Scream if you want to go faster....

Princeton economist Paul Krugman thinks that US home prices will "fall enough for us to produce about 20 million people with negative equity. That's almost a quarter of U.S. homes. If home prices are rising, or if there's positive equity, you can refinance or sell. But if you have negative equity, you can end up being foreclosed on, and then some people will just find it to their advantage to walk away. We're probably heading for $6 trillion or $7 trillion in capital losses in housing. Some fraction of that will fall on owners of mortgages. I still think the estimates people are putting out there - $400 billion or $500 billion in losses - are too low. I think there'll be $1 trillion of losses on mortgage-backed securities showing up somewhere. "

As far as US interest rates are concerned Krugman says "I'm now reasonably sure that they (the Fed) will cut again and again and again. A few cuts of 75 basis points and we'll be down to zero. And there's a pretty good chance that we're heading to zero, and that there's going to be a Japan-style ZIRP, zero-interest-rate policy. "

Has that happened in the US before? "Not since the 1930s. They didn't have the Fed funds target rate back then, but effectively we had a zero-interest-rate policy for a good part of the '30s. If the Fed responds this time with as much cutting as it did in the last two recessions, we get to zero. And then the problem is, What if that isn't enough? And there's a pretty good chance it won't be. "