To: nextrade! who wrote (25222 ) 11/13/2004 8:08:09 PM From: nextrade! Read Replies (1) | Respond to of 306849 Credit Bubble Bulletin, Doug Nolandprudentbear.com Monetary Disorder November 12, 2004 The U.S. bond market remains the epicenter for liquidity excess. With Fed assurances of continuous marketplace liquidity; guarantees that they will act to support stable and strong markets; and promises that they will forewarn participants to rising rates, the U.S. Credit system has become a bastion of over-liquidity and speculative excess. Strong economic data has had minimal impact on market yields, while weak data incites big bond rallies. Big stock gains are a yawner, while appearances of equity market vulnerability incite major bond rallies. And, amazingly, surging energy prices incited – what else but a bond market rally. Importantly, these bond market rallies created additional liquidity that then stimulated stocks and underpinned the economy. And these dynamics rest at the heart of today’s Monetary Disorder - destabilizing liquidity that has created unstable asset inflation, boom and bust dynamics, and financial asset prices increasingly detached from underlying economic wealth. Financial markets have been extricated from reality. In short, the Fed has remained ultra-easy because of the systemic risk brought on by unprecedented financial leveraging and speculation. This has only nourished the dysfunctional Financial Sphere to greater Credit inflation, liquidity excesses, and endemic Bubble excess. Fed policy nurtures the Great Credit Bubble. And those merely focusing on the seductively deceiving exploits of the New Economic Sphere and asset prices have no appreciation for the great risk posed by our vulnerable currency and Intransigent Monetary Disorder.