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

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To: John Vosilla who wrote (69841)	9/15/2006 2:00:41 PM
From: mishedlo	Read Replies (1) of 110194

On the same basis there was zero chance of deflation in Japan but that happened if I am not mistaken. Did lower interest rates all the way to zero keep overvalued assets in Japan high or not? As for lending standards, you fail to see that loose lending standards are what caused the problem. Will keeping the standards loose just add to pool of growing defaults? I suggest it would. In other words the longer lending standards are kept loose the worse the ultimate problem. That said, when defaults and foreclosures get ugly, I do expect lending standards to tighten considerably. Perhaps some will blame that tightening on the problem. The problem was loose standards to begin with. On top of speculation in housing, and savings rates that have nowhere to jo but up, and unenemployment that has nowhere to go but up, and credit that really has nowhere to go but down, the groundwork has been laid for deflation. Not sure what the trigger will be but it easily could be Democrats taking control of the house and or senate. Mish

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