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

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From: UncleBigs	11/5/2005 4:47:45 PM
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The stalling/bursting housing bubble will prove to be most difficult for the Fed to manage...even for Helicopter Bernanke. I think it's safe to say that anyone who is remotely considering buying a house or three has done so. People have bought the buy now or be left behind propaganda hook, line and sinker. The Fed could stop raising rates right now and this bubble will burst on its own. Another 2 or 3 hikes should be the final nails in the coffin. However, it won't be easy for Bernanke to fight this by going "unconventional". While you can create electronic money and buy stock futures with a few clicks of the keyboard, you can't buy liquify the housing market like that. "Buy now or be left behind" is turning into "sell now or watch your gains evaporate". That change in psychology won't be easy to reverse. The only thing that will support housing is a return to ultra low interest rates. However, that will likely result in raging inflation and a cratering dollar. The Fed has cooked its own goose this time. I see no plausible way out of this mess without a big disaster. I don't see the U.S. economy making it through 2007 without a major financial crisis.

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