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

To: SouthFloridaGuy who wrote (30814)	4/17/2005 8:04:18 AM
From: el_gaviero	Read Replies (1) \| Respond to of 110194

Great post. Very clear and helpful. Thanks. My question is this: can we follow the Japanese model (where yields fall towards zero) without Japanese levels of high household savings? If yield equates to somebody’s income, and yields get low, then is it not the case that people (in the USA) are even more dependent upon savings? Are they not going to have to draw down savings? Or is it that I am confused about these macro categories?

To: SouthFloridaGuy who wrote (30814)	4/17/2005 8:25:48 AM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 110194

ah, but the fed did reflate per the old game starting in 1998. they just couldn't control where it went this time around, on the one hand. regarding the fed tool box... it is a limited one this time as you suggest, and as it has been pointed out elsewhere and often, the fmn approach to propping up liquidity is now hamstrung by the congress and its newly active overseers. until now, it was a primary instrument for raising liquidity. the repatriation of corporate nest eggs under this year's tax advantage has been and does remain a significant force in dollar flows back to the US. funny the Japanese were leaving as the upward dollar correction was beginning to run full steam... there's probably a question worth asking in that regard. agreed. the big bad liquidity float running amok out there is slowly running out of places to go, as you say. on the reserves side, some of it is being plowed into infrastructure. on the investment side, some of it is still moving into real estate... i.e. foreign investment into real property in the US has coincided with the weaker dollar... i.e. another prop helping the current rally. are asset values deflating while the hard costs of living are inflating... there is equally evidence of that. you see it in daily life. assuming now, asset values really begin to return to the market "mean" number and below. with all of the competing forces currently roaming the landscape from energy, to loose liquidity, to the unknowable consequences (as yet) of punching through the consumer's cash flow prop into his/her 0 reserve for making payments... many kaleidescopic results are possible... stagflation being the easiest quick answer for the moment, and one that may be historically very very bizarre indeed. thanks for the insight.