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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (1783)	3/11/2004 10:18:13 AM
From: zonder	Read Replies (2) \| Respond to of 116555

I agree with you that the massive debt levels in the US are a problem, not only for the consumer but also for the US state whose bills are being snapped up by various Central Banks. I also agree with you that the credit bubble is the story of the post-2001 expansion. This was of course established through an excessive lowering of the interest rates into negative real levels, whereby it was more intelligent to SPEND your money rather than deposit it for negative real returns. They did this through installing the fear of deflation in the heart of American nation, despite 4% PPI in 2003. However, the scenario between "credit bubble will have to deflate" and "setting in motion a deflationary debt depression" is not all that clear to me. Yes, real estate market will have to correct as interest rates normalize, and so will the more indebted customers go belly up. However, this transition does not have to be so harsh as to lead to a housing market crash and most consumers having to declare personal bankruptcy.

To: Wyätt Gwyön who wrote (1783)	3/11/2004 10:42:45 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

thanks darffot that is a quick answer and one I agree with. Another version is this: The US consumer is the consumer of last resort. Driving much of the world economy. Currency wars are even being fought over this. Everyone wants the US$ higher (to keep exporting to us), we want it lower (so that we can keep exporting). In the meantime debt is stacking up unabated and can not go on forever. When the US consumer gives up, and he will if jobs are not there or confidence falls low enough, the whole world economy goes into the toilet. Right now jobs suck, and confidence is falling off the table. Finally, China is acting to curb its demand as well. We do not need rate hikes to push this over the edge, we are falling off the edge as I type. Mish

To: Wyätt Gwyön who wrote (1783)	3/11/2004 10:48:31 AM
From: mishedlo	Respond to of 116555

Mish - Yesterday on the trade deficit: I have been pondering the US$ today. It makes no sense on the SURFACE. Rien replies today: I am talking about the USD/EUR exchange rate here. First, the Euro was plain oversold. A normal market reaction started and the euro recovered somewhat. Then the US recovery went astray. No jobs. And the people began to see the downside of the dollar; no jobs, big deficit, fed wants USD to fall, it became a self sustaining force to the point where all analysts were calling for a lower dollar at the beginning of the year. Next the dollar became oversold, and besides the EZ hurt too much so people started calling for intervention and lower rates in the EZ. A trading range ensued. This trading range has worn off the idea that the dollar has to fall, people (currency traders) have become unsure of the future direction. Now the game has changed once again, it is now about which economy caves in first/the most. For now I stick to my thesis that the US gov will do everything it can to paint a picture of a healthy US economy, while in the EZ the rapid decent of the USD is now starting to show in the reported numbers. Even though many traders will "know" that the USD has to fall, the above will keep them in check until there are clear signs from the US economy that things are falling apart. That will signal the next whoosh. So for now, we stay in the trading range. And if I hazzard a guess, it should last at least a couple of months. Best, Rien.

To: Wyätt Gwyön who wrote (1783)	3/11/2004 11:13:05 AM
From: mishedlo	Respond to of 116555

Goldman Says Greenspan May Not Raise Key Rate Before Term Ends By Beth Thomas March 11 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan may not raise the U.S. key interest rate before his term ends in February 2006, according to Goldman, Sachs & Co. The economy has to get rid of excess capacity before the Fed increases the target rate for overnight loans between banks from 1 percent, the lowest since July 1958, Edward McKelvey, Goldman's senior U.S. economist, wrote in a note to clients. ``This raises a tantalizing question -- have we seen the last tightening from Mr. Greenspan?' New York-based McKelvey wrote in an e-mailed note yesterday. ``There is some risk that our expectation of tightening in mid-2005 could be premature.' U.S. President George W. Bush intends to reappoint Greenspan, 78, as Fed chairman when his current term expires on June 20, a White House spokesman said last month. Greenspan's 14-year tenure as a Federal Reserve governor ends in 2006. There is a risk of disinflation, or a slowdown in price increases, because factories are not working at full capacity, the Goldman report said. ====================================================== Right idea - I hope it does not get widely believed Also I expect Greenspan to resign for "personal reasons" this summer. M