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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (24904)1/18/2005 11:52:10 PM
From: mishedlo  Read Replies (1) of 110194
 
In any case I cannot fathom the true cleansing of debts and serious recession we need without a real backup in long term rates first. Perhaps it will be two recessions with the first one the shallow one and the one down the road 18-36 months the true bursting of the credit/housing bubble?

The next recession can not possibly be shallow IMO.

You underestimate the amount of credit, debt, money that will be destroyed if housing turns down. How can low interest rates possibly prevent that destruction of capital in a turndown? When we are as leveraged as we are what difference does interest rates make at all? All it takes is a trigger (or exhaustion) to send housing down. We have had 5 rate hikes you know. Your assumption that credit can not be destroyed at low interest rates sure seems false. If deflation could not happen at low interest rates, how did Japan have it at 0%? This is the key question: Exactly what is stopping us from having a credit crunch right here at 2.25%? Please state the case because I do not think you can. IMO If housing slows down it is all over. Perhaps you think that housing will not slow down here but you must agree that it possible.

As for a series of recessions, I agree but the first one will be a doozie. If housing stalls, I doubt it can quickly be revived no matter how fast Greenspan cuts.

Mish
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