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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: jimmg who wrote (76667)12/26/2006 4:25:17 PM
From: russwinter  Read Replies (1) of 110194
 
You couldn't be more wrong, you are the one who has the cart before the horse. The horse driving this is fictitious capital from CBs, which in turn leads to distorted, wild risk taking, and then sillier and sillier loan to J6P as the cycle goes on.

Ultimately, if you offer silly credit to just about anybody, enough will take it regardless of ability to service and pay back. That gives cart before horse observers like you the impression it's the natural order of things. It's not, as all it takes to change the dynamics are somewhat tighter credit conditions. One cause could be when FCBs, Downey, FNM, et al get caught holding a bunch of defaulting ABS crap that had been trading at par.
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