If you remember my consistent position since this mess began in early 2007 has been that the banks have roughly $3-3.5 trillion in losses in residential real estate.

The IMF now says that half of those losses remain unrealized and intentionally hidden:

“It is our view we are still in the situation where a lot of losses haven’t been disclosed,” Strauss-Kahn said during questions at the Confederation of British Industry’s conference in London today. “How much is a difficult assessment, but let’s say something which is close to half of it.”

Now consider the fact that the Central Banks, including The Fed, and governments, including ours (Treasury) have printed, lied, cajoled and otherwise "cushioned" the first half of these defaults and losses.

But with interest rates at or near zero, gold skyrocketing and deficits running well north of $1 trillion annually in the US, the ability to pull that trick again has been extinguished.

So what happens, my friends, when the second half of those losses "come out from the dark" and are forced to be recognized?

Kudlow appears to have started to detoxify from the KoolAid to some extent, but he's pretty much it.  Kneale and the other "useful idiots" continue to spew the party line - "it's all getting better" - but none of them want to talk about what the IMF said over the weekend - and guess what - they're telling the truth.

Someone has figured it out.

“We cannot spin a positive story from the fact that a third-of-a-trillion dollars a week is trying to lock down Treasury bill yields of less that 0.05 percent,” Bianco said. “There is still tremendous demand for the front end of the curve despite the fact that people are saying things like there is no yield there and that cash is trash.”

$300 billion worth of "someones" - per week.

Let's cut the crap.  The IMF has (correctly) surmised that there will be no ability - politically or fiscally - to fund another bailout.

The IMF has also (correctly) surmised that only half of the losses necessary to take have been realized, with the rest being papered over by government malfeasance, accounting chicanery and outright fraud.

Now you might try to make a case that "the worst is over" and "it will all be good, we're recovering in the economy", but to do so you have to explain where the money is going to come from to absorb the other $1.5 trillion in residential real estate loan losses along with how we're going to prevent the MBS on The Fed's balance sheet from detonating - and we haven't talked about the commercial real estate lending market yet.

Have another glass of KoolAid folks - it's grape-flavored, mixed by someone named "Jones" and tastes great!