Comments on: A Tale Of Two Bubbles

By: TerryP

TerryP — Mon, 27 Oct 2008 22:23:46 +0000

Actually what I see coming out of this is another inflationary boom in something fueled by all the money that the fed is pumping into our economy now. I am not really sure what it will be, possibly it will be generally everything, maybe it will be RE, most likely it will be commodities, maybe it will be something else but we will likely just go through this whole process again.

The biggest problem will be that most everyone will be relatively worse off as the dollar we have today will be worth far less in the future. And one of these days because of this the world will decide to either not lend to us anymore or drop the dollar as the world’s reserve currency or both. I think we are already seeing a little of this now. If either of these happens we are in for a world of hurt that makes today’s financial problems look like small potatoes. Though this may be the only way we can get back to some saneness in our monetary policy and force us to become more financially responsibile.

By: Quincy

Quincy — Fri, 24 Oct 2008 23:33:51 +0000

The Fed’s engineering seems to do little more than accentuate the extremes our economy vibrates.

In so many words… exactly.

By: Jeff Molby

Jeff Molby — Fri, 24 Oct 2008 18:39:16 +0000

When the economy hits bottom, we’ll have a stronger, more stable dollar and more goods and services available to Americans without credit.

Uncoincidentally, we’ll also be right back to where we’d be if we had simply been operating under a sound economy with a sound currency all this time.

The Fed’s engineering seems to do little more than accentuate the extremes our economy vibrates.

By: Quincy

Quincy — Fri, 24 Oct 2008 17:26:27 +0000

tkc –

I think what you’re witnessing is more a monetary phenomenon than an actual recession. The unwillingness to lend money on the part of many banks causes a crunch that decreases the amount of money available to the economy, sending it into a deflationary mode.

I would argue that this is necessary for the long-term health of the US economy. The asset bubble was causing overvaluation all over the economy that caused Americans to be ever more dependent on credit for major purchases. It was a vicious positive feedback loop that was finally broken by the global margin call you saw a few weeks back.

When the economy hits bottom, we’ll have a stronger, more stable dollar and more goods and services available to Americans without credit.

By: tkc

tkc — Fri, 24 Oct 2008 16:26:31 +0000

The decline in commodity prices is also linked to a recession. Less economic output in an industrialized economy requires less energy. Less demand equals lower prices.

It looked to me that the run into the commodities market was a retreat from the dollar. Once the credit crunch spread to Europe, that put an end to that.

Either way, it points to a recession.