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

To: mishedlo who wrote (44660)	1/17/2006 6:40:47 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 116555

mish This has been discussed before but the fuel for the bubble fire had several sources... the 500k married couple windfall tax exemption for personal residence sale was huge. That was the lighter fluid on this bar-b-q the other factors are rotation from stocks coupled with the lowering of interest rates and lending standards. Take away any of the 4 and you have a collapse in RE pricing, IMO. Removing any of the four bricks will make this house collapse.

To: mishedlo who wrote (44660)	1/17/2006 9:39:08 PM
From: TimbaBear	Read Replies (4) \| Respond to of 116555

Mish Your argument was that wages need to increase before housing prices could. Now you're bringing all the other stuff to the table. My point back to you was that wages had little to do with this boom so your argument has a major flaw if it incorporates wages in it. This boom was fueled by credit and if it is to continue, it will continue to be fueled by credit. Wages have zero to do with it or you wouldn't have stated income mortgages. You are stuck in this "wages dictate consumption" paradigm and it has its uses and times when it applies. The last several years have not been one of those periods. Consumption has exploded while real wages have remained flat to negative. I would say to you that in a global labor arbitrage world economy you will see more warping of this "wages dictate consumption" paradigm, perhaps for several decades. You say there is a huge difference at the turn and I say: "Prove it!" Who's to say Bernanke doesn't come in and cut rates several times at 50bp per shot? How long would it take to crank the mania right back up? I'm not saying he will or won't do that, just saying that your unbridled confidence in deflation has more holes in it than a sieve. It is a good argument, but not a flawless one by any means. Timba