Earlier this month, Ron Paul, an internet superstar as far as presidential candidates are concerned was interviewed on Kudlow & Company regarding the housing bubble. So far we’ve seen President Bush say “No” to a federal bailout, while some democrats like Hillary Clinton are proposing otherwise. With a complete turnaround in mortgage rates, it’s tough to find who is backing who. An interesting conversation indeed:

Larry Kudlow:

If there was a President Paul, how would you be handling this?

Ron Paul:

Mortgage rates were artificially low. … The fed was inflating like crazy. … There was a lot of malinvestment. First it was in the NASDAQ bubble, now it’s in the housing bubble, so it was very predictable so nobody should be surprised.

Larry Kudlow:

Ron Paul:

I don’t see how it could be anything else, where did the fed get this 120-130 billion dollars to buy bills and buy securities? They didn’t get it out of thin air – this bails the banks out!

The president is saying the right things, and he doesn’t want to bail out but the fed is bailing out!

Politicians will never allow the correction to come. And that’s the fallacy, by bailing out and propping up, you just delay the inevitable. The correction will come until you liquidate all the bad debt.