The Europeans have once again extended and pretended with Greece instead of dealing with the real underlying problem-Greece is insolvent and never can become solvent until there is a devaluation and a massive change of culture and political beliefs in that country. Greece has been essentially broke and in default for decades. They lied and Europe winked to get them into the Euro zone. As with all of these monetary and fiscal problems, they will have to be dealt with someday.

Obama continues to use inflammatory and absurd rhetoric to claim the children and old people will suffer horribly unless taxes are raised and subsidies on jets is eliminated. He only makes himself look silly with such statements, just as he did by releasing oil from the reserves instead of dealing with the real issue of drilling. The Republicans stick with adherence to Grover Norquist and refuse to even talk about true tax reform which is badly needed to have a simplified and fairer system. In the end they will have no choice to both compromise and find a temporary agreement which will not accomplish true reform of entitlements and deficit reduction of at least $4 trillion or more in 10 years. There is no choice but to make a deal just as the NFL will make a deal shortly because there is simply too much at stake for everyone.

So what does all this mean for real estate and investors. Just as the equity market went up materially this past week on Greece, it will rise a lot more when there is a deal announced on the deficit and the debt ceiling. Everyone will feel better for a few weeks, but it is unlikely any real problems will be solved, the jobs market will not materially improve, housing will continue to bounce along the bottom, and not a lot else will change. Interest rates will remain low for a long time because the fiscal problems will not be solved, and confidence by companies and lenders will not be materially improved. Companies invest in plant and equipment for the long term, and the underlying problems of excessive regulation, the Boeing outrageous case, and bad economic policy will remain as reasons not to invest. Continued attacks on banks and new politically motivated investigations and lawsuits, like in New York, will just make it much harder for lenders to expand lending. They are paying so much to lawyers and in settlements, that it is much harder to build retained earnings, so they will remain more constrained than is good for the economy. Politically motivated decisions to draw down troop levels in Afghanistan against the unanimous advice of the commanders on the ground, will further exasperate the challenges from Pakistan and Iran and others and will undermine the leadership position of the US in world affairs. The Chinese watch these things and take the lesson that they can push us around on things like currencies, trade and Google. Nothing happens in a vacuum, and the longer term consequences of short term bad political decisions have very bad long term consequences.