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

To: russwinter who wrote (20091)	10/17/2004 2:16:31 PM
From: jrhana	Read Replies (1) \| Respond to of 110194

<..capital flight, a credit revulsion panic and, crack up boom behavior out of USD and USD denominated script (such as bonds) and into other forms of value and assets that might maintain value relatively well against devalued Money (script).> In the extreme scenario, I believe that real estate in fact will be the life boat that allows many financially unsophisticated to survive. At least those that own there own home in a not over-leveraged situation. People will want things they can touch-like a house.

To: russwinter who wrote (20091)	10/18/2004 7:39:35 PM
From: glenn_a	Respond to of 110194

Russ. You commented regarding the housing bubble: "But it's still crack up boom behavior on the part of buyers, that recognizes real interest rates are far too low, given the true level of inflation, and that lending standards are far too easy." I'm wondering, do you really think that most buyers can piece it together that "interest rates are far too low, given the true level of inflation, and that lending standards are far too easy"? This seems to imply a level of perspective and economic sophistication that for the most part I'm not sure home buyers would not have. Rather, it seems to me that it's more like "Heh, I can get money really cheap and consume" ... and the thought process really doesn't go too much beyond that. Would you agree with this sentiment or not? This partly goes to why I think at some point we'll get a deflationary monetary policy response (but it would take that, as a matter of policy response). Because home owners are so set up to take a fall on this one. What I think you're typical home owner wouldn't appreciate is that negative real interest rates distort the time value of money (oh oh, here's that lever concept again). Thus, rates that appear to be "easy credit" in an easy money and negative interest rate environment can very quickly become onerous should the interest rate structure normalize. Which is why I'm kind of looking for the perfect crime to be committed here. A massively-geared slight of hand by the Fed and other central bankers globally that effects a massive wealth transfer from households to corporations, and that effected only upon the normalization of the interest rate structure. I mean, over the past couple of years corporate American has really rebuilt its balance sheet and if I'm not mistaken stands very liquid from a historical vantage point. And at whose expense has corporate American become liquid? Why, the worker/homeowner of course. What a fantastic scam. Make sense to you? Or am I off a bit somewhere? Also, this is why I kind of concur with Mish that a deflationary policy response is in the offing. Because it is the precondition for the perfect crime, a massive heist by corporate American on homeowners/householders. You know, more and more I find myself starting to think like a criminal. I actually value what I consider my sense of honesty and compassion ... could starting to think like a criminal possible jeopardize these qualities in me? Say it ain't so! ;) Regards, Glenn