Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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From: russwinter	7/3/2006 7:13:09 PM
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Interesting take aways from Steve Church: prudentbear.com We also demonstrated in our March, 2006 update that consumer liquidity was falling sharply. After a brief respite at the end of March, consumer liquidity has resumed its downward trend. Liquidity has fallen to 3 weeks of funds on our preferred measure. The conclusion of our March, 2006 update has not changed: The key to the consumer’s future is now home resales. Since home resales peaked in the summer of 2005 and are in a downtrend, we expect a further slowing of home resales and a decline in M-2 growth consistent with our paper on “Money Supply and Real Estate.” The Federal Reserve MUST continue to raise short-term interest rates in order to prolong the opportunity for U.S. households to access long-term debt at high levels. If the Federal Reserve does not raise short-term interest rates, we would expect long-term interest rates to increase and cause a significant slowdown in the accumulation of real-estate based debt. A debt slowdown would hasten a recession.

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