So says Michael Olenick at Naked Capitalism.
It’s a “shadow” inventory because the lenders and servicers are engaged in a kind of intentional, self-imposed paralysis. And it’s not leniency, but rather self-interest at work. A loan isn’t in “default” until the creditor declares it, but the parties to the loan – the borrower and the lender – both know the score.
Of course, the paralysis affects both parties. That’s a lot of people in limbo, unable to resolve the issue of whether they have a home or not, which is a big problem in and of itself.
H/T Steve Keen
A regular commenter here – Zarapheth – and I do not agree, but in disagreeing he makes valuable contributions to the discussion here:
The problem with the monetary system is just a small piece of a larger problem.
Yes and no. The monetary system has indirectly resulted in huge distortions and maldistributions in the economy, and fixing the monetary system by itself will not directly address that, of course. But I have never suggested that fixing the monetary system is a panacea. In fact, I have suggested fixing the monetary system only in conjunction with a debt jubilee; but even both of these done at the same time won’t make heaven on earth.
The debt jubilee addresses the maldistribution issue directly and without force, by simply declining to have government force used to enforce existing debts. This amounts to a collective wealth transfer from debtors to creditors on a vast scale, unlike anything else in modern times, but due to the limitations of what the law can do, it paints this picture with an extremely broad brush. The virtue of it is that it just leaves everything where it is and subjects no one to compulsion. But this is a very important virtue politically, socially, economically and intellectually. Don’t give it short shrift.