No replies to this topic

[andiron]

As I have posted many times the worldwide credit (debt) binge has resulted in hyperinflated asset prices, MOST of which have not adjusted at all post global financial crisis...The top honors are taken obviously by ridiculous RE prices the world over from Shanties of Mumbai to Flats of Kensington Street, London....Any market correction, hence the hit on mortgage bond holders like banks or private investors, has been fought tooth and nail by the CBs/Govts lest the MTM balance sheet (LOL) of the banks renders them insolvent.... Japan did the exercise for years and the malaise never went away and this in the decades where global economy and hence Japanese exports were going gangbusters...leading the great economist Koo to postulate that monetary injections do not help ultimately and what is needed is fiscal blitz.... However, fiscal power the world over is getting exhausted...And global financial system RESET cannot be avoided for long...The lower bound on the 10 yr rates is at hand in US and Germany ( perhaps another 1/2 percent to ~1% of adrenelin shot is probable)..but then what? Contrary to many who may think that as bonds no longer appreciate, stocks must rise, it is opposite in a zero bound financial crisis...Here the rise in rates would block the arteries of the vital blood that kept the System alive and kept asset prices high....

Edited by andiron, 31 May 2012 - 11:16 AM.