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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: westpacific who wrote (48982)1/7/2006 12:06:31 PM
From: UncleBigs  Read Replies (4) of 110194
 
West, looking at past California real estate busts and concluding the next bust will be the same is erroneous in my opinion.

It's a matter of field position at the time of the bust. When the savings rate is zero, debt is sky high, and an employment base tied to real estate, our economy can't handle a real estate bust like the past.

Never before in our nation's history have we had a housing centric economy. Housing is THE economy. It's also the focus of a speculative mania like never before.

When housing goes bust this time, it will trigger a massive deflationary debt collapse. It will be interesting to see if the Fed has the flexibility to get aggressive. I'm not sure they do. We are dependent on foreign capital flows and they will flee if the Fed gets too aggressive.

The Fed can use the printing press, but that would also cause capital flight and a monetary collapse. The Fed is in a terrible box.
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