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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: UncleBigs who wrote (59124)4/22/2006 2:50:18 PM
From: bond_bubble  Read Replies (1) of 110194
 
Uncle, One thing that is important is the time line. I believe all prices including commodities will fall - but the timelines are NOT ALL AT ONCE. The moment there is slowness, the Fed might not be able to lower interest rates this time (this is Doug Noland's position from this weeks article). And this has been my position based on PPI being higher than CPI. But what is important to understand is the Credit bust does NOT mean immediate fall in all asset prices. Just as credit bubble does not cause immediate inflation in all assets!! whatever assets have contracts (like commodities) and whatever assets will be bought using the reserve currency in FCBs (like commodities) can survive longer with higher prices!! i.e until all the reserves are depleted in FCBs (either thru default or devaluation or plain spending) and the contracts for high prices expire with corporations (for both investing and industrial use) - i.e until ALL THE CREDITS ARE EXTINGUISHED - some assets could have life breathing in them. But eventually, everything falls to ground zero. The TIMELINE is most important. I think it is risky to bet on this timeline - but people with guts (understanding the final consequence is nearer) can go for it I guess...Because commodity will take longer to fall, Fed will not be able to lower interest rate this time (this is Doug Noland's position as well). My belief is, depending on what Fed and US Govt does in the next 5 years (on monetary policy and fiscal policy regarding SS, medicare), interest rate in future can fall to 0% (in ten years, if Govt defaults on SS and medicare) or increase to 10% or higher (if govt supports $ fall aggressively and govt spends more and more on SS). I've a feeling, the govt will make it worse and choose the 10% interest rate route....
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