When is the taxpayer subprime bailout going to happen?

You know the one:

• The government buys back all those bad mortgages, but calls it a "loan"
• The government buys back all those bank-owned repo houses but calls it a "loan"
• The governmnet lets the FHA lend still more money to homeowners who already owe more than their house is worth

The reality is that the US government is going to do an enormous bailout. But it won't bail out you the homeowner. You will still be on the hook. The bailout will be to Citi, WaMu, Countrywide and Wells Fargo along with perhaps Lehman and Bear Stearns and the Wall Street firms in trouble.

What I mean is this. The banks are dragging their feet in working out loan modifications and short sales with homeowners. The banks are waiting for the US government to just bail out their situation.

That means two things. Taxes will go towards the banks so they don't go out of business. And the US government will be printing money like crazy in order to meet all these promises. It doesn't matter if a Democrat or Republican wins (except for Ron Paul). There is big time inflation now, folks, and the US government is happy about it. They hope that inflation rescues your house so that it doesn't keep falling in value.

Eventually the US dollar like all currencies will be worth far less. So your house mortgage will seem small someday. If you can wait that long, you'll be fine even if you owe more than it's worth. Because the value will increase thanks to relentless high inflation.

The only problem with this scenario is interest rates. House prices go up when interest rates are low and money is easy. With the "credit crunch" interest rates are going up in many cases. Money is hard to get. So that is not good for "real" home prices.

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