House Prices and God

In keeping with the theme of anarchiving onto-theologico-political economy, consider this article from Wikipedia on MLEC  (Master Liquidity Enhancement Conduit).  An important excerpt:

The mark to model process is similar to certain tactics used to support the Enron accounting fraud, where assets were assigned values that benefited the company's bottom line. Many of the securities' valuations can be found in the company's financial report as illiquid and hard to value level 3 assets.

Krugman insists that the new bailout will be the same:  a fraudulent inflation of values.  Which values? Well, first of all, MBS (mortgage backed securities), and thus mortgages, and so houses themselves, the land under them, the immigrants who build them, etc.  The spectrum is quite broad...but the bottom line is that, like Enron, the federal government is trying to pervert and obstruct the progress of the deflation of value, by deploying the hegemony of a fictitious, and in every other way malignant, "model" of corporate and banking assets.  As JEBM describes, only by artificially engineering unaffordability can the labor market and economy continue to function in all its magnificent brutality.  If home prices return to traditional price-to-rent and price-to-income ratios, capitalism will lose the ground of its new feudalism:  the ground itself.  Land, and housing.  

The good news:  this keynsian idiocy can find no purchase (pun intended) in the current environment.  France is showing the future misfire of this technique best.  France cannot hope to inflate its housing market by pissing liquidity into banks, because the market has too much downward inertia, and there is no demand for overpriced mortgages in most of the country.  We will soon, I think, see that the same is true in the US, and that the attempted inflation of housing will not keep up with production of houses.  Why?  Because, as far as I can guess, much of the liquidity provided to banks, as well as any recapitalization through federal overpayment for their toxic assets, will be lent out to builders and landowners desperate to get to work again, and willing to work and build very very cheap, and en masse.  It will lead, perhaps, not to an inflation of housing, but a resurgence in building.  Banks are not stupid enough to inflate a no-recourse housing market ever again.  They will however invest in the growth of new, cheaply-built, squalor-contemporary communities in loosely regulated no-man's lands, with highly modular design, thereby turning the American housing market into a gigantic Malwart - the only difference now is that the Walmart is smaller than it will, and it more expensive than it should be. (it is target;)  

So coming back to political theology:  we are witnessing a skeptical crisis in the mythology of the infinite value of the dwelling, with millions of ticky-tacky houses as empty as an English church...