If one sees how much in debt each US citizen is, people must be aware that 700 MRD will be simple not enough. We've to see also how much worth houses are if loans busted. The price is that high as people are willing to sell it for. if building a house has costed let's say 100 000 then that was it's worth one build. Howerver the money for it is gone, and now the debt can not be paid. So you have to write down this price to whatever you find acceptable. The difference to 100 000 is a loss. Now this isn't a big thing if that happens a few times, but if it happens on mass, then nothing can stop this avalanche crumbeling down. Impossible in theoretical and practical means. If you look at the figures of Fay and Fred Mac you'll see the loans exceed 5 Billions.(Trillion in US speack) 700 Mrd are a bit above 10% of that value. Howerver let us try to estimate how much worth the houses are. Let us assume that at least a bit money was "ones" own. So let's say 20 % that's around 1 Billion. So the housing are "worth" let's day roughl 6 Billions. (I know it's too low but let's just take it for some calculations) This was the prices the lend the money for. let's assume that 2 Billion were spend on the mortgages in the last 6 years. During that time the prices have risen by 85 per cent. Let's calculate the value that money has had 7 years ago with an inflation rate of 3 % we have
2 / 1.03^7 = 1,62 Billions, we must also take into account that hardly anyone will buy for that prices so let's assume a discount at around 30 % then we have 2,11 billions for the costs of the debt for the houses of this large failures. This alone is 3 time as much as the asked 700 Mrd.
And guess what that just covers a fraction of the real loans. So I'd argue with a quite high probability the 700 Mrd will be just the tip of the icebrg. You have to see that the greedy manages have put everything to put out risk on different areas. So we can be 100% sure that the mess us magnitudes larger than implied by this incredible 700 Mrd $. Now say something about throwing good money after bad money.
I just can hope I've made some error in my calculations, otherwise the devastating "news " is : "Game over".
The only "signs" that is may be a bit less worse is that, the bad credits were spread all over the world. So in fact everyone having invested in this kind of stuff, really is "busted". Don't expect to see much from that money back. It's time to prepare for even worse times...