regarding inflation: in a way, it needs a counter-party. There is no such thing as a high price without someone having to pay it. That is the problem with a hyper-inflationary scenario -- average folks are losing money. They aren't able to pay. That's why they're defaulting.
I think when we look back a few years from now we'll see that these past years have been the inflationary stage. The housing bubble has been the economic growth we've been experiencing and has disguised the economy's real weakness following the tech bust. We never actually recovered, we just bubbled it over.
Now we are entering stagflation as the reality sets in. Next up; deflation.

Peter Schiff on the Housing Market and the Rescue Plan

I think it's disingenuous to discuss this mess only from the point of view of the foreclosures. This housing bubble has trapped everyone. It's going to bankrupt families who didn't buy stupid, and it's going to bankrupt states.

It was a bubble, folks. It's not just a case of some greedy subprimers getting uppity and forgetting their place. It's a massive failure of the financial system. The wealthy banksters and Wall Street are the ones who got greedy first. I blame JSP less for wanting to join the middle class than I blame the Masters of the Universe for wanting to 'make' another million or so a year off the JSPs who never should have been given loans in the first place on houses that were inflated in price. The taxpayer bail-out is for the big banks and fund managers. The individual homeowners who may get rate-freezes are just a means for that to happen. This is about bailing out the big guys.

If people can't see the big picture here, then they must be myopic! Stop being jealous that some $50k a year guy maybe got a home equity loan he didn't work for, and realize that the big playas in the financial system are on the verge of bringing the entire country down! You are going to be paying taxes for a very long time to cover the mistakes of millionaires. Joe Six Pack was just a tool.

Peter Schiff on the Housing Market and the Rescue Plan

There seems to be an 'all or nothing' mindset developing regarding these subprime borrowers. But in the real world, each homeowner's case is different, and each deserves to be treated individually. These are people's properties, and it is their money that is making the payments. If they truly are in over their heads, then yes, they will have to face that fact. But many are salvagable. Should they be thrown out just so housing can correct faster?

That makes no sense. A LOT of people aren't selling at today's prices. They're waiting. Housing isn't frozen because of those with rate resets. It's frozen because even those with equity can't accept the losses they'd suffer if they sold.

Throwing people out of their homes is not going to solve the problem. It's bigger than that. Why is everyone so anxious to shake a moralistic finger at subprime borrowers when it was the vampires on Wall Street who made the big bucks off this mess? Subprime borrowers are subsidizing $20 million apts overlooking Central Park, and yet the wealthy like Peter Schiff blame them?? Talk about elitist snobs!

Peter Schiff wants marginal people to be tossed out so he can see where the economy is going, so that he can make investments to line his own pockets. Follow his press releases and writings -- he ends every interview with a plug for his book and an advertizement for his investing group. Peter Schiff is a shameless hustler. Oh, and check out his fees. Ouch.