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

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To: mishedlo who wrote (64219)	6/20/2006 3:57:16 PM
From: Mike Johnston	Read Replies (1) of 110194

some of those are IMO illogical True, but under extreme scenario of government intervention/confiscation/socialism/collapse, all kinds of strange distortions could happen. but let me put a more realistic yet still unlikely set of numbers on those 1. California house prices down 75% from the peak. 2. 35% of outstanding mortgages in default. 3. 15 million foreclosures. 4. 18% unemployment rate. 7. DJIA dropping back to a level of around 3000. I think the above scenario has a very good chance of occurring, unless the Fed starts using unconventional measures (quite likely under that scenario ). The question is when and how would the Fed intervene, with the only way out being either suffering through the depression or going all out to defeat it and causing hyperinflation. I believe that if left to free markets, the scenario that you gave not only has a good probability, but it should happen based on laws of economics, given the scope of monetary and fiscal mismanagement, and government intervention in past years.

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