More importantly, the lenders are frozen in terms of their liquidation options. They have discovered that when there are no bidders, you are not going to sell at all. Just as the advent of oil at $150 brought the economy to a screeching halt this past summer, present real estate prices have made it impossible for the lenders to liquidate.
So perhaps doing nothing right now is an excellent option. We sure know that they will all be a lot more realistic next year at this time.
In the meantime, what else has happened? The real global economy slammed on the brakes and shook off excess use of credit and inventory. All commodity prices have collapsed back to painful levels, including that of oil. Surplus inventories and capacity has now built up so we have ample reserves to supply the global recovery.
Global trade has dropped over 15% since September and dropped another 5%, this month, but then reorders must begin to kick in about now and the numbers will be trending upward in the spring. Expect a broad recovery to be fully underway this fall and winter and a recovery to prior levels as early as late 2010.
Capital spending will be led by energy investment as the world now understands that $150 oil is not an option.
Also the American automotive industry needs a trip through chapter 11 to shake off contracts that have made it non competitive even in the USA.
Personally, I have no clue what the stimulus boys think that they are going to accomplish with their money. If they actually can fix the financial system, that will be wonderful. I have already said what needs to be done to bounce out of this rat hole. So far they are on the road to attempt to restore the original bubble. It simply cannot be done because no one is going to buy stupid paper from America anymore. You only get one bite at that particular apple.
The key point that we can make is that the global economy is getting over its funk and finding that they are still in business, and there is still so much real liquidity around that business at least will get financed. I expect all surplus inventories except housing to be cleaned up by the end of the year and everything to be functioning normally if a little less flambouyantly.