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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: patron_anejo_por_favor who wrote (100979)2/6/2009 2:47:23 AM
From: Hawkmoon  Read Replies (2) of 110194
 
What is needed is saving...in large amounts and over a long period of time...by consumers. To rebuild the nation's thoroughly depleted captial stock.

So what are they going to save? Unemployment and food stamp stubs?

For people to save $$$, they have to have jobs. And since a good portion of American jobs are either in the construction or service industries, it's going to be hard to save anything..

But let me turn on to something a bit more pernicious:

ft.com

Message 25386653

Fundamentally the efficient markets theory is screwed up. Any Tom, Dick, or Harry, who wants to short the bond and RMBS markets only has to go long on the CDS's. And in contrast to the infinite risks taken by someone directly short-selling the underlying bonds, those investing in CDS's have a finite risk.

In sum, what Soros is telling us (and I think he's right) is that it makes sense for the "big money" to take finite risks going long in CDS derivatives than going long on bonds and equities.

If permitted to continue the ultimate result will be the collapse of the fractional reserve system to the point where $1 in deposits will be required to back $1 in outstanding debt.

Hawk
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