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

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To: russwinter who wrote (58457)	4/17/2006 11:13:10 PM
From: basho	Read Replies (3) of 110194

Post deregulation of the financial system and floating of the dollar in NZ in 1984-85, an astounding boom in pretty much everything ran on for a few years despite interest rates of 20% plus. Most were convinced NZ stood at the dawn of a new era and foreign capital poured in. In other words, psychology can be the primary driver in the short to medium term. I suspect a somewhat similar phenomenon lies behind much of what appears inexplicable at the moment. The commodities boom is not in my view driven by a "flight to real things" based on fear or distrust of fiat money so much as strong (albeit very distorted) supply/demand fundamentals and a widespread boom mentality. Ditto with other asset classes. All fed, of course, by a terminally dysfunctional financial system. As was the case in NZ, a shift in perceptions -- however caused -- can turn these reflexive trends around in a flash. If we are to see a crackup boom, it will in my view only come about as a result of official responses to the severe downturn likely to result from such a shift in perceptions. The real end game, in other words, has not IMHO even begun.

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