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To: Box-By-The-Riviera™ who wrote (271394)	12/18/2003 7:27:06 PM
From: patron_anejo_por_favor	Read Replies (3) \| Respond to of 436258

Really fine opus on credit delivered by Pru Bear's Mannfm11: prudentbear.com I don't believe the loss is going to come from inflation in bonds. It is going to come from credit risk. I don't know that you guys have noticed how poorly the economy has performed with money rates at below zero inflation adjusted. I don't know if you guys realize that what bonds are going to pay over the next 25 years is going to dwarf stocks at these prices. There seems to be a misunderstanding about what credit is. The government creates credit by issuing debt and the Fed buying the debt. But, the government has to walk a thin line or they will lose their credit rating. It is our asses that are collateral for this debt. Our jobs, our homes, our land, our cars (notice they only give you a piece of paper that certifies a title exists).plus the collateral behind the rest of the paper currency in the world. Just because the credit system is together right now doesn't mean it is going to stay together in the future. So much of what has been expended over the past 3 years by the government and by the Fed has been merely to keep the debt bubble from collapsing. It is getting harder and harder to keep this debt bubble inflated. Credit doesn't come free. The dollar is the reserve currency of the world, mainly because there is real collateral in the United States. Try to collect on an appreciable amount of collateral in China and see where you get? I don't know the debt situation for the world, but I would guess we are looking at around $70 trillion at the least. Just 1% annually on that amount exceeds the assets of the Federal Reserve. It isn't the Fed that is liable for this debt, but you and I personally. If the credit pile starts to run backwards, the collateral the lenders use to push the pile forward gets bent over backwards. Once this occurs, there is nothing to support more MBNA credit cards, FNMA warehouse lines to create new loans, corporate profits or any of the other situations. The idea those that have the gold are going to let the fools that borrowed it off the hook with their property intact is limited by the propensity of the people who are losing their property to revolt. Once this deflation takes hold, anything that is good enough to pay a return is going to become dear. We are seeing a managed bankruptcy in this economy now and nothing else and those with broken credit won't be around to fund the repayments of those whose credit isn't broken yet. Credit is like cocaine. A little gives you a boost, a little more a real jolt, but eventually it takes more and more just to stay even. The end result is a long bout with depression that no amount of cocaine will cure. What part of the world wants to cut the United States off and then have their property collateralize this mess? Once the market decides the US has enough credit out there, the whole system implodes. We can look for signs of inflation all around and say it is here and it is there, but the truth is the best shot fired by the Fed has done nothing but inflate the stock market one more time. Bonds offer a much better choice at least over the next 5 to 10 years than to play in this casino.