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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Perspective who wrote (61712)5/23/2006 2:51:26 AM
From: GST  Read Replies (3) of 110194
 
The impact of Japan's bubble was the exact opposite of the impact in the United States -- in Japan it fueled export oriented investment and in the US it fueled import oriented consumption. These are COMPLETELY opposite. The degree of distortion was clearly far greater in Japan. And the consequences were severe -- 17 years of economic stagnation. The result of our bubble is likely to be a drop in consumer spending and a rise in prices along with falling housing prices. Will it take 17 years of economic stagnation to work through the housing situation in the US? Not likely. It will take a few years at most. And in that time we will face the consequences of a far more serious distortion -- the price of the dollar. The valuation of the dollar will adjust, and that is far more likely to disrupt life as we know it than is the housing bubble. For the dollar, there is no solution except a painful drop and a very difficult adjustment process for anybody holding dollars.
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