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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (257849)	6/30/2010 9:39:48 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

You understand that interest rates steadily declining to zero, while the ratio of debt to income increases, is merely the narrative of massive credit bubble being formed. There's no free market activities occurring in this narrative, just deliberate central bank and bank regulation policy. Bernanke's commentary that there appeared to be a large amount of "excess savings" is so disingenuous that it's a popular joke. Debt bubbles inflate either "asset prices" or "consumer prices" or both. If we describe only consumer prices as inflation, leaving out asset prices, we can marvel over our conundrum. Otherwise we merely see the effect of a massive credit bubble. What about population growth? Doesn't that affect the debt to income ratio? I don't know, does it? I suppose you will argue that it's only natural for the savings rate to have declined dramatically since 1980 as the Baby Boom Generation nears retirement. How about our balance of trade? Certainly that somehow naturally created the massive credit bubble America has experienced since 1980? No, in fact our trade deficit is the natural child of the credit bubble. When an economy collectively spends more than it earns it either pushes up domestic prices, or it imports goods from abroad. Americans mortgaged their homes to import goods like oil and trinkets. .