The more the dollar crashes in value the less house prices will fall in terms of dollars.
Could you expand on that correlation, because for the life of me, I can’t see it. If today’s dollar was worth a penny tomorrow, how would that affect the cost or benefit of any assets within the USA? Imports would cost 100 times more, but your income and outflow would all be relatively the same. A $100,000 income would have $1,000 value but your $500,000 mortgage would have a value of $5,000. No difference. You’ve totally lost me...
I can see how a crashing dollar and high inflation shrinks the national debt over time. But how does that stop the fall in house prices in time to end this liquidity crisis?
If the actual value of a house drops 20% but the dollar loses 20% of it's value the price in dollars stays the same even though the actual value of the house has still lost 20%.
The affect of a devalued dollar is inflation - not just its value compared to other currencies. In the case of the house, rising inflation helps hide the falling value of the house. Why do you think prices on virtually everything are going up rapidly? We don't live in a vacuum. Oil is priced in dollars, going straight up. Energy is the life blood of any modern economy. Gold priced in dollars, going straight up (as are virtually any other metal). The vast majority of the things we consume have underlying components from raw materials to full assemblies from outside the country - all going up. It just takes time for the affects to trickle through the economy. For people and businesses to raise prices because they find they can't purchase as much and replace inventories using the same number of dollars.
Now back to the house. If the bank has the value of the house as $300,000 on their books, they show it as $300,000 worth of collateral. They are required to have a given amount of collateral for how much they loan out. If the house drops to $200,000 they are in trouble not only because they may have more into it than they can get back from it, but because they can't show its value as being $300,000 anymore forcing them to find more cash or getting rid of more debt in order to meet the collateral requirements. Now if you devalue the dollar that house is worth more dollars (not more actual value). With it numerically worth more dollars the banks show less of a loss numerically if they foreclose. But more importantly that asset on their books is numerically worth more dollars balancing their books keeping them solvent. This while everything that is held in dollars is actually becoming worth less across the board - inflation.