After feeling a stone's throw—a long one—from almost being mainstream this morning, President Bush comes out and says he will use my tax dollars to keep asset prices excessively high and, in the case of home ownership, out of reach of new buyers, unless I want to take out a toxic loan where the banking industry benefits from the high interest payment I would be forced to endure, not to mention high taxes for state coffers, and the banks will expect a bailout if I run out of money in all this. Put briefly, I feel entirely disconnected from the societal consensus and contrarian harmony has been restored.
I'd be distressed if I weren't convinced he is just speaking irrelevant gibberish that is neither here nor there in terms of the inevitable price corrections and return to economic equlibrium. The Feds injections of liquidity is just a temporary bandaid which, like all credit, will have no effect on money supply if viewed over the full course of the loan. If they really want to keep prices elevated they are going to have to print.
But the market seemed reassured by Bush's speech and abruptly shot up by 400 points, erasing yesterdays losses.