I think the only plan being tossed around that makes any sense is Congressman Barney Frank's plan to trade real writedowns for gov't guarantees. In this voluntary plan, the lender would have to be willing to write down the mortgage balance to 85% of the home's current appraised value, and then FHA would guarantee the new mortgage.

What the government can't grasp is that in order for housing demand to pick up again, prices must drop much lower to be affordable. They don't want to face the reality that the dynamics that drove the housing bubble are no longer in place. Credit and lending requirements have substantially tightened, and the cost of everything have substantially risen. State and local governments will have to adjust their budgets to the new reality of lower property values.

Not sure what the alternative would be, except to say that the system seemed to lack integrity in terms of risk.

Just like the lack of price convergence occuring in the futures market (surely caused by hedge funds which are ignoring the fundamentals of the commodity itself), there were too many players involved with mortgage that had no stake in the actual ownership of the property, and so clear signals leading up to the debacle were ignored (and in some cases are still being ignored).

I think that any solution ought to stick with the basics: there's a house and an occupant. Anything that can be done to incent the occupant to remain a stakeholder is optimal. The auction block ought to be the market of very last resort. Likewise any government guarantee ought to favor the current owner. Instead of using the government to try to stimulate a sale, try to undergird value.

The same holds true for the futures market: there's the commodity, its delivery time, and its delivery place. Everyone else ought to play second-fiddle.

Prof Joseph Mason asks some good questions, which expose the obvious flaws in the proposed solutions; we need to ask ourselves what is the wise thing to do? I think what concerns me the most is that some who have a fiduciary responsibility are unable to ask these same questions.

How do we address the flaws that are inherently part of the current system? Flaws that a few benefit from and that most on the planet have yet to comprehend?

I don’t think the players understand that the game is over and that the "big scheme" is coming to an end. Any system that causes suffering will not last. I don’t know what everyone tells themselves, some minds clouded by fiction, excuses and blame, but Contributory Negligent Homicide (resulting from system imbalance) is not something to be taken lightly.

Will the managers of the system give up their fat illicit revenue pipes to save the body? Or will they want to keep feeding just one organ while the rest of the body acquires gangrene?

We must address the fundamental flaws of the system. I suspect that the individuals currently in charge are not capable of doing this. We can see this based on the proposed solutions they are trying to keep alive the same old game.

Let me put it really simply; the people of the planet have a choice between two systems.

One charges 25 cents for every dollar of value created; it also has leaks where some can extract wealth without a “genuine” value contribution. It also results in some of the borrowers losing their collateral, the conversion of an intangible symbol into a tangible asset, quite clever.

The other system charges 2 cents and has no leakage.

Which system do you think the 6.5 billion people on the planet will choose to embrace?

Now the current system operators have two choices either they can redesign the system from the ground up, from a holistic perspective or they will soon find themselves destitute and equal to everyone else. The billionaires and millionaires of today will be the street sweepers of tomorrow if they don’t first encounter the wrath of those that have been violated in an unfair game.

It is not going be business as usual any more and I think it prudent that some accept that and embrace the evolutionary process and perhaps they can retain some of what they have now, otherwise you might end up with nothing.

What is the difference between paying interest or rent? Just the labels sounds like it was all by design doesn’t it?

I suppose it was all an accident, like human evolution, a bunch of miscalculations.

You know I am thinking it is interesting that there is a debate as to what causes inflation, when it is really all just math. Then how hard can it be to determine the cause of inflation? Unless there are some hidden parts to the system? Or is it that those that profess to understand really don’t or is it simply the flaws in the system?
I was thinking the other day Inflation could be a good thing as long as worker and producer wages are increased to keep up with it. This way only those that have hoarded wealth and created a system imbalance are affected as the perceived value of their wealth is diminished. The more inflation we have the less you owe on your property; something to ponder.

Let us hope that they embrace their truth before it is embraced for them.