The tail that wags the dog

Whenever a European friend asks me how is the US economy doing, I invariably answer by “still not as good as it could...” In truth, our economy continues to be dragged down by a pervasive and continuous real estate crisis. Through mortgage credit, banks are technically into red territory, but won't recognize it because of the negative impact this would have on their stocks. Yet, until someone puts their finger on that reality and take serious action, the more protracted our economic crisis will be. Yes, real estate is the “tail” that keeps on wagging the “economic dog!”

We need to go as fast as possible to the rock bottom of the real estate valuation to finally find ourselves in a position to build back from there, but as long as banks won't accept to look at the reality in the face and accept the significant losses that come with it, that silly game might last for another 2 to 3 years, and frankly, the country can't ill afford that kind of denial. Our Treasury Department is the one that should remove the veil hiding that stark reality. Until it does, we'll muddle through a long, deep and indeed “great” recession...