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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: John Vosilla who wrote (58975)4/21/2006 3:39:08 PM
From: bond_bubble  Read Replies (1) of 110194
 
I dont see long term rates falling because the dollar will be supported with higher interest rates (A gold standard would not have demanded higher interest rates in the recession but a fiat currency does).

Copper, oil, rent prices falling - Absolutely. But only after credit bust is well entrenched. At that stage, who needs copper, oil anyway? who is going to buy anything - unless people can eat copper and oil instead of food?

Housing contruction cost? Are you kidding me? Look around. how many houses are there? Do you still need new houses? And that too at higher cost?

declining wages? - That is going to be obvious when the recession hits.

Negative CPI - Ofcourse not. when did US have negative CPI since Fed was opened for business? Even in 1929, there was only 15% negative CPI for 2 years and that was probably because of house price falling 80% and CPI at that time was based on house prices. The rest of deflation era had positive CPI (you can check BLS). we have avoided negative CPI by incorporating rents in CPI. There is no way we are going to have negative CPI. BTw, how many years did Japan have negative CPI since 1990s? You will be surprised that it was mostly positive inspite of the hedonics trying to push it negative so that BoJ can keep the printing presses running....

Financial institutions going under: You have excess capacity here. Suppose, there is hyperinflation, you will need even more fin. capacity. My guess is: excess capacity will be washed out. This is my investment strategy...
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