Those highs were unsustainable, and the housing crash that ensued destroyed a great deal of wealth for consumers and the economy as a whole. The losses are real and the consequences severe for many individuals and many businesses. Moreover, monetary policy cannot paper over these losses, nor should it try to do so.
Nevertheless, households and businesses continue to make progress on restoring the health of their balance sheets by paying down debt and increasing savings. That is a healthy trend, and most economists, including me, believe that this trend will continue into 2012.