Now that it looks like the federal government is going to step in and prevent reality from falling on the mortgage market, Kentucky policymakers holding out hope for a federal bailout of our public employee fringe benefits mess have to know the cavalry isn’t coming:
“In choosing inflation over the collapse of the real estate market, which a Freddie and Fannie bankruptcy would immediately produce, the government is trading lower home prices for higher consumer prices. However a real estate price collapse is inevitable. Either nominal prices will fall sharply, or real prices will be crushed even more. The government has predictably opted for the latter. So buckle up, and prepare for a dollar collapse and soaring consumer goods prices, as the direct consequences of this “bailout.” In the end, even those getting the bailout, holders of Freddie and Fannie insured mortgages, will lose, as the value of the dollars in which these bonds are denominated go up in smoke.” – Peter D. Schiff, Euro Pacific Capital
In the midst of all this national turmoil, Kentucky is going to have to work out its own solution to our problems. And soon.