Someone at Wells Fargo gets it..

From the latest edition of Wells Fargo Financial Market Strategies newsletter:

For a year and a half, the U.S. Federal Reserve, the U.S. Treasury, the FDIC, the White House, Congress, etc., have been immersed (and almost obsessed!) with a push to prevent home prices from dropping, and my question all along has been the same: Why? If everybody agrees, and today nobody can deny it, that the U.S. suffered a home price bubble, then what is the problem with allowing home prices to drop? If home prices are "bubblish," why not allow them to drop to more reasonable levels? The more we do to prevent home prices from dropping the longer this crisis will last.

While this has been on and failed, monetary and fiscal policymakers have forgotten a very important fact: it is employment that will keep this economy from following a "debt-deflation" spiral (see below). Thus, the conclusion is that the U.S. government, in full force, should be trying to put a floor under employment destruction rather than under home price destruction. At this time, nothing should be off the table for fiscal policymakers, because the consequences of a debt-deflation spiral could be worse than any fiscal deficit created by a strong stimulus package. The plan should be two tiered: one, a medium- and long-term infrastructure investment and two, a
short-term jobs/work program that would include education subsidies for retraining of displaced workers.