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

To: loantech who wrote (22737)	12/2/2004 9:01:19 AM
From: russwinter	Read Replies (2) \| Respond to of 110194

<Russ are you and I missing something here?> Read the last part () of the 6/2/04 Shostak essay, it will explain it. mises.org It's the whole "two Americas": concept of "first recipients" and "late receivers or non-receivers" and how inflationary credit and housing Bubbles create massive redistribution of wealth, and maladjustments. The example I posted on folks living in squalor in Arizona, azcentral.com versus their fat cat neighbors purchasing of gas guzzling RVs on credit, biz.yahoo.com tells it all. Does a 2.25% Fed Funds rate change all this? What level would? If we can get the answer to that question, we can time the corrections and/or collapse. My indicator is the four week moving average of MBAA purchase index currently at a mile high 472. So rates so far just aren't high enough. This will needs to drop solidly below 400, and stay there, to put a dent in Mr. Fat Cat's consumption and borrowing spree. () Why any policy of intervention can only make things much worse The entire idea that policies of intervention can somehow bring the economy onto a path of stability is untenable. A policy of intervention always benefits some individuals at the expense of other individuals. It always leads to a redistribution of real wealth and weakens the process of wealth formation. The fact that individuals can correctly anticipate the future course of the monetary policy of the Fed cannot undo the damage that such future policies will inflict on the economy. When new money is injected there are always first recipients of the newly injected money who benefit from this injection. The first recipients, with more money at their disposal, can now acquire a greater amount of goods while the prices of these goods are still unchanged. As money starts to move around, the prices of goods begin to rise. Consequently a late receiver benefits to a lesser extent from monetary injections, or may even find that most prices have risen so much that they can now afford less goods. In short, increases in money supply lead to a redistribution of real wealth from later recipients, or nonrecipients of money to the earlier recipients. Likewise once new money is injected, irrespective of whether it was expected or not, it will set in motion the diversion of real resources from wealth generating activities to activities that sprang up on the back of newly pumped money (the first recipients of money). This monetary pumping, which is associated with the lowering of interest rates, sets in motion the so-called economic boom. Now, whenever the Fed reverses the loose stance by slowing down monetary pumping and lifting interest rates it arrests the diversion of real resources and weakens various activities that emerged on account of the previous loose monetary policy, i.e., an economic bust ensues. Pursuing more transparent and predictable monetary pumping cannot stop the damage that this pumping inflicts on the last recipients of money and on the process of wealth generation. What matters here is not expectations but rather real actions. Hence the only way to avoid the damage is to stop monetary pumping altogether and the resulting manipulation of interest rates. Furthermore, to present the economy as some kind of object that follows a growth path is an absurdity. The so-called economy is just a metaphor—in reality there is no such thing as an ‘economy,’ there are only various individuals who are producing various goods and services and exchanging with each other. There are no means or ways available to measure and quantify the totality of these activities since various heterogeneous goods cannot be added up into a meaningful total. So if we cannot tell what the total product is obviously there is no way or means to know what the so-called economy is doing. Consequently, any policy which attempts to navigate the imaginary "economy" only disrupts the process of wealth generation and undermines the well being of individuals.

To: loantech who wrote (22737)	12/2/2004 10:37:39 AM
From: Jim McMannis	Read Replies (1) \| Respond to of 110194

Flip your house tax free and buy a Winnebago. Simple as that.

To: loantech who wrote (22737)	12/2/2004 11:31:37 AM
From: John Vosilla	Respond to of 110194

<Russ are you and I missing something here? I read an article the other day seemed to say maybe a greater segment of the population in the USA is making over 100K per year than ever? Maybe that is false memory syndrome I don't know, but how are people buying so much as far as Cars, RV's, McMansions etc,? Sure credit is easy but they have to pay something> I don't think you are missing anything. Two slogans that might apply these days are "don't bet against the US consumer" and "manias can last much longer than you can remain sane or solvent betting against it" . A funny commercial from Lending Tree.COM on TV shows middle aged man driving around town in his golf cart and laughing at how he is up to his eyeballs in debt shown with his family at the McMansion, his luxury cars, country club membership and other material possessions. No doubt credit has been easy, housing and related businesses have boomed and now we see if the mantel can be carried by capital investment and next generation innovations as the consumer does a fade next year. Only time will tell. I personally look for the stock market as the best leading indicator to be probably headed for a top in January or perhaps as late as April. In the slight chance the likes of Harry S Dent Jr are right we should breakout to new highs and housing doesn't crack. I'm prepared for either scenario though heavily leaning towards a major downturn .