The Financial Crisis is over says Fed

According to Ben Bernanke, the Federal Reserve chairman, all the major US banks are now solvent and prepared to weather the downturn, so you can expect house prices to start climbing again. Except for the small matter of needing another $130 billion in capital. Not being an economist, I don't expect to be able to understand why a solvent bank would need to raise more capital, but there you go. Thankfully, the banks can also value their assets at whatever price they feel is appropriate so all is now well. General Motors will only lose $6 billion this quarter, so we should see some improvement in the general economy. Only 12 % losses in the commercial property markets are now expected, despite the fact that commercial property has devalued by around 40% since peak prices.

And if you are wondering what that smell is - it is sarcasm.

Much the same story comes out of the UK. Everything is fine, there are "green shoots of recovery" all over the place, Barclays will only lose another £2.3 billion, the Bank of England has decided to "create" another £50 billion in new money and everything will return to normal by the end of the year.

I suppose eventually the powers that be will realize that putting out obviously contradictory statements such as these will only serve to weaken the markets - including the housing market. Unable as I am to understand why a solvent bank needs to raise more capital to meet the Fed's admittedly feeble stress tests, I suspect this means even more pain and even more devaluations of asset prices.