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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: orkrious who wrote (71389)2/4/2007 1:10:00 PM
From: SouthFloridaGuy of 306849
 
Okrious, I would like you to repeat this post to ahhaha and see what he says. Even give it to Mish. He has a lot more patience than I do.

<<Anyway, I think that the bursting of the housing bubble is going to slow economic growth tremendously. The only reason the economy has had any strength at all the last five years is the housing ATM (half the jobs created during this time have in one way or another been created because of housing). I do agree with Mish that this process will be deflationary, but that doesn't mean that the cost of everything is going to go down. Rather than focus on what may or may not go up or down in price, let's look at the effect on longer bonds. Housing problems are going to widen credit spreads because there are going to be many more defaults. People just have too much debt. This will negatively impact longer bonds. Concurrently and somewhat ironically, an economic slowdown is going to reduce foreign demand for our debt, which will put further pressure on bond prices. This whole process will put pressure on our dollar, making imports (including a big one, energy) more expensive.

In response to these problems, the Fed will do the only thing it knows how to do, cut and print. This time, cutting short term rates isn't going to help lower long term rates because it can't save the housing bubble. Once a bubble bursts it can't be reinflated. The housing bubble bursting is going to set in motion the problems discussed in the preceding paragraph. Where's all of the money going to go that the Fed's going to print? The next bubble...gold and precious metals.>>
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