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

To: jimmg who wrote (75926)	12/18/2006 6:28:08 AM
From: Mike Johnston	Respond to of 110194

True, but the Fed is out of options unless they are now willing to take the pain. Given the choices of: 1) Take the pain now and allow the economy to rebalance or 2) Take worse pain later, I think they've already shown which option they prefer. They did not allow economy to experience some pain in 1998, they did not take the bigger pain in 2000/01 so there is no way they would go a different path now, since the potential amount of pain would be so much worse. And each inflationary reaction has to be much bigger, than the previous one. It took hyperinflation in housing on the order of 200-300%+ to prevent the economy from sliding into recession due to bursting stock market bubble in 2000 (the biggest stock bubble in history of mankind ). What will it take now, since the housing bubble was much bigger in size and scope than the stock bubble ? This is a collapsing economy and tripling of house prices was one symptom of that. I am open to any possibility, even a mind boggling gain in the stock market, since if and when bond market monetization begins, there will be no restraining force on the inflationary flight of money into the stock market. Only higher rates can potentially hurt the stock market since the market has to increase 15-20% a year just to be even in real terms.