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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Crimson Ghost who wrote (25896)	2/5/2005 7:27:53 PM
From: mishedlo	Read Replies (3) of 110194

The absolute level of rates is just as important as the shape of the yield curve IMHO. An inverted curve at a very low rate might be sufficient to trigger a garden variety recession, but might not be enough to prick ongoing asset bubbles which have developed enormous momentum. And pricking these bubbles has got to be the prime motivation for Fed tightening. Why do you say that? Japan deflated all the way down to 0%. You are making a statement about absolute rates that does not appear to have a basis in fact. As for an inverted curve, an inverted curve is a sufficient condition for a recession but not a necessary one. I do not believe the yield curve inverts before we have one. My biggest disagreement is with "garden variety" recession. Once housing tumbles the jobs and credit that blow up will be enormous. Greenspan will be unable to contain it IMO. 1% rates will just not seem so outrageous the next time we get there. Mish

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