All I can say is, if you are predicting price deflation over the next five years, then I think you are nuts.

The federal government is now considering backing up to $600 billion in home mortgages. Now I'm sure a lot of proponents will rush to explain that not all of that will go down the toilet, since not everyone will default. But of course, it is targeted to "troubled" loans; that's the whole point. (You don't need to rescue healthy people, unless you are one of the 9 largest banks in the country I mean.)

So it's true, the government's move will not actually increase budget deficits by $600 billion over the next few years. Let's say $25 billion and call it a day.

This is one of the many problems of the original Paulson bailout. Once the government approved $700 billion for rich bankers, the floodgates were open. Now, if someone recommends any plan involving less than $50 billion, it doesn't even sound serious. "Where you been, Jack?" The public has been desensitized to the astronomical* numbers, and so now we must prepare for trillion-dollar-plus deficits very soon. Maybe not in FY 2009, but I bet FY 2010. I am willing to make a public wager on that, if someone wants to take the other side.


* I am reminded of a funny Feynman quip where he says something like, "People say 'astronomical' to mean really large, but things in astronomy only go up to the billions. Yet the national debt is in the trillions. So I propose the term 'economical' for really big numbers."