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Strategies & Market Trends : Joe Stocks Trader Talk
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To: Joe Stocks who started this subject3/31/2002 5:17:57 PM
From: Joe Stocks   of 787
 
Credit Bubble- Doug Noland digs deep into credits in home mortgage industry.

Here is an excerpt and the link.

"I posit to readers that what we are experiencing and witnessing is all very consistent with an historic Bubble economy. An out of control financial sector fuels self-reinforcing asset Bubbles (especially in the securities and real estate markets) that sustain consumption and spew purchasing power throughout the maladjusted “service-sector” U.S. economy. Myriad sectoral “sub-Bubbles” operate, with the bursting of the technology debt “sub-Bubble” having strangled that particular sector over the recent past. We will assume that the Fed believed that the technology sector was THE Bubble as the explanation for their major error in over-reacting. Their response to the bursting of a “sub-Bubble” was only to dramatically stoke the Great Credit Bubble. And with the two key and interrelated monetary transmission mechanisms - leveraged speculation in the Credit market and reckless lending throughout mortgage finance - operating on overdrive throughout the past year, there is no mystery whatsoever as to the monetary processes fueling this Bubble economy. But I think we have seen enough to confirm our supposition that this Bubble economy requires enormous amounts of new Credit to muster even marginal growth, while at the same time needing significant growth to mask the deep structural imbalances that have become endemic to the economy. The inherent characteristics of a dangerous Credit-induced Bubble economy then only incite further accommodation of increasingly dangerous Credit excess from our central bankers."

prudentbear.com
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