so how much is my home worth?

we buy chinese goods and pay in dollars. in turn the chinese are unable or unwilling to consume a like amount of american goods. the resulting surplus on the chinese side is absorbed by the issuance of debt in the form of us treasury bonds commanding a very low rate of interest. in effect and in practice, the us pays its debts by printing more paper dollars. this is the tax imposed on the world by the currency (currently the dollar, prior to world war I, the British pound) which is accepted globally as the sovereign means of payment.

the repatriated dollars lacking sufficient domestic productive outlets is invested in fixed assets: homes, commodities and stock issues or seeks investment opportunities in foreign markets. the prices of assets (e.g. our homes) and commodities (e.g. oil) are pushed higher and higher by the easy liquidity provided by foreign purchases of our debt and the recourse to more and more subtle means of leverage by wall street finance.

evidently a problem here lies in the world-wide glut of dollar instruments in relation to their potential productive investment. the excess dollars are spent to speculative purpose on asset bubbles.

finally, the unproductive speculative use of the dollar in raising asset prices (in the current crisis, home prices) foments a bubble which pops when the leverage behind it can no longer prop it up. in a neo-liberal economic regime like that of the us, finally, wages are inadequate as the base to keep supporting and building the house of cards.

what's the holistic way out of these specualtive bubbles? ultimately the rest of the world, the chinese first of all, needs to increase domestic wages and consumption and prop up less of its export production by buying worthless us treasuries. in turn, the us has to rebalance its consumption patterns with a more equitable distribution of wealth and produce more of what the world needs.

among the many unanswerable questions: can the world sustain more consumption from asian countries? the price of raw materials can be expected to restrain western consumption standards in asia and then also reduce those standards in the west itself.

so how much is my house worth? well, the government by nationalising the housing market debt wants to prevent you from knowing its current value. this is considered to be in your best interests. in effect the government will prevent the pricing of unfunctioning mortgage securities and hold the debt until it judges the market is more favorable to judging the true value of homes. in the treasury's opinion, the proverbial bottom will then have been reached. sounds like a plan to me. the chinese lent us the dollars we used to drive up the housing market. now they are asked to continue to buy us treasuries after the speculative use of the previous lent dollars has gone bust. obviously, the chinese need to work off the pile of dollars in their possession without causing its collapse.