Back to Basics - Supply and Demand

The Fannie Mae Dice Roll Continues

http://online.wsj.com/article/SB10001424052748704402404574527440083580698.html?mod=djemITP

Part of what should scare the lenders to the US is that the forces of supply and demand, saving and borrowing are being so enormously distorted.

The unemployment rate may be one of the flags evidencing what is going on, while the low interest rates at which the Treasury can borrow seem more like the delusion of constantly rising housing prices.

A question could be at what point of decline and at what level of misery, the US will decide to take a different tack than the one its on? Certainly there are states that are further down the road of economic dislocation and economic misery.

Yesterday's paper stated that New York State income tax receipts were down by 1/3rd. At the same time, the legislature didn't want to cut social consumption spending. So, like the families also highlighted yesterday that run through their severance and savings, the US is using up its capital stock and borrowing capacity - not to fund job creation or economic growth, but to support current consumption.

When and how will the debts be paid?