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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (71700)10/12/2006 1:25:11 AM
From: John Vosilla  Read Replies (1) of 110194
 
'..out of the blue and in the midst of a painful recession (brought on by a housing crunch and consumer debt crisis) we will suddenly have a high savings rate is pure unsubstantiated fantasy'

Our entire banking system was insolvent during 1989-94. We had a painful housing crunch, commercial real estate nationwide dropped an average of 60-70%, the stock market crash of the half century, the beginnings of a decade long downward spiral by the Japanese economy and very tight monetary policy until about 1992-93. Yet inflation remained during that time, the economy was weak, deficits large and savings low till the late 1990's when we finally had our goldilocks strong economy with low inflation and no deficits .. One prior post here recently made a feeble attempt at explaining it by saying we were saved from deflation by the tech and housing bubbles way down the road. The fact is we had moderate to low inflation before and during time the real economy took off.. It was post 9/11 and the reckless spending and borrowing policies of GWB along with 1% fed funds, the OCC and OTS looking the other way on toxic loans for way too long and bringing democracy and US consumerism to Chindia like never before in unison that created this recent inflationary pressure..
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