The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (76666)	12/26/2006 4:11:00 PM
From: jimmg	Read Replies (3) of 110194

<<Who comes up with and influences the trillions in credit and overpriced securities that enable the vast middle classes to behave they way they do? Falls from trees? God? The natural order of the universe?>> I think you confuse cause and effect. The free market will always supply what is demanded. The vast middle class didn't get a home equity loan because a fcb bought agency bonds. The flow of funds works like this: j6p wants a home theatre system made in China and doesn't have the money. He goes to Downey Savings and gets an option arm mortgage loan. He buys the home theatre system and sends China us dollars. The manufacturer in China exchanges those dollars for yuan at the central bank of China. China prints the yuan and takes the dollars in return. Now that they have us dollars, they go buy fannie mae bonds. Obviously, its j6p who influenced the behavior of the fcb, not the other way around.

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