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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: russwinter who wrote (238)7/21/2003 3:51:38 PM
From: Little Joe  Read Replies (1) of 110194
 
Russ:

I thought about it and I disagree. I certainly agree that in our society it does require large amounts of cheap, easy credit, but that does not change its character as a hard asset anymore than gold purchased with borrowed funds would not be a hard asset.

In spite of the above I do think that real estate could collapse if the cheap money stops without a corresponding increase in the overall price level and wages as occurred in the sixties. The real issue is can the gov and greenie pull it off. Can they induce enought inflation so that wages will rise along with interest rates and overcome the deflationary spiral.

As I have said many time before they will do whatever is possible including handing out money on street corners to avoid the deflation and the depression that will surely follow. That is why I think we will see terrible inflation before a bust and why I think the housing bubble burst is some way off. I agree when the bust comes, real estate will go down in value, not because it is not a hard asset, but because it will be impossible to sustain the prices in a deflationary economy.

Whatever happens, we do live in interesting times.

Little joe
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