The Coming Deflation In Home Prices
The folks at Elliott Wave International have a feature up about deflation. "Dow-Jones newswires reports that a Fannie Mae executive told a mortgage-banking conference last week that Fannie Mae would be making the 40-year mortgage a standard product."
"Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt)."
"Non-self-liquidating credit is a loan that is not tied to production and tends to stay in the system. When financial institutions lend for consumer purchases such as cars, boats or homes, or for speculations such as the purchase of stock certificates, no production effort is tied to the loan."
"Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation, because almost no one expects deflation before it starts."