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Pastimes : All Clowns Must Be Destroyed -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (38921)	6/9/2000 11:09:00 PM
From: pater tenebrarum	Respond to of 42523

i think that the concerns Noland raises here are 100% justified...this is why i often point out that the credit markets are showing increasing signs of stress - they warned of the NAZ debacle in April as well. it's also the reason why the Fed will probably be happy that some tamer economic numbers have come along(even though they are obviously cooked -that is not a question anymore after today's ludicrous PPI report), because they probably know that raising rates further would bring the whole house of cards down right away. as usual they will opt for further bubble expansion instead of restraint - of that i am certain. but it's a vicious circle, because they merely ensure an even worse outcome down the road. the problem is that economic growth, i.e. keeping the expansion on track (the Fed's often stated goal) is not going to help correct the imbalances - on the contrary, it will help them to grow even larger. already $5,30 in new credit are created for every $1 in (hedonically overstated) GDP growth. at the same time the red ink on the current account is becoming an ever uglier blot (it would even be worse if the disposition of foreign owned gold by the NY Fed wasn't counted as an 'export' in the trade data). the only question we have to ask is actually whether the system has become already unstable enough to make a re-inflation of the bubble spiral impossible. that's a real possibility for the first time with the increasing demand pull exerted by reviving economies around the world. since the competition for capital has now become more fierce, a mini interest rate bidding war seems to have erupted already. the BoJ has hinted that it sees its time as a feeding trough for the US bubble coming to an end as well...i.e. it will raise rates for the first time in ages. that's good for Japan actually, as savers there need to get a decent return and a psychological signal by the BoJ regarding the durability of the upswing must be set. but it's a catastrophe for the US bubble economy that is in need of $500 billion from foreign sources annually to keep the current account financed. the recent ECB hike is another nail in the coffin...as US entities have borrowed $350 bn. in Euros over the last 12 months. credit spreads have begun to blow out in Euroland as well now. in other words, yet another source of cheap capital for the bubble is beginning to dry up. in the US the banking system has for a time taken over from the shut-down credit markets and has expanded commercial lending as well as lending for securities purchases at an unprecedented pace. it's a desperate attempt to keep the ponzi scheme going...we'll see if it works. imo it's touch-and-go at this point.