Kincella still isnt there yet. He/she sees it as an equity markets bad - housing market good argument.
If one chooses to see it in such simplistic terms, then it should be recognised as a contest between equity markets and debt markets. The housing market is a proxy for debt markets. And debt markets are taking a pasting. As they should. As he/she has pointed out governments are spending like drunken sailors. Why? They are doing this to take up the slack left by individuals who have now passed out under the table. Some raised themselves up on one elbow & gorged some more on FHOG & $900 cheques but now they've collapsed again.
For reasons I dont understand, the debt gorging undertaken by private citizens over the past three decades has largely been ignored by debt markets. But now, portions of these (bad) debts are transferring to government balance sheets, and finally all hell is breaking loose. I guess a bad debt can always be recovered from a defenceless individual, but its a different proposition trying to get your money back from a sovereign. Withholding money is a bank's only means of attack. A good tactic too.
