Uh, when a loan is defaulted, it deflates the currency. Which with the housing market tanking, that's a significant problem in our deflation situation.
So housing falling on news in the last 2 weeks? That doesn't even make sense IMO. What we have here is you lose your job the banks were foreclosing on houses they didn't have a paper trail or clear title to. The buyer got the house without paying anymore payments due to their lack of proof, the banks lost their shirts. A class action suite is now pending on this illegal activity. Housing went down due to your typical house in areas like California went from 50 grand in the 60's to millions before the bust. That's called a correction. Far too many people own more than one house trying to get rich by infomercial.
Best do your own research on what the M2 is and what it isn't.
Doesn't make sense? It's how money is created and destroyed in a fractional reserve banking system. It's something taught in freshmen econ classes.
You can call it whatever you want... when a loan is defaulted, that money is destroyed. When a loan is paid back, that principal is destroyed.
http://www.youtube.com/watch?v=xNehYxy77RI
It's a fundamental function of the money supply. Study!