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

To: Mike Johnston who wrote (76643)	12/26/2006 1:56:45 PM
From: John Vosilla	Respond to of 110194

Many 'smart' academic types have been fooled by the fraudulent CPI stats but Joe6pack understood a rising cost of living with easy credit and took advantage of it for better and for worse.. Continued serious erosion of purchasing power coupled with strength of our financial institutions to continue 'socialized lending' in a low interest rate environment with negative real interest rates making foreigners the ultimate bagholders trump all IMHO if this continues.. What's the new saying ".. you owe your bank $100k you are in trouble..if you owe the bank a trillion the bank is in trouble.." Applies on several fronts these days with US financial institutions the big winner to date. Will they still be so even if we get that 30-40% collapse in coastal home prices?

To: Mike Johnston who wrote (76643)	12/26/2006 3:21:23 PM
From: pogohere	Read Replies (2) \| Respond to of 110194

Russ Winter was speculating on the WSE radio show the other day about where the pig men would be investing their booty. He suggested they might be buyers of US notes. Additionally, he suggested they have an interest in a relatively stable US$. Given the amounts involved, many hundreds of billions at least, wouldn't it be ironic if this constituted a/the source for the domestic liquidity that would move bond rates lower and keep them low for a spell, as Mish suggested? It could have some effect on the US$ very short term, but since the US$ valuation is a function of global liquidity and preferences and trades about $2 tril/day, I wouldn't expect that effect to have much bearing on it. Eventually, the pig men run out of ammo and US interest rates would climb, but I wouldn't expect that to have any effect on the US$ level either (as a result of climbing interest rates) as I imagine it will be overwhelmed by global considerations.