The Obama plan just keeps getting bigger and bigger.  The US President is going to use $275 billion out of the $700 billion fiscal bailout plan to cut mortgage payments to as many as 9 million struggling home owners. If it was divided equally to would be $30,555 each.  Lets say the average mortgage is $300,000 then we are talking about 10%.  Many of those with problems have houses that are now have lost more than 10% of what they paid for it.  The package sounds good, but given the magnitude of the problem it is just a drop in the ocean.  The plan also is giving extra money to Freddie and Fannie by buying as much as $200 billion of preferred stock in the two companies.  With credit now tight prospective home owners are being asked to have a 20 to 30% deposit.  Given the savings rate in the US over the past few decades this is an impossible ask. 

The end result is showing up already.  New houses sitting unsold and unoccupied.  Builders starting the fewest houses on record.

So where is all these billions comming from?  It’s not even the printing press, just an extra couple of zeros in some computer at the Fed.  We have had the Tech bubble, the Housing bubble, the credit bubble, now we are heading for the dollar bubble.  We have seen what excessive expansion of the money supple does in Germany after WWII and in Zimbawbwe today.  It is going to be interesting to see how this plays out.

Gold is up over $960 per oz, but that is another story.