Mortgage Rates Headed Higher.

Here's the only metric anyone really needs to know:

Real estate values drop approximately 1% for every 10 basis point increase in mortgage rates. A 100 basis point increase (4.75% -> 5.75%) in 30 yr mortgages produces approximately a 10% decrease in housing prices.

Now, apply that factor to the $ Trillions of highly leveraged MBS used to collateralize/construct the various CDO & CDS L3 assets sitting on the 19 TARP banks.

It doesn't matter how high the market gets pumped (and pimped) so that these TBTF banks can issue new stock in a desperate attempt at re-capitalizing their balance sheets. 10, 50, 100, 250 Billion is jack squat compared to the jagged whole punched in the asset side every time 10yr Treasuries jump a few basis points.

Bernanke is locked in a death spiral.

If he continues to print, people will eventually start to go hungry (commodity price inflation -> oil is the biggest input in food production). If he doesn't print, we enter the vortex of the most powerful debt-deflation spiral the world has ever seen, taking the big 19, the Fed and government along for the ride into bankruptcy.

The entire game rests on our ability to convince others that we are indispensable, we must have "real" or hard external funds to finance our debts, otherwise the jig is up. Watch Treasuries & the USD. The beginning of our long descent into hell starts when global capital comes to realize that no one country is that critical to their own sovereign interests.