The problem, of course, is that thanks to the self-serving exuberance shown by many appraisers during the real estate bubble-mania, at this point nobody actually knows where the bottom is. Another 10%? 20%? 30%?

There really is only one way to find out… let the brush fire burn, as painful as that will be. But as I don’t need to tell you, “doing nothing” is not a concept that politicians in an election year are very comfortable with. And so, like trained seals leaping after vote-fish, the politicians will jump though any number of hoops to keep people in their homes even though many can’t afford the carrying costs, let alone the mortgages. That only prolongs the pain and increases the government deficits that are at the core of the current crisis.

So, we have a tumbling collapse in the largest component of the stock market, coinciding with a tumbling collapse in the largest component of people’s net worth, their homes.

And we aren’t even warming up yet.

For a more complete accounting, you also have to add into the mix the intractable problems unfolding in energy patch, including the near-certainty that Mexico, the 3^rd largest source of imported oil for the U.S., will stop exporting said oil within 4 to 6 years… max.

Rather than rushing ahead with emergency initiatives to open up new energy sources, the U.S. Congress just emergency legislation to prevent so much as exploring for uranium anywhere near that big hole in the ground, the Grand Canyon. It is this perfect world mentality that assures that the cost of what energy is available, will only get more, not less, expensive. Of course, as energy is required in the production of, well… everything, so the cost of everything will go up.

And that includes, food… which, as I don’t need to tell you, has been on a tear of late. Sure, opportunistic new plantings will help, over time, to moderate the higher food prices… but not overnight. Meanwhile, the cost of filling the old tractor and shipping food to market will keep going up.

So, to the list of serious problems for the economy, we have to add persistent high energy and food prices.

But even those fall short of the KING KONG of the set piece… the collapsing fiat monetary system that helped created the recent series of bubbles in the first place.

In a fiat monetary system the only tangible barriers to money creation are provided by a loss in stakeholder confidence. While the average American is, sad to say, almost completely ignorant of what a fiat monetary system is, let alone the consequences of same, the same cannot be said of the foreign holders of an unprecedented $6 to $7 trillion dollars.

To be a touch more specific, by unprecedented I mean as in “never happened before”. While, under other circumstances this fact might evoke a raised eyebrow or a concerned comment over cocktails… going into the jaws of a vicious economic/dollar crisis those foreign dollar holdings become akin to playing toss with a lit stick of dynamite. He who holds the dollars when the fuse meets the powder are in for a very, very bad day.

As a result, the foreign holders are watching the moves of the Fed very closely. Trying to avoid that scrutiny the Fed, like a curbside three card Monty dealer, has come up with some clever sleights of hand, including lending directly to investment banks and swapping Treasury bills for toxic paper. But that has accomplished little more than buying some time; it does nothing to resolve the “rock and a hard place” dilemma.