Well done, Amanda!

I am impressed. Amanda Marcotte makes a nearly flawless post on the housing market chicanery:

* First, mortgage lenders, in a bid to get their numbers and commissions up, start shopping out mortgages to customers who can’t quite reasonably afford the houses on their salaries.
* They often convince people to buy into these mortgages by making the payments small—at first. They do this by putting people into variable rate loans that start off at temptingly low rates, and once people sign on the dotted line, the rate jacks up incredibly high.
* Then the mortgage lenders sell the papers on these loans to investment banks, who use them to back up securities.
* Housing prices continue to rise.
* Hope that the bottom doesn’t fall out, because you know, there’s no such thing as dramatic crashes after a market’s been artificially inflated.

She left only the first step out, which was the Federal Reserve methodically slashing interest rates to historically low levels. It’s not just the ARMs that are the problem – although they are the first to fail – but also higher fixed rates preventing those who would like to sell their homes from being able to do so. Other than that omission, it’s a better analysis than you’ll find on Fox News or CNBC.

Perhaps we’ll make an Austrian out of her yet. Look into M3 if you really want to get a handle on why the USD is low and the stock market is high.