The markets probably underprice the value of forgiving debt. For instance, cancelling all mortgage debt under $300K would liquefy the housing market overnight and bring housing prices more in line w/ income, while improving public health and welfare.
The market doesn't price such things in, though. That would be up to the government. How much was spent on the bailouts, and how much would that translate to per mortgage?
The reason the market doesn't price such things in is that the guy holding a $300k mortgage is unlikely to personally realize $300k in improved public health by forgiving the debt.
The market doesn't price such things in, though. That would be up to the government. How much was spent on the bailouts, and how much would that translate to per mortgage?