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

To: orkrious who wrote (36728)	7/22/2005 8:02:42 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

I think everybody should read this piece, wallstreetexaminer.com especially as it pertains to credit (debt) growth. It's my belief that the US economy needs double digit debt growth just to service existing debt and get any economic "growth" at all. I don't know what the ratio of new debt to GDP growth is now, but must be 5 or 6 to 1. Also double digit "credit" growth most certainly feeds inflation. It's how consumers afford to buy products. I differ from the Mish view that jobs and wages only determines this. Double digit debt growth swamps wage and income growth. If debt growth slows meaningful though, this will remove the consumer ATM punch bowl. Note Lee Adler's data on page 3, it's important to this debate. Credit growth (using bank credit, of course this doesn't account for ABS issuance to "non-banks", from Doug Noland ()) has slowed from 18% quarterly annualized (highly inflationary and Bubble inducing) in March, down to 6.94% now. 7% and slowing is not enough to support this bloated economy. Go through his piece and this credit growth is broken down in segments (home equity, consumer, RE, etc), but still paints the picture. On the Bubble debate, it's not enough to support all or multiple bubbles. I think housing right now is the most vulnerable, which in turn could feed into even more credit growth slowing. If that happens the Perpetual Motion Machine goes into reverse, a sight to behold without a doubt. The other aspect that Adler mentions, is that rising bullishness, not rising liquidity is fueling this latest blowoff rally. That of course makes it suspect. () ABS issuance increased to $13 billion (from JPMorgan). Year-to-date issuance of $387 billion is 24% ahead of comparable 2004. At $244 billion, y-t-d home equity ABS issuance is 28% above the year ago level.

To: orkrious who wrote (36728)	7/22/2005 9:43:53 PM
From: GST	Respond to of 110194

I think if the dollar tanks it will take all US denominated assets with it -- yes. But the US Fed will flood the market so further bubbling is by no means out of the question. In the case of the UK, I don't see the same role for their currency as is played by the US $ in global markets -- that has protected us so far but will have the opposite impact if the dollar falls apart because everybody just has so many dollars that it will be hard to find anybody willing to give you anything for one.