Is Debt-Deflation Just Beginning?

Last Thursday I received an email from David Meier, Associate Advisor at the MotleyFool concerning Debt-Deflation.

David asked if I had any comments on his article Debt-deflation: Just the beginning? Here is a partial listing:

The debate rages on.

Is inflation or deflation the bigger threat? There are lots of people -- lots of smart people -- on both sides of the debate and they present lots of good arguments. One thing that I have not seen -- and maybe I just missed it -- was an analysis using Irving Fisher's debt-deflation framework. So I decided to put one together myself and to inject my understanding of what Bernanke is try to do to stop deflation from taking hold.

The question I keep coming back to, especially as I read more about the situation Japan faced (I'm reading everything I can by Richard Koo, including his book "The Holy Grail of Macroeconomics."

And just to make sure I am not being one-sided, I am countering my fears of deflation with "Monetary Regimes and Inflation" by Peter Bernholz, which should arrive next week.

Without further ado, below is my research on debt-deflation.

Dave

Dave's research is a 70 page Slideshow On Debt-Deflation that is easy enough to read or download from Scribd.

Here is my response ....

You should not be afraid of deflation.

You should be afraid of policies attempting to fight it.

Deflation (rather price deflation) is actually the natural state of affairs. As productivity increases, more goods and services are produced relative to the population and prices would therefore be expected to drop.

It is the Fed, along with misguided Keynesian and Monetarist economists who think falling prices are a bad thing. Who amongst us does not like falling prices (except of course on things we own like houses, but even then who is not sick of higher property taxes that result)?

The reality is inflation benefits those with first access to money. Guess who that is? The answer is easy: banks, government, and the already wealthy. Inflation is actually a tax on the middle class and the poor who get access to money last. During the housing bubble, by the time the poor could get access to to money easily, it was far too late to buy.

Given that inflation benefits those with first access to money, any targeted inflation at all is morally wrong.

Note that Congress has passed 300+ affordable housing measures over the years and all of them failed. The irony now is Congress has simultaneously passed measures hoping to prop up the price of homes while seeking still additional money to create affordable housing.

Home prices need to fall (and will fall) to levels of affordability based on wages and wage growth regardless of what the Fed does. Thus, efforts to prop up prices are triply stupid: They are costly; They they will not work (prices will fall to where they are headed anyway); and they will delay a recovery.

Deflation is only bad in the context of the short-term pain it will involve. Moreover, it is important to remember that the pain of deflation is relative to the inflation party that preceded it. That party must be paid for either in terms of time or price.

Following the Footsteps of Japan

The irony is Greenspan and Bernanke repeatedly criticized the Bank of Japan for not writing off bad bank debts. So what do we do?

We are Following the Footsteps of Japan even though we have proven without a shadow of a doubt it is economic insanity.

Psychology of Deflation Revisited

In January 2007, someone on the Motley Fool told me "Too even compare the citizens of Japan to the US is stupid, stupid, stupid Forest Gump!"

I was also told "Fannie Mae can revive the housing bubble" and that I "ignore an enormous amount of 1990s monetary theory by Bernanke and co about how they would have dealt with Japans deflation."

Inquiring minds can read Q&A on the Psychology of Deflation to see my replies.

It now seems that Things That "Can't" Happen, did happen.

Indeed Economic Madness Is Repeatedly Endless

Bernanke's Deflation Preventing Scorecard

In case no one is keeping track, Bernanke has now fired every bullet from his 2002 �helicopter drop� speech Deflation: Making Sure "It" Doesn't Happen Here.

Misunderstanding Japan's Lost Two Decades

Richard Koo of Nomura Research Institute Ltd. says U.S. Risks Japan-Like �Lost Decade� on Stimulus Exit.

I say U.S. Faces Second Lost Decade "Because" of Misguided Stimulus

Real Lesson of Japan's Lost Decades

The real lesson is no matter how much money you throw around, economies cannot recover until uncollectible debts and malinvestments are written off. That is why you have �zero interest rates and still nothing�s happening.�

The moment fiscal stimulus stops economies are virtually guaranteed to relapse until asset bubbles deflate, and malinvestments and bad debts are written off.

Bailing out the banks did nothing to fix these problems. Consumers are still saddled in debt, in underwater mortgages, with no job. Moreover, there is no driver for jobs given rampant overcapacity in nearly every sector.

Banks do not want to lend in this kind of environment so they don't. Businesses do not want to expand in this kind of environment so they don't. Meanwhile the Obama administration is making matters worse by increasing taxes on small businesses and proposing everyone pay for health insurance, with businesses forced to offer a plan or pony up part of the cost.

This too is giving small businesses an incentive not to hire. Housing prices are too high yet the Administration and Congress are hell bent on propping up prices. The solution is to let prices fall until they are affordable.

Illusion of Stimulus

Recoveries based on stimulus are nothing but an illusion. Here is a snip worth reading from U.S. Faces Second Lost Decade "Because" of Misguided Stimulus written by my friend "HB" about Christina Romer, chair of Obama's Council of Economic Advisers.

I know Christina Romer best for her misinterpretation of what happened in 1937-38. She believes that the fallback into full-scale depression from 'depression light' (as evidenced by unemployment in 1938 almost returning to the highest levels of the depression trough 32/33) is proof that it was a mistake to tighten policy (fiscal and monetary) too early.

In other words, according to her, if the Fed had continued pumping as furiously as possible, then everything would have been alright.

In reality, the entire inflationary mini-boomlet-within-the-depression was simply an illusion. 'GDP growth' that is bought with monetary pumping and feckless fiscal spending only misdirects and ultimately consumes even more scarce capital.

Fiscal stimulus may temporarily give the impression of a recovery, but it is not a genuine recovery. It makes things worse. The moment the pumping is abandoned, the true state of affairs is simply unmasked. That is what happened in 37/38 - a slight tightening of monetary policy revealed the fact that the mini-boomlet was as unsound as its predecessor boom in the years prior to the '29 crash.

It would not have been possible to hide this reality forever. There is nothing, absolutely nothing, that government intervention can achieve in terms of 'fixing' the economy. The choice was in either abandoning the unsound policy and the unsound investments it produced, or careen toward a complete destruction of the currency system.

Once again, I stand amazed at how people can look at this, and look at Japan, and look at the housing bubble/bust sequence, and still believe that monetary pumping and deficit spending are viable tools of economic policy when a bust occurs. It really boggles the mind, reminding me of Einstein's definition of insanity, 'doing the same thing over and over again and expecting a different result'.

Understanding Velocity

David had several slides on velocity. The important point he missed is that velocity of money is a result not a cause of anything to come.

Velocity is falling because the Fed is printing hoping to stimulate the economy but banks are not lending because

1) credit risks are high
2) there is rampant overcapacity everywhere, thus businesses have no reason to expand
3) credit worthy consumers do not want to borrow

The attitudes of lenders and potential borrowers have changed. Under these conditions, the more Bernanke prints, the lower velocity will go.

Spending Collapses In All Generation Groups

Please consider Spending Collapses In All Generation Groups

It's no secret that boomers fearing an underfunded retirement have sharply cut spending. However, it's not just boomers cutting back. Consumer attitudes toward debt have changed across all age groups.

Bernanke can flood the world with "reserves" and indeed he has. However, he cannot force banks to lend or consumers to borrow.

Here is a simple analogy that everyone should be able to understand: You can lead a horse to water but you cannot make it drink. And if the horse does not want to drink, it was a waste of time and energy to lead the horse to the water.

In a debt-based economy, it is extremely difficult (by monetary policy) to produce inflation if consumers will not participate. And as noted above, demographics and attitudes strongly suggest consumers have had enough of debt and spending sprees.

Government bodies like Congress can theoretically produce inflation but Japan tried and failed for years.

Uncharted Territory

In the US and globally we are in uncharted territory. Odds are we will see many things we have never seen before as stimulus after stimulus fails to produce desired results.

I ask you to consider Twelve Reasons For A Job Loss Recovery.

Humpty Dumpty On Depression Conditions

The conditions now are very similar to what happened in the great depression, discounting for the moment this reflationary effort by the Fed that is doomed to fail.

For more on the conditions one would expect to see in deflation please consider
Humpty Dumpty On Inflation.

Some of those conditions have changed since December. However, bank failures, total bank credit, and short term treasury yields near 0% have not. Moreover, long term yields have ticked up but they are still at historic lows compared to anything but the lows last December.

It is important not to confuse a recovery in the stock market with an economic recovery.

Don't just take my word for it. Please consider Leading indicators and the shape of the recovery by Paul Krugman?

Michael Shedlock has an awesome takedown of ECRI�s claim that its indicators (a) have successfully predicted turning points in the past (b) point to a sold recovery now. I�d add that this is a really, really bad time to be relying on conventional indicators.

Why? Basically, because in a zero-interest rate world � the three-month rate was .066% last I looked � especially one that�s suffered from a collapse of the shadow banking system, conventional indicators don�t mean what they usually mean. Increases in the monetary base aren�t especially expansionary. The yield curve more or less has to slope up, even if no recovery is expected. And so on.

So historical correlations, to the extent that they exist � and as Shedlock points out, ECRI is claiming a much better record than it really has � can�t be counted on to prevail. There�s really no alternative to making fundamental analyses of the macro situation.

One important point to note is this is a credit bubble bust, similar to the Great Depression, not an earnings scare recession, or a routine business cycle recession.

This is a once in several generational event. I bet the ECRIs leading indicators applied in April of 1930 would have looked quite similar.

One thing is for sure, is that Krugman does not hold any grudges. I sure have to give him credit for that. I also happen to agree with Krugman when it come to free trade for which we are both strong proponents.

Unfortunately however, there is a rising tide of protectionism in Congress and this Administration. Note that the Smoot-Hawley Tariff Act is one of the things that made the Great Depression much worse.

States are repeating another mistake by raising property taxes.

Keynesian Model Broken Beyond Repair

The Keynesian and Monetarist models are broken beyond repair.

It is amazing that so much love exists for a man whose ideas have been thoroughly discredited on many occasions. Here is a little blurb from the American Journal of Economics and Sociology.

The crisis policy devised by John Maynard (Lord) Keynes, which seemed to work well during World War II and in postwar reconstruction, met its nadir in 1975. Contrary to Keynesian theory, formalized in the Phillips Curve argument that inflation and mass unemployment are mutual trade offs, double digit inflation and record unemployment made further deficit spending an impossible policy.

In case you fail to understand the implications, Keynes is arguing one cannot have a recession and inflation at the same time.

Did The Keynesian Economists Give Up Their Theories Confronted With Japan?

The answer is no. Stagflation in the 70's discredited Keyensian theory as did Japan's building bridges to nowhere.

Keynesian economists now say the problem was Japan simply did not act fast enough.

The amount of global monetary stimulus thrown at curing the deflation problem is staggering. Yet here we are with the same debt overhang, no jobs, and no way to pay off that debt. Deflation looms larger than ever because of Central Bank efforts to fight it.

Let's return to the beginning. It's important to remember that inflation and deflation about not about prices but rather about the expansion of money supply and credit. Concern over prices is putting the cart before the horse.

Fantasizing In Academic Wonderland

Keynesian academic models do not work in a real world, with real people, where attitudes and global forces such as global wage arbitrage are in play. The Fed cannot force consumers to borrow or banks to lend. Nor can the Fed create jobs. Congress can create makeshift jobs but as we have shown above, makeshift jobs cannot possibly create a solid economic foundation.

In response to the above someone is sure to tell me how negative interest rates could be used to force banks to lend. My response is forcing banks to lend cannot and will not work in actual practice.

One reason Bernanke wanted to pay interest on reserves was to slowly recapitalize them over time. One cannot achieve that while forcing them to lend. Moreover forcing banks to lend will do nothing but increase further writeoffs.

Again, it is important to look at how things operate in a real world model, with real consequences, as opposed to fantasizing in academic wonderland about how to force banks to lend.

Fiat World Mathematical Model

Logically speaking, when the problem is debt is to high, it is insane to think a spending spree will fix the problem. Even a 6th grader would be able to understand this, but Keynesian and Monetarist academic wonks just cannot manage the task.

Greenspan stimulated the economy in 2002 and all we have to show for it is a collapsing housing bubble and still more debt.

Instead of following a Keynesian model that does not work, please consider a Fiat World Mathematical Model.

I believe Steve Keen and I have it correct. In a credit-based, fiat-currency model, deflation will always manifest itself as debt-deflation. Price deflation is a meaningless sideshow.

I am not sure how far along we are with debt deflation given that much depends on how far and how long the Fed and Congress attempts to fight it. The preliminary results however, do not look very good. I expect a second lost decade in the US, just as happened in Japan.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Ron Paul on Forbes: Be Prepared For The Worst; On Larry King Discussing Michael Moore

In an On My Mind segment of Forbes Ron Paul says Be Prepared for the Worst

Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.

A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.

By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?

What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years.

Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money.

The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.

Fake Recovery

I agree with most of what Ron Paul says except for the likelihood of hyperinflation. While theoretically possible, concern should be more over what legislation Barney Frank and Congress comes up with rather than what Bernanke is going to do next.

On every other point I agree.

• This is a fake recovery that will die as soon as stimulus stops. It will die eventually whether stimulus stops or not.
• The policies of Hoover and Roosevelt certainly caused the Depression to worsen.
• Government intervention cannot lead to economic growth and the policy responses out of the Fed and Congress are simply making matters worse.

Ron Paul vs Michael Moore on Larry King CNN 10/29/2009

Inquiring minds are listening to Ron Paul on Larry king.



Partial Transcript

I dislike the health care system as much as Michael Moore does. But he is complaining about this being a part of capitalism. It has nothing to do with capitalism. This is corporatism. ... Pumping money into as system does not improve quality; it increases prices.

When a country embarks on deficit financing and inflationism you wipe out the middle class ad wealth is transferred from the middle class and the poor to the rich.

The problem isn't the fact that we don't have enough government, we have way too much government. Government crated this monster. If he [Moore] doesn't like what we have, he has to look at what we have been doing for 30 or 40 years. It's called interventionism; it's called Keynesianism; it's called inflationism, and it's called big government. That's the problem.

[On Afghanistan and Iraq] My position is we shouldn't have gone in and we should just come home. There has been a token effort at bringing some troops home from Iraq. Iraq is a mess. But at the same time we are sending in contractors to replace the troops, paying them a lot more money, subsidizing the military industrial complex and Obama ought to be condemned for that.

We just marched in we can just march home. Besides, I will win this argument. We are bankrupt and cannot afford it.

Let's quit this militarism around the world. We are in 130 countries and 700 bases around the world and we cannot sustain these. It's pumped out by the left and the right. There is conservative Keynesianism and liberal Keynesianism which always fails and gives us the financial crisis we are in.

I have no quibbles with what Ron Paul says in that interview. Please listen to it. Moore is also criticizing our policy in Iraq.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Before and After Party!

It's a par-tay people!!

I feel like I should title this post "Lamp Pass and Lamp BIG FAT FAIL." I recently redid two lamps and only one turned out like I had hoped. The other...well...notsogood. The first started when I found this cutie little drum shade at Goodwill for $2.99:

I am quickly becoming obsessed with drum shades. I just think they are uber cool. I had been wanting a new shade for the lamp on my self-made sofa table in our living room for ages. The shade I had there was just so GINORMOUS:I was just going to cover the denim, but when I went to remove the trim, it all came off pretty easy. Then I realized I could just peel the fabric right off the shade. Who knew?:

I had some extra fabric from try No. 2 with our dining room drapes years ago, and I covered the shade with it like I showed you here.

Drum shades are easy peasy to cover, no angles to worry about. ;)

For the unfinished edges on the inside, I always add a little trim (also from another project):

A little hot glue does the trick!

The trim also helps to cover the uneven fabric that you wrap around the top and bottom. The fabric looks fine without trim covering it until you turn on the light -- then it shows all the edges.

Loverly!:

This one is a pass, right? I think so. I absolutely love it!

The next one...well. I'm not so sure about. I wanted a new lamp for our dresser in the bedroom and was on the lookout for something with a cool shape at Goodwill. I found this one for $7.99, brand new with tags:I LOVED the shape and size. The color of the wood, not really. I already have three spray painted lamps in our bedroom, so I was really hoping to stain this one instead.

I sanded this sucker down with my electric sander because the finish would just not. come. off. otherwise:

I was so stinking excited, thinking how GORG it would be with my walnut stain!

Uhhhhhh....no. It looked like total butt. It was so uneven and just grody. I didn't even take a picture because I was so totally annoyed I had just spent all that time sanding the blasted thing.

So, once a spray painter, always a spray painter I guess:

Oh yeah, I know it looks OK from afar. I sprayed it with my oil rubbed bronze paint, and it's OK. But oh my goodness, the finish is SO uneven. It's a Mona Lisa -- you know the type. Looks good from far away but when you get close...ewwww...

It's not the crack that bothers me, I like that. Dang it! The pictures don't do this thing justice. For the first time in eternity, the picture looks BETTER than real life. How often does that happen? Usually it's the other way around. I am OK with it...it's staying so when I get over my tiff with this one, I'll work on it more... ;)

So what before and afters have you got to show off today? I can't wait to see!

You know the drill -- use the link from that post, not to your blog, to link to the party. (I have to delete those -- and I don't like bein' mean!!) :)

Today's archidose #366

Here are some photos of the Wales Millennium Centre (Canolfan Mileniwm Cymru) in Cardiff, Wales (completed in 2004) by Jonathan Adams of Capita Architecture. Photographs are by wojtek gurak.

To contribute your Flickr images for consideration, just:

:: Join and add photos to the archidose pool, and/or
:: Tag your photos archidose

Simple Digital Photography Tips to Take Professional Quality Pictures With Your Digital Camera

As a film photographer, there are many similar techniques for good shots, as there are in using a digital camera. There are also some important differences, such as the delay between when you press the shutter button and when the digital camera takes the photo (unless you have a very expensive DSLR) camera to use. The longer the lag time taken between pressing the button and the image the harder it is to make a great photo. There are a few tips thatcan help you solve this problem.

Set the camera focus in Advance

On most digital cameras can, before the focus of the camera is to press the button halfway down. It will automatically focus on the subject in your frame. You may need a few seconds with your finger to spend up to half way down on the button, but when you finally to the image, the camera will focus not waste valuable second. It will lead to a sharper picture, a much clearer and more impressivePhoto.

Use the camera exposure setting Yourself

Take your time, your camera menu and navigation, and practice taking pictures with various settings will be familiarizing himself with the camera and allow you to manually preset the exposure study at the camera. This is so much better than your camera to reduce exposure as a priority, as it wasted valuable time, and you can miss your shot charge.

There are many other tips for good pictures, butfamiliarize yourself with your camera and read the manual is the best place to start and then just snap. It's one thing you can do everything costs and what you do not like and learn how to delete go a long time.

Tags : CANON SLR 45OD BEST DIGITALCAMERA Canon EOS50D 450D-DIGITALCAMERA FROM CANON NEW DIGITAL CAMERAS CANON SLR adn review the best new digital SLR camera adn review Best Alternative Rock General

Simple Digital Photography Tips to Take Professional Quality Pictures With Your Digital Camera

As a film photographer, there are many similar techniques for good shots, as there are in using a digital camera. There are also some important differences, such as the delay between when you press the shutter button and when the digital camera takes the photo (unless you have a very expensive DSLR) camera to use. The longer the lag time taken between pressing the button and the image the harder it is to make a great photo. There are a few tips thatcan help you solve this problem.

Set the camera focus in Advance

On most digital cameras can, before the focus of the camera is to press the button halfway down. It will automatically focus on the subject in your frame. You may need a few seconds with your finger to spend up to half way down on the button, but when you finally to the image, the camera will focus not waste valuable second. It will lead to a sharper picture, a much clearer and more impressivePhoto.

Use the camera exposure setting Yourself

Take your time, your camera menu and navigation, and practice taking pictures with various settings will be familiarizing himself with the camera and allow you to manually preset the exposure study at the camera. This is so much better than your camera to reduce exposure as a priority, as it wasted valuable time, and you can miss your shot charge.

There are many other tips for good pictures, butfamiliarize yourself with your camera and read the manual is the best place to start and then just snap. It's one thing you can do everything costs and what you do not like and learn how to delete go a long time.

Tags : CANON SLR 45OD BEST DIGITALCAMERA Canon EOS50D 450D-DIGITALCAMERA FROM CANON NEW DIGITAL CAMERAS CANON SLR adn review the best new digital SLR camera adn review Best Alternative Rock General

Before Walking Away Consult An Attorney

I occasionally have people ask me what they should do about their underwater mortgage. I sometimes give them an opinion as to what I think might be appropriate but I always tell them to consult an attorney or You Walk Away (the latter has attorneys for the states they do business in).

The reason I say this, and it came up Friday before I did these recent pieces, is because I cannot possibly know what the laws and nuances are in every state.

Today I received another email in response to "Strategic Defaults" a Mortgage Broker Comments on Fear and Shame Tactics which in turn was in response to Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves.

The following is from Dan McKillop, J.D. of McKillop Law Firm, Sarasota Florida.

Mr. Shedlock,

I read your page every day, and appreciate your take on our economy. I wanted to warn you about blanket advice from a mortgage broker that you highlighted in your most recent post. In particular, the advice for homeowners to just walk away from their homes and take a credit hit could be very very risky for homeowners, depending on the state they live in.

For example, please consider the state of Florida, where my wife and I practice foreclosure defense law. A homeowner absolutely SHOULD NOT just walk away from a home in Florida. Florida is a judicial foreclosure state, with very few mandatory protections for defaulting homeowners. Most importantly, in Florida the homeowner�s promissory note is not extinguished in foreclosure in Florida. This means that a bank can foreclose on the property and then pursue the ex-homeowner for the deficiency. Just walking away is the worst thing a homeowner can do in Florida, and in many other states across the nation.

Blanket advice is very dangerous advice to be giving to anyone, particularly in a state like Florida. In Florida, the bank would foreclose on the property, and they would then have the right to pursue her for the $100,000 deficiency. I will grant that not all banks do pursue deficiencies right now, but the kicker is this: the banks have years in which they can wait and choose to pursue a deficiency. These debts can be sat on, or sold, and the ex-homeowner may find the debt weighing over their heads for decades.

The correct advice from Mr. Becker should have been �Please Go Talk To A Lawyer.� Only someone familiar with both real estate foreclosure law AND collections law should be giving out advice, especially in the current environment.

I admit that I am not familiar with the laws of the state of Virginia, but if that woman was from Florida, just walking away could make things much worse.

In the spirit of full disclosure, my law practice is primarily focused on foreclosure defense. We work hard to provide Florida homeowners with real solutions to their mortgage debt, and in most cases are able to get negotiated releases for homeowners.

Many people walk into our office thinking that �walking away� is a viable option. However, homeowners who don�t know their rights AND the lender's rights as well, should only be steered in one direction�towards a competent lawyer who understands foreclosure and collection laws in their states.

If you have any questions on this matter, or anything related to foreclosures, please let me know.

Respectfully,
Dan McKillop, J.D.
555 S. Osprey Ave
SARASOTA, FL 34236

Thanks Dan
Your advice is appreciated.

In another Email "DD" Writes:

Excellent posts. This is really the only way the lending community can be brought back into line. Watching revenue disappear when people stop paying exorbitant mortgages they should never have been given in the first place will make the lenders more careful. Good writing as usual! I wish Obama had your phone number. He needs some good advice.

Cheers
"DD"

"Kill The Debt" Writes:

In my line of work, consumer debt, the MOST frequent question I deal with is credit reports/FICO score.

One of the most successful social/societal campaigns ever foisted on a populace is the credit score. Many people make irrational emotional decisions that can impact them negatively for years, all in the name of FICO.

I have many ways of answering the questions that are posed relating to the credit score. One of them is to phrase my answer as a question. The detailed explanation surrounding the question I ask will depend on the answer I get, but the question and answers track well with what Becker has put forth.

Here is the rub:

How much would you buy your credit score for?

In "Strategic Defaults" a Mortgage Broker Comments on Fear and Shame Tactics, Becker's friend suggests a credit score value of 100k for a 3 year period....

Like it or not, hang your hat on morality or not; strategic or circumstantial default will be part of clearing the debt overhang for years going forward. Until the waste and refuse resulting from the last couple decades of the debt & credit orgy are cleared, there will be little in the way of an effective economic recovery.

Yes, it is amazing that someone's primary concern is over a credit score, so much so they would be willing to pay $100,000 for it. If asked to do so up front, out of pocket, no one would.

More importantly, "Kill The Debt" is correct with his assessment "Until the waste and refuse resulting from the last couple decades of the debt & credit orgy are cleared, there will be little in the way of an effective economic recovery."

On that basis, the moral thing to do is consult an attorney then walk away.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List