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

To: John Vosilla who wrote (76812)	12/29/2006 8:56:50 AM
From: GST	Respond to of 110194

In the 'payment' economy prices are soaring. You need to ask what role short term rates play in the mind of the consumer. Where have rates hit the economy hardest? A car loan is far more expensive now -- so for the consumer cars are much more expensive this year than they were last year. Same with everything paid for with credit card debt. Housing based on short term ARM rates is far more expensive now than it was a year ago and prices will continue to zoom upwards if you take a consumer cash flow perspective. In places like Florida add in insurance. In a 'payments' economy, short rates cap what we can buy at any point in time by giving us less stuff for the same payment. People here focus on asset prices alone -- this can be misleading when the consumer thinks of prices in terms of payments. We were already past the point where people could honestly qualify for the mortgages they took out -- but with low short rates people convinced themselves they could handle the payments. As the dollar falls, we will get even less stuff. Our payments will always be with us, only each year we will get less and less for those payments.