Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: John Vosilla who wrote (20002)	12/31/2004 7:44:08 AM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 116555

I think that would still be expansionary though (read: stagflation). You would probably need short-rates at the same level or higher than long rates in such a situation. The thing is that is almost counter-intuitive to the deflation argument because we'd be exactly where we started from in 2000, with the Fed having the flexibility to cut over 400 basis points in your example and more in mine. Still enough to delay the inevitable. I'm more of a believer in Mish's bond prognosis. The Fed will continue to raise the short-end as stagflationary pressures manifest, the yield curve continues to flatten because the long bond won't budge, much to everybody's shock. Then you get a scenario that is faced by Britain and to a lesser extent Australia today.

To: John Vosilla who wrote (20002)	12/31/2004 10:41:50 AM
From: mishedlo	Read Replies (2) \| Respond to of 116555

We also will not begin to have a true cleansing of all the excess debt without a spike up in long term rates first. Why not? When housing goes it is all over and I do not care at what interest rate it starts. If you presume that it will take a big spike in rates to kill housing, I believe you are mistaken. Housing starts and new home sales are already showing the way. Housing dies and this whole economy dies. That is it in a nutshell. Tell me why it is mandatory for interest rates to spike to kill housing. I do not think you can. If you are waiting for the long end to get to 7% you will be waiting for something like forever. Not gonna happen IMO. Mish