Make heads or tails of this

How things work is odd at times.

The sub-prime atomic bomb is exploding as we speak, causing worry on Wall Street.
So what happens? Treasury bond prices rally, driving down the interest rate on the 10-year note, which pushes mortgage rates down.
This helps the housing market, of course, including homeowners with adjustable-rate loans and those who want to refinance.
Let me summarize for the confused (including me):
Foreclosures = more trouble in the sub-prime market = lower interest rates = fewer troubled homeowners = fewer foreclosure = less trouble in the sub-prime market = higher interest rates = a housing slowdown = more foreclosures = ......
Is this a market driven version of self-healing?
Is this proof that markets work?

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