What's your best guess on how long they can keep everything held up like this? When does the interest on the debt not become manageable? When will printing money not have a propping up effect on the stock market and housing?
The gov't/wall street machine keeps using the word, "recovery", but has there ever been a recovery where debt levels increased? Greenspan has kept rates artificially low which has resulted in Americans financing and refinancing in order to spawn a "consuming" recovery. Is not this "recovery" a mere illusion since it is being financed with debt?
And it even goes further. The gov't, through FNMA and GNMA have colluded with the banks and Greenspasm to "assume" the "risk" of a lot of these mortgages, so they have, in essence, given a green light to banks to lend money to much poorer credit risks than normal. They have done this to simply keep money flowing in the system to prop the economy and keep the "recovery" going. Since about 20% of the mortgages are now in this "sub-prime" risky area, and they are financed with adjustable-rate loans, this is a very real danger if interest rates rise, and they must, right?
So what does Greenspasm do? He must raise rates to fight inflation and the dollar collapse, but if rates go up, he risks popping the real estate bubble. Also, keeping low rates, he risks at some point the foreigners become sick of investing in US debt to get nothing out of it. For now, China and Japan seem to be keeping this whole ponzi scheme intact. What would make them abandon this ship? Won't they have to become convinced that Bush and Greenspasm are liars and the US "recovery" is a mere fairy tale to postpone the inevitable? Even so, do they have a choice on whether to keep buying US bonds if they want the US consumers to keep buying their products? They are caught, just as the US is -- keep buying bonds that return nothing, or risk US consumers demand going down and Asian unemployment rising.
My question is, what makes the wheels come off this wagon the whole world is on right now? Obviously, seeing today's stock action, Bush and Greenspasm still have enough of the world totally convinced of their "recovery." I'm at a loss for how long this can continue.
I remain,
SOROS |
