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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Ramsey Su who wrote (24179)1/7/2005 6:22:22 PM
From: Elroy Jetson  Read Replies (2) of 110194
 
Regarding the large decline in Consumer Debt. I have two observations.

On a local level I keep in touch with the owners of a number of independent retail businesses to get an anecdotal view of what is going on in the Southern California economy. They all agree that business sharply contracted around the beginning of November and has not recovered.

On a national level, the Fed has allegedly been raising short-term interest rates, but this has not been accompanied by a reduction in the growth of the money supply. I've compared this with someone trying to raise the price of peaches during a peach glut. If the Fed is serious about raising short-term rates, at some point they are going to have to slow down the growth of the money supply - or risk becoming the laughable magician who waves the wand and says Abracadabra only to have nothing happen.
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