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

To: Tommaso who wrote (75729)	12/15/2006 11:52:48 AM
From: mishedlo	Respond to of 110194

The saving and face-saving ethic of Japan, among other things, makes it not comparable to the United States. Could not agree more on that single point. It has already been discussed. It makes the situation all the more worse and deflation all the more likely in fact (once credit limit of consumers has been reached). Mish: Would you say that consumer debt in the US as opposed to the lack of consumer debt in Japan increases the deflationary pressures on the US economy? Kasriel: Yes, absolutely. The latest figures that I have show that banks' exposure to the mortgage market is at 62% of their total earnings assets, an all time high. If a prolonged housing bust ensues, banks could be in big trouble. Mish: What if Bernanke cuts interest rates to 1 percent? Kasriel: In a sustained housing bust that causes banks to take a big hit to their capital it simply will not matter. This is essentially what happened recently in Japan and also in the US during the great depression. It is far easier for the Fed to reflate banks and businesses than consumers. Do you disagree with that? You also forget that US consumers once saved. All the signs point to a shift in willingness of US consumers to spend. It will in all likelihood shift FAR to the other side before all is said and done. Boomer retirement alone may force the issue. Mish