We are stuck in a downward spiral. The iterative process of declining housing prices has pulled us into a vicious cycle that only expansionist policy can remove us from. The S&P Case Shiller Home Price reports that housing prices dropped 16.6% from a year ago. Prices are approximately back to where they were in 2004. This shocking statistic shows just how bad this crisis is and that it will have to get worse before it gets better. Declining housing prices were the source of this economic collapse, and they are going to decline even more because of it. As consumer confidence continues to decline, foreclosures increase, and unemployment rises, housing prices are going to continue to plummet. Because of the liquidity crisis, it is nearly impossible to even get a loan to buy a house. As cyclical unemployment increases, people are going to be less and less likely to buy. As the demand for houses decreases, the prices for houses are going to continue to decrease, which will increase foreclosures and add to the already dire liquidity crisis. The $700,000,000,000 bail out will have to move quickly to stop this cycle before it repeats itself.

The Feds new $800,000,000,000 plan to help consumer debt is targeting this problem.