Interesting chart of residential real estate delinquincies.

The fed did not fix any of the structural problems in the economy when it started bloating its balance sheet back in 2009.  All it did was stop, errr, delay the timely and proper liquidation of assets from the useless serial defaulters like Donald Trump into the hands of conservatives.  All it did was incentivize more of the same bad behavior that caused the problems in the first place.  All it did was trick more good people into believing that a bottom was in only to have them go in and catch the bouncing  (but soon to be falling again) knife.

The only question is when.  The obvious answer to that is when most people least expect it.  In other words, when it will do the most damage.  But the fib ratios can be useful turning point markers and so I will offer into the record the following chart that shows how confidence in the recovery has increased since about 2010.  What, you say?  This is not a confidence chart but rather a mortgage delinquency chart.  To which I respond "what's the difference"?

The delinquency chart was going exponential before Bernanke stepped in and threw the kitchen sink at the economy.  In fact, this is WHY he did it.  If something were not done to stop this then very soon all of the major banks in the federal reserve system have been declared insolvent.  Remember what Greenspan told us: there is no real recovery until housing recovers.  He didn't say why but it is obvious: real estate the banks are owed money on is real estate owned by the banks and it appears on their balance sheet as an asset.  Home owners are treated as nothing more than renters until they repay the loan.  Thus, if home prices drop causing people to be underwater on the value of their house, they lose confidence that the purchase is worth continuing to work to save.  That's when they stop paying their mortgages and that's when housing values collapse, the tide goes out and we finally see that the biggest skinny dippers of all are the banks.

Bernanke and Yellen are bankers.  As long as the federal reserve is thought to be solvent then people like them will continue to have power.  Loading up your balance sheet with assets that nobody else wants might prop up the price of those assets for awhile but sooner or later you will get stuck with a ton of defaults.  Bernanke's strategy was simple: we will hold these loans to duration.  What he didn't count on however was that as soon as the economic stimulus goes away (as it eventually has to lest milk and gas become $8 a gallon), the delinquency rate is going to start picking up again.

Bottom line: the fed threw everything they had at the problem but the delinquency rate didn't go back down to 2005 levels.  All it has done thus far is a 38.2% fib retracement.  Some people who should have defaulted in wave 1 up were given false hope in wave 2 which is likely nearly complete at this point.  I don't think I have to remind you what likely happens during wave 3...

Deflation is still running the show but within a few years that will turn into massive inflation.  Just in time to screw the boomers out of their retirement wealth that is denominated in dollars with no way to get it out of the system before the government essentially steals it all.  Just like has already been done several other times already in other 3rd world $hitholes around the world.