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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: orkrious who wrote (5882)	1/22/2004 9:06:22 PM
From: mishedlo	Respond to of 110194

Heinz on the Bubble Not sure who he is responding to since I only have his post (in relayed fashion) but here goes ==================================================================== what REALLY happened is this: the serial bubble blowers at the central banks have delayed the necessary liquidation of the malinvestments amassed during the previous boom by means of fostering the expansion of an enormous credit bubble to sheer incredible proportions ( total US credit market debt is now at approx. 360% of GDP, 70% HIGHER than at the infamous 1929 top ) . this has led to another false boomlet, that is obviously straining resources as evidenced by sharply rising commodity prices ( i.e., demands are made on resources that can't be supplied - a typical phenomenon when capital is misallocated in a credit induced boom ) . iow, the malinvestment episode has been drawn out, and in fact, has begun to engulf the whole world ( industrial overcapacities are near record levels and China's contribution deserves to be called a crack-up boom in the Misesian sense ) . tax cuts are of course always a positive development, but have to be brought into context. since e.g. the Bush administration has concurrently with its tax cuts closed many so-called 'tax loop holes', it has in fact RAISED taxes bottom-line wise. it has also incurred a huge budget deficit, in typical Keynesian fashion, which represents a waste of resources that counteracts the positive effects of the tax cut. the negative consequences of all this monetary and fiscal insanity are of course not immediately apparent - they will however become apparent down the road ( i.e., soon ) , when the credit expansion stalls, as it eventually must. at that point, it will become obvious that capital has once again been wasted on the false expectations engendered by the credit expansion. the next downturn ( and the recent deflationary plunge in the money supply suggests it is imminent ) will not only reveal the extent to which capital has been malinvested, it will also meet with authorities powerless to delay the liquidation process any further, since both monetary and fiscal excess have reached points that have historically proven to be limiting factors - i.e. once the FF rate is at 1%, there is no more stimulus to be expected from that quarter, and likewise, a budget deficit close to 5% of GDP will resist further expansion as the friendly ( or rather, stupid ) foreigners financing this nonsense will probably turn tail ( they already do, as the plunge in the dollar attests to ) . i think Kudlow and the other Keynesians-in-drag will be very unpleasantly surprised when depression, part 2, eventually hits home. and did i hear right? you're actually a bureaucrat yourself? why am i not surprised?