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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (49497)1/11/2006 8:20:37 PM
From: UncleBigs  Read Replies (3) of 110194
 
100% rock solid, Mish. The only thing I might add is the following:

There is a signicant human psychology to inflations and deflations. As debt saturation sets in and asset prices begin to fall, human emotions will add fuel to the contraction. Risk seeking behavior can fairly quickly stampede into risk aversion. This is why the unwind of bubbles is rarely orderly.

Today, I see Americans collectively at a risk level never before seen in our nations history. It's as if the entire country has gone "all-in" on a risky bet. At best I see a long drawn out deflationary contraction over a period of years. At worst, this unwind has a potential to be catastrophic in terms of cascading events (hedge fund blowups, pension blowups, etc.).
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