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

To: mishedlo who wrote (78437)	4/29/2008 4:32:39 PM
From: benwood	Respond to of 116555

I think the bubble is 90-95% of it; the skyrocketing energy/food bill is causing the reality of the deflating bubble to confront homeowners earlier. For those who thought they'd left nothing to chance by stretching into the maximum fixed mortgage they could, the escalation in energy/food/maintenance has put them under enormous pressure, too. And for all those speculators who helped fuel the bubble, they are simply being ravaged by their gross miscalculation.

To: mishedlo who wrote (78437)	4/29/2008 9:21:36 PM
From: Claude Cormier	Read Replies (2) \| Respond to of 116555

- Home prices rose because of a speculative bubble in credit and creative financing (ie inflation) Crystal clear - and now we are seeing that credit destroyed at an amazing rate (deflation). Please explain. Credit is destroyed because the owner of the home walk away and the bank is left with a home that it must resale at a price that is much lower than the initial loan. So I assume you mean the credit that is destroy is the difference between the initial mortgage and the second mortgage. But the money that was created with the first mortgage is still in the system and will continue to have its inflationary effects. Somebody cashed in on this initiale sale and is moving food, commodities and other stuff up with the proceed. We now have hot money that is not loaned by a bank. Can we say that although total credit shrinked with this transaction, the money supply increased by the difference between the two mortgages.