Mark Trahant: Real estate crisis really about credit

"I've been on vacation and had a chance to travel around the West. In many of the places I visited, concerns about a real estate crisis are growing. People are starting to fear what this means for them personally. The interesting thing about coming home is the narrative in Seattle remains "we're different."

I continue to be skeptical. I think the region's housing market is playing a regional version of the "Prisoner's Dilemma."

To me, this housing crisis isn't really about housing; it's about credit. We are a nation that has borrowed too much money at every level -- personal debt, corporate debt and government debt. Now, we've got to figure out how to increase our payment levels at a time when revenue seems to be shrinking on all three planes.

One way we could do that is accept higher inflation. It's easier to pay down debt (especially if you quit borrowing) with dollars that are worth less than those you borrowed. On the flip side, the worse thing that can happen to a nation that owes so much is deflation. That's the scenario that ought to scare the bejeeburs out of policymakers because it could be the logical result from a decline in housing prices.

Ready to play the Prisoner's Dilemma?"

Get the Story:
Mark Trahant: The housing crisis is all about credit (The Seattle Post-Intelligencer 7/29)

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